Power Purchase Agreements (PPAs) are standard mechanisms used in the energy sector to purchase electricity from independent power producers. PPAs are contractual agreements between a power generator and a power purchaser that outline the terms of the sale and purchase of electricity. Bitcoin mining involves a significant amount of computational power and energy consumption. As a result, Bitcoin miners are always looking for ways to secure a reliable and cost-effective electricity supply to power their mining operations.

One solution that many Bitcoin miners are adopting is using PPAs, which allow them to purchase electricity from a power generator or independent power producer at a fixed price, ensuring a steady and predictable power supply. In this article, we will provide a comprehensive overview of everything you need to know about PPAs, including the parties involved, the types of PPAs, the critical elements of a PPA, the benefits and challenges of entering into a PPA, and more.

Sections:

• Parties Involved
• Elements of a PPA
• Demand Response in a PPA
• Types of PPAs
• Benefits and Challenges

Parties Involved

In a Power Purchase Agreement (PPA), two main parties are typically involved: the power generator and the power purchaser. For Bitcoin miners, the power generator is responsible for producing the electricity used to power mining equipment. This can be a company or organization that owns and operates a power plant or energy facility, such as a natural gas plant or hydroelectric dam. The power generator may also be an independent power producer (IPP) specializing in producing and selling electricity to other parties.

On the other hand, the power purchaser is responsible for buying the electricity produced by the power generator under the terms of the PPA. In the case of Bitcoin mining, the power purchaser is the mining company or individual miner who uses the electricity to power their mining operations. By entering into a PPA, Bitcoin miners can secure a long-term electricity supply at a fixed price, helping to manage the costs of mining operations and mitigate the risks associated with fluctuating energy prices.

While the power generator and power purchaser are the main parties involved in a PPA, a third party may also be involved in some cases. For example, a financing institution may provide funding for the power generation project, or a transmission and distribution utility may be responsible for delivering the electricity from the power generator to the mining facility. The roles and responsibilities of each party are defined in the PPA, which serves as the legal framework for the sale and purchase of electricity for Bitcoin mining operations.

Elements of a PPA

In the context of Power Purchase Agreements (PPAs) for Bitcoin miners, the main elements typically include the quantity of electricity, delivery schedule, pricing, term, performance guarantee, termination, and payment terms. They can vary from each ISO, like ERCOT, PJM, or others. The quantity of electricity outlines the amount of electricity the power generator must supply to the miner. At the same time, the delivery schedule specifies the time frame for the delivery of electricity to ensure a reliable and consistent supply of energy for the miner’s operations.

Pricing is a critical element of a PPA and outlines the price the miner will pay for the electricity. The pricing can be fixed or variable, depending on market conditions, and can significantly impact the profitability of the mining operation. The term of the PPA specifies the length of the contract, which can range from short-term to long-term and depends on the specific needs of the miner.

Performance guarantee is another critical element of the PPA, which outlines the power generator’s commitment to providing a certain level of reliability and performance in delivering electricity. The termination clause outlines the circumstances under which the contract can be terminated, such as breach of contract or ‘Forces Majeure’ events.

Finally, payment terms specify the terms and frequency of payments to the power generator for the electricity supplied. Overall, these elements help ensure a reliable and cost-effective electricity supply for Bitcoin miners, helping them mitigate risks associated with energy price volatility and availability and operate their mining operations more efficiently.

Demand Response in PPAs

Demand Response (DR) is a provision commonly included in Power Purchase Agreements (PPAs) to help power purchasers manage energy costs during peak demand periods. Under a DR provision, the power purchaser agrees to reduce their electricity usage during these periods in exchange for a lower electricity price. This benefits the power generator and purchaser by allowing for better energy supply management and reducing expensive peaking power plants while supporting a more stable energy grid. However, DR provisions can be complex and require careful consideration of the purchaser’s and grid’s needs.

Types of PPAs

Various types of Power Purchase Agreements (PPAs) are available in the energy industry to suit different energy needs and preferences. Here are the most commonly used PPAs, each with unique features and advantages.

Physical PPAs: are contracts where the power generator sells physical electricity to the power purchaser at a fixed price over a specified term.

Virtual PPAs (vPPA): a financial contract between a power generator and a purchaser that settles cash flows based on the difference between contract and market electricity prices without requiring physical delivery of electricity. Usually used for energy price hedging.

Sleeved PPAs: involves a third party, usually a utility or energy retailer, facilitating electricity delivery from a generator to a purchaser, handling physical logistics while the parties agree on contract terms. It is used when direct procurement isn’t feasible due to constraints.

Uncontracted PPAs: Occurs when a power generator sells electricity directly to the wholesale market without a long-term agreement, exposing the generator to market price volatility and higher risks—essentially real-time markets.

Proxy Generation PPAs: virtual PPA variation used for variable-output energy projects, where financial settlements are based on estimated generation, called “proxy generation,” rather than actual output. Usually used for Variable energy sources such as wind, solar, and hydro.

Bitcoin miners typically use physical Power Purchase Agreements (PPAs) to secure a reliable and cost-effective electricity supply for their mining operations. Physical PPAs are contracts between a power generator and a power purchaser that involve the physical delivery of electricity from the generator to the purchaser. Additionally, physical PPAs can help Bitcoin miners mitigate the risks associated with fluctuations in energy prices and availability, which can significantly impact the profitability of their mining operations.

Benefits And Challenges Of PPAs

Benefits

When it comes to Bitcoin mining, PPAs offer several benefits and challenges. One of the main benefits of a PPA for Bitcoin miners is price stability. Since the cost of electricity is one of the main operational expenses for Bitcoin miners, a PPA can provide a stable and predictable price for electricity over a specified term, which can help miners manage their energy costs and mitigate risks associated with energy price volatility.

Another benefit of a PPA for Bitcoin miners is access to a long-term energy supply. A PPA can help miners secure a reliable source of energy, which is essential for the operation of mining rigs. This can help miners avoid interruptions to their operations and ensure they can access the energy needed to mine Bitcoin.

Challenges

However, several challenges are associated with using a PPA for Bitcoin mining. One of the main challenges is regulatory and legal risks. The Bitcoin mining market is still relatively new and unregulated, and there may be legal or regulatory obstacles that prevent the implementation of a PPA for mining operations.

Another challenge is credit risk. Bitcoin miners may face credit risks if they need more revenue to pay for the electricity they use under the terms of the PPA. Market risk is also a challenge, as the Bitcoin market is subject to significant price volatility, which can impact the profitability of mining operations.

Operational risks may also arise with implementing a PPA for Bitcoin mining, such as issues related to project management, construction delays, or technical problems with the energy infrastructure. PPAs can also be complex and involve multiple parties creating negotiation, administration, and enforcement challenges like in colocation facilities.

PPAs are complex contractual agreements that involve multiple parties and elements. The types of PPAs vary widely, and demand response is an important consideration. While there are many benefits to using a PPA, there are also several challenges to be aware of. By carefully considering these factors and working with experienced professionals, power generators and purchasers can develop and implement successful PPAs that meet their energy needs and support their goals, regardless of the generated energy source.

With today’s competitive Bitcoin mining environment, it is critical to be precise with all equipment used in the facility. Mining facilities house thousands of ASICs that require reliable and efficient power distribution to operate optimally.

A smart PDU (Power Distribution Unit) is a modern solution that offers advanced power management and monitoring features to help businesses improve energy efficiency, reduce costs, and increase uptime. This article will explore the differences between basic PDUs, the benefits of using smart PDUs, and how they can optimize power usage, improve reliability, and enhance overall performance by integrating the Foreman platform.

Overview Of PDUs

A PDU (Power Distribution Unit) is essential to distribute power to multiple electronic devices from a single power source. These devices are critical components in mining facilities, data centers, server rooms, and other technology-intensive environments where reliable and efficient power distribution is essential for business operations.

Basic PDUs

Generic PDUs are a simple solution to distribute power to multiple devices from a single power source while providing several critical functions, including power distribution, circuit protection, cable management, and mounting options.

The core function of a basic PDU is to provide a means to distribute power to multiple devices. The function is achieved through multiple outlets or sockets available in the PDU that allows multiple devices to connect to a single power source. Basic PDUs reduce the wiring required and simplify powering multiple devices. They are glorified extension cords for high-powered devices. Circuit protection is a critical function of a basic PDU as it protects the connected devices from power-related issues such as surges, overloads, and short circuits.

Cable management is another essential function of a basic PDU, as it helps to keep the installation neat, making it easier to access and maintain the devices. A well-organized installation also ensures that power cords are not tangled or damaged, reducing the risk of fire hazards or electrical accidents. Mounting options available in a basic PDU provide flexibility in how the PDU is installed, allowing it to be positioned in the most convenient location for the devices it is powering. Rack-mount, wall-mount, or floor-mount options suit different installation needs.

Smart PDUs

Smart PDUs are the most advanced and offer features like remote monitoring, individual outlet control, energy metering, and environmental sensors, providing advanced power management and monitoring capabilities. Below is a list of the key features and use cases of smart PDUs.

What Are The Key Features Of Smart PDUs?

Smart PDUs, or Power Distribution Units, are pivotal components within data centers and similar environments where efficient power management is essential. These devices are equipped with various features geared towards optimizing power distribution, enhancing energy efficiency, and ensuring the availability of critical equipment. Below are some standard key features:

Remote Power Monitoring: Provides real-time power usage monitoring, offering information on voltage, current, and power consumption at the outlet and device level.

Power Consumption Tracking: Tracks energy consumption over time, aiding in identifying usage trends and patterns for better energy management.

Outlet-Level Metering: Measures power consumption at the individual outlet level, facilitating the identification of devices or equipment using excessive power.

Remote Power Cycling: Allows IT administrators to remotely turn individual outlets on or off, helping to conserve power when devices are not in use and aiding in troubleshooting.

Environmental Monitoring: Often includes sensors for temperature, humidity, and airflow, enabling the detection of areas where cooling is inefficient and energy is wasted.

Alerts and Notifications: Sends alerts or notifications when power usage or environmental conditions surpass predefined thresholds, enabling quick responses to prevent issues from escalating.

Network Connectivity: Typically includes network connectivity, facilitating remote management, and monitoring through a web interface or other networked management systems.

Phase Balancing: Ensures even electrical load distribution across phases in three-phase power distribution systems, minimizing the risk of overloading on any single phase.

Energy Cost Management: Calculates energy costs based on power consumption data, assisting organizations in budget allocation and energy-saving strategies.

Redundancy and Failover: Equipped with redundant power supplies and failover capabilities, ensuring uninterrupted power distribution even during PDU or power source failures.

Security Features: Includes security measures such as password protection, user authentication, and encryption to safeguard against unauthorized access and control.

Integration with Management Systems: Designed for seamless integration with data center management systems like DCIM software, streamlining monitoring and control across the entire data center ecosystem.

Scalability: Available in various configurations and form factors to accommodate power distribution needs, making them suitable for environments of different sizes.

Foreman is a comprehensive systems management tool that integrates with Smart PDUs to map containers or sites precisely based on plug location. One of the key features of a smart PDU is remote management, which allows Foreman to monitor and control the PDU from a remote location using the platform. This enables administrators to easily access information about the power usage of individual outlets and devices, set up automated site map locations, and remotely turn on or off individual outlets through power cycling. To understand how to set up the site map function using a smart PDU, check out our post here.

Another advanced feature of a smart PDU is power monitoring. Smart PDUs can measure and report power usage at the individual outlet level, providing Foreman with detailed information about the power consumption of each device. This data can be used for capacity planning, troubleshooting, and energy efficiency optimization. With the help of power monitoring, Foreman can identify which devices are consuming the most power and take steps to optimize energy usage, reduce costs, and improve overall efficiency.

Outlet control is another feature that sets smart PDUs apart from basic PDUs. Smart PDUs offer individual outlet control, which allows Foreman to remotely turn on or off individual outlets or set up automated power schedules that are useful in Demand Response. Individual outlet control enables Foreman to manage power usage more efficiently and ensure uptime while precisely targeting miners through phases of Demand Response curtailments.

With smart PDUs, Foreman utilizes miners to cycle up and down miners. However, future use cases could utilize anything plugged into the PDU, including large facility fans.

Choosing A PDU

When selecting a PDU, it is important to consider your specific power distribution needs and the features that will be most useful in your environment. A basic PDU may be sufficient if you have a relatively simple setup with a limited number of devices. However, suppose you require more advanced power management features such as remote monitoring and control, power monitoring, environmental monitoring, and individual outlet control. In that case, a smart PDU may be the better option.

Factors such as mounting options, power capacity, and compatibility with your existing hardware should also be considered. By carefully assessing your needs and evaluating the available integration options, you can select a PDU that provides the right features and functionality for your specific requirements.

Related Articles:

• ASIC Container Mining 101 (Prices, Cooling, Deployment + more)
• How do I add and associate APDUs using the Infrastructure feature?

Bitcoin mining containers are versatile units that allow miners to deploy mining rigs on almost any site. This solution has become the most accessible for those benefiting from on-site energy arbitrage. The versatility of mining containers has quickly grown into a fast-evolving industry, enabling Bitcoin miner deployment in many shapes and sizes, from large-scale facilities to remote flare gas sites.

Containers have become an unexpendable tool for those seeking low-cost electricity and power arbitrage on-site and in remote locations. Below we’ll go through all the aspects you need to know about a mining container, including types of containers, what to look for, and general pitfalls when purchasing.

Sections:

• Container Types and Sizes
• Remote Management
• Air Intake, Circulation, and Filtration
• Power Distribution
• Rack Style and Miner Type
• Security
• Deployment

Container Types and Sizes

Container types and sizes can vary depending on the application and drop zone. The two application types are specific to the miners you’re deploying: air-cooled or water/immersion-cooled. Container size can range from a few feet to the size of a train car.

Air Cooled

Air-cooled containers are the most common type of mining container. They come in small to large applications and vary depending on power capabilities on site. The size of the site matters when looking into mining containers. If there is a specific output wattage the site is targeting, it’s best to base your container purchase on that. For example, small flaring sites run a small modular data center costing around $20,000 to $40,000. In contrast, larger sites that produce multiple megawatts will likely need multiple 40ft containers ranging to upwards of $200,000.

Immersion

For immersion, applications come in tanks, a few feet wide to larger sizes, and containers filled with immersion. Tanks hold the specific hardware and circulate non-conductive dielectric cooling liquid through the tank to keep the machines at a regulated temperature. Immersion tanks can increase the machine’s lifetime and allow users to overclock more efficiently. While Immersion miners have some different features, they require a more complicated setup than air-cooled machines.

Remote Management

Something that is not typically included when purchasing containers is the miner management system. Sure, hardware in the container provides miners power and networking, but remote management is vital to the efficiency of your operation. Foreman provides a management solution for owners to keep a pulse on the miners remotely; all it takes is a small on-site computer.

Miner Management software allows users to monitor their container and the site, visualize if miners have powered down, and keep miners running at maximum capacity. The ticketing system can conserve time and energy by batching issues before sending a technician to the site. Foreman can also integrate and curtail using smart PDUs, auto-generate a  site map, and allow easy visibility into the container.

For more information, visit the Foreman information page here.

Air intake, Circulation, and Filtration

Fans:

There are two types of fans for air intake systems.

• On-board miner fans
• External auxiliary fans.

The first type utilizes onboard fans from the machines, with no additional fan to pull air through the container. The miner uses its inboard fans to direct the air through the container, drawing no additional power.

The second type of fan is an auxiliary fan. Large fans are placed inside or outside, pulling the air through the container and sending hot air out. These fans are generally bigger and optimized to make airflow the most efficient. There are usually two types of powering auxiliary fans, with a simple on/off function or with variable frequency drives (VFD). Variable frequency fans are helpful when underclocking/overclocking machines as they allow you to modulate the speed of the fans. This way, the fans can run slower or faster depending on different variables such as ambient temperature or more nuanced chip temps.

Intake

Miner air intake can be either flat with no change in the panel or have an increased surface area in the air intake panel itself. An increase in size or surface area allows the intake to pull much more air in so as not to choke or impede the fans, allowing more air to enter the container to evacuate more heat eventually. That pressure change helps keep hot air from getting sucked back into the miner and causing backdrafts.

Filtration

Air intake is crucial to keeping machines running at optimal levels. When containers are dropped on site, it is worth noting what type of site the container might be used on. Is it going to be snowy and cold or hot and dusty? Does the air intake have a rain cover? All these should be considered for the application of your mining container. Different types of Air filters will help in different situations; it’s just about finding the right one for the job.

Power Distribution

PDUs and Smart PDUs

Two types of Power Distribution Units (PDUs) are usually used within a container. Both are for different applications and use cases, depending on how much the user is willing to spend.

A regular PDU is a device that distributes power to multiple devices across the container. They were historically used for data centers and now find a similar use case with bitcoin mining. Mining containers have adapted their rack system utilizing the same hardware.

Smart PDUs offer a range of advanced features that go beyond basic power distribution. They leverage network capabilities to monitor and manage crucial variables like power input and output, ensuring efficient and reliable power delivery. One key enhancement provided by Smart PDUs is phase balancing. These PDUs can distribute power more evenly across multiple phases by employing a three-phase system. This prevents imbalances and helps maintain a consistent and stable power supply to the ASICs (Application-Specific Integrated Circuits) within the mining container. This, in turn, safeguards the quality and reliability of the mining operations by reducing the risk of power fluctuations and associated downtime. In essence, Smart PDUs with phase-balancing capabilities are instrumental in optimizing the performance and longevity of mining containers in cryptocurrency mining operations.

Specifically, in Foreman, users can add ASICs efficiently to a site map. ASICs can also be controlled and monitored more precisely with these tools, showing the direct power draw of the machine with the ability to export reports and data.

Mining Container Power Infrastructure

Everything in your container should be rated for continuous use with an 80% De-rate if the container is in the field or on-site. That means that if there are 30 amp breakers, the max cap is 24 amps. Ensuring the rig is checked by an electrician is essential when understanding the derate and providing things are up to standard.

Checking the wiring and neatness in the container is also a good idea. Practicing proper wire management will keep everything visually neat and accessible within your container.  Safety is another concern with power distribution. It’s essential to look for grounding throughout the container, bare wiring at the connection points, and electrical panels with dead fronts to prevent arc flashes. An Arc Flash is a massive electrical explosion, possibly caused by improperly installed, worn, or gapped connections or parts. It is no joke, and having equipment to help protect the workers is something to consider when looking for containers. Any plastic or plexiglass should be avoided.

Rack Style

The racking system is how the miners sit within the container. The rack will decide how much power density the unit has and should be specific to the miner type that is going to be installed. The rack could be set up in order of most to least prevalent in two primary ways.

Bitmain Rack

The ASIC with the most significant footprint is the Antminer. Purchasing a container with this rack size can keep the power density high while leaving room for future customization. Because the Bitmain ASIC machines are so large, you could install a smaller ASIC like the Whatsminer. Unfortunately, that could mean a lower power density, fitting fewer machines.

Modular Rack

These racks allow users to install whichever device they choose, adding customizable elements. This is also not ideal if you want to fill out the entire unit and optimize power density. Whatsminer-specific racks can also be found but may be harder to find, given that they fit in both modular and the Bitmain style.

Security

Security is of the more critical things to consider for your mine, depending on location and risk factors. There are a few levels of security, and we’ll list them from low to high priority.

1. Locked container
2. Camera (inside and out)
3. A fence around the perimeter
4. on-site security guard(s)

The level of security should be tied to how much equipment you’re securing. If there are multiple containers on site with upwards of Megawatts being supplied to the containers, it might be wise to take a high level of security precautions. If it is a small data center box with only a few kilowatts, at the very least, a high-security lock on the container itself is needed. It is up to the purchaser’s discretion. Just consider security when designing your site to protect your investment.

Deployment

Consult local safety rules and regulations when deploying. Some important things to consider before dropping the container are water and drainage. Ensure there isn’t sitting or standing water or a low area, and keep the container lifted off the ground to avoid flooding. Any flooding or sitting water can cause shortages or degrade the container.

Purchasing a container is an investment worthy of research. Hopefully, this guide helped with the different considerations and acknowledgments. The software and management infrastructure are as essential as the miner infrastructure and hardware. Foreman makes remote miner management easy with automated tools and reports. For consultation and a free 30-day trial, check us out here.

Previously, we have covered different software allowing users to configure and manage their ASICs, such as BTC Tools and Whatsminer Tools. Some are low-tech, and others are more advanced, giving users a higher level of control. Miner Management Software is a high-leverage version allowing users to manage their mine at scale. Much like Foreman, AntSentry is a similar software with some key feature differences.

In early 2020 AntSentry came out with their miner management tool, coordinating the miners to allow users to mine at scale. It was so popular with Chinese miners that they launched it in the United States and other countries in late 2020.

AntSentry is similar to Foreman; it uses an on-site computer to help users manage their site at scale. This article will go through the similarities and differences in the miner management software, showcasing the different abilities of the two.

Similarities

Foreman and AntSentry have many similarities. They are real-time miner management software systems allowing customers to leverage a tool to configure and control the mine at scale. When setting up, they both enable batch processing for setup, passwords, updates, and automatic operations, along with a map of the entire site.

The dashboard lets users visualize and manage miners, showing miner states and charts such as hashrate, wattage, and pool estimates. Both Foreman and AntSentry allow users to audit pools and compare hashrate. Users can plug in their electricity prices to get other stats, such as income estimates and profitability. These platforms both log issues and show maintenance requests.

They allow users to mine with all ASIC types, including Antminer, Whatsminer, and Avalon. Users can set up autostart settings with duration and hashrate preferences and stats. Miner management software was created to leverage the miners at scale, giving users capabilities through batching processes.

Features Only Available On Foreman

Searches and Sorting

With many similarities, there are also some critical differences between the two management software platforms. Searches and sorting are primary features in Foreman. It lets users search the active workers by ASIC type, model, customer, real-time hashrate, and other parameters.

Alerts & Triggers

Foreman sends alerts through several platforms like Discord, Telegram, Google Chat, and Slack. Specifically, Foreman allows users to fix and configure miners through triggers automatically; a feature AntSentry does not currently have. If a miner shuts down or isn’t hashing, Foreman can automatically reboot the miner to start up again while sending users an alert for the process. For more info on other triggers configurable in Foreman, check out our documentation here.

Power Control

Finally, one of the most powerful features of  Foreman is the ability to utilize power controls. Foreman connects to your provider’s real-time electricity price feeds and allows users to set strike prices. The strike price is the break-even point at which your miner is profitable. If costs exceed this level, it is no longer profitable, and the strike price triggers a curtailment event.

On top of the Strike Price feature, Foreman integrates with QSEs and CSPs to help users take advantage of Demand Response programs. These programs are set up through specific ISOs and power providers to provide power back to the grid in times of stress. People enrolled in these programs can get paid per performance. Foreman can send alerts to users and warn them of upcoming windows for curtailment, or if the user opts in, they can automatically curtail. For more information on Demand Response, an article is available on our blog.

In summary, management software can make a huge difference when running a mine at scale. Automation and features can help users leverage their time as efficiently as possible while at the same time helping them push their machines to the limit. Key features and usability make or break the platform, so Foreman strives to bring every bit of functionality to the users. If you have any suggestions that could push our management software further, join our discord, and help improve our community.

When electricity prices explode to the upside, it is no secret miners must turn off machines to save on costs and avoid high rates. But what if miners were paid for spinning down operations and sending the electricity back to the grid? This solution, known as “Selling Blocks,” is made possible through Foreman’s platform, which allows miners to automatically and precisely target arbitrage opportunities through our unique platform features.

Part One of the “Cost Saving Strategies” series explored how miners could avoid high electricity costs through automated curtailment solutions, during volatile peak pricing periods. In part two, we will delve into how sending power back to the grid can turn that curtailed time into profit, paying the miner on both sides.

“If you still need to read Part 1 on Peak Avoidance, check it out for more context.”

Miners will temporarily shut off their machines at the break-even point where mining costs exceed their revenue. However, instead of turning off machines and earning nothing, there is an opportunity to generate additional revenue on the other end of that transaction by owning the rights to the electricity block. Looking at the chart below, imagine instead of a miner simply turning off at the break-even with no revenue, the grid paid them directly for the electricity they supplied. This seems like it would be considered a `Demand Response` event, but it’s not. It’s much more lucrative. So what would this look like in practice?

How Does It Work?

In the first installment of our Cost Saving Strategies, we examined the strategy of Peak Shaving, which involves shutting down miners at the break-even point to cut costs and avoid peak prices. But what if the miner owned that electricity and could sell their unused capacity back to the grid? This is referred to as “selling blocks” and differs from  Demand Response programs.  But it’s only possible when working with retail energy providers that give the consumer the right to own the power. This is entirely separate from Demand Response.

“It is possible to double dip with Blocks and Demand Response, but if you are caught curtailing during a Demand Response window, you will be charged a fee for lack of participation.”

Here’s how it’s broken down. An energy provider acts as a liaison between the miner and the energy producer, securing a specified amount of megawatts for a designated time frame, known as a “block.” The energy provider then locks in the electricity price for that block at an agreed rate, for example, $45/MWh. The miner can shut off and halt electricity consumption if the real-time or day-ahead prices go up. ERCOT or other ISOs recognize this and will sell the block at market value in that given period. So if the miner is mining at a revenue of roughly $80/MWh, anything above that means the miner could stand to make a larger profit margin. Suppose Electricity prices rise to $100/MWh. In that case, Foreman can curtail at the “break-even,” and the miner gets paid the difference, making a higher profit margin. At $100/MWh, that would be a 57% higher profit margin for that period.

So to reiterate, when the miner shuts off, the ISO recognizes that it pays the difference in whatever the real-time electricity rate is. In this, it is $100/MWh.

Zooming out and comparing that to the overall cost savings, as we showed in part 1, the added revenue is much higher. If we take the same data from electricity prices over the winter storm in ERCOT, the revenue from selling electricity blocks alone would be close to $120,000 simply from curtailing compared to making nothing at all.

The mechanism works the same way as it would if the miner shut off at their break-even point. There is no added complexity, the only difference would be the miner owns the rights to the electricity block and gets paid to curtail, and thus would be paid through the meter for what they didn’t consume at the real-time electricity price.

Mining Bitcoin and Selling Blocks

Let’s compare the above figure with the earnings from selling blocks and mining. The periods in which mining could have been more profitable during the winter storm were abrupt. In the last article, we showed that if miners were left on for only two hours, a 20MW facility would have lost $50,000 because electricity prices were pushing $4,000 per MWh, almost 100x above normal pricing.

The advantage of owning the electricity blocks means the miner owns the electricity and gets to “sell it back.” Turning off electricity shows on the meter, and the ISO sees that as curtailment, sending back revenue during the curtailed period. The miner will likely see that as a credit on their power bill. Adding the revenue of selling back that electricity above the break-even point now gives a wildly different chart.

Instead of simply making a profit of $94,000 from mining, the facility that takes the risk of owning the electricity blocks can stand to make more during a period of volatility from selling electricity than from mining bitcoin. Add those profits together, and that facility makes money on both ends of the transaction.

The miner that sold blocks and used Foreman to curtail during more profitable periods made $120,000 on top of the mining profits. This is taking a bad situation of electricity price volatility and using it as an advantage. The total earnings from this would be close to $216,000 rather than just sub $100,000.

Foreman allows miners to avoid peak prices and take advantage of the volatility, automatically capturing the arbitrage in electricity prices through selling blocks. Our platform makes this possible with real-time pricing and programmatic curtailment. Miners using these features can outpace the competition, often lowering their overall operating costs and ultimately becoming more competitive.

If you’d like to test Foreman, check our website and sign up for a free trial. If you are a customer and would like a consultation to take advantage of power blocks, reach out to us directly, and we can connect you with a retail energy provider. Cheers and happy mining.

As a deregulated market, ERCOT enables consumers to access free market electricity rates and take advantage of arbitrage opportunities in real-time to optimize their electricity. But how can someone utilize fluctuating power prices to maximize profitability during a volatile weather event without Demand Response?

The analysis will walk through what it would have been like for a miner to implement Peak Avoidance (otherwise known as “peak shaving” or “load shedding”) using two case studies of a theoretical 10MW facility equipped with S19j Pro Miners operating at 100Th/s and consuming 3050kW in ERCOT.

The below study shows how a customer utilizing Foreman and our automated, strike price-based curtailment (peak avoidance) saved up to 90% of costs over the week of the winter storm. This study does not include any payback a power consumer would receive from Demand Response, or any benefit from selling back to the grid. It is only cost avoidance.

Electricity Cost and Storm Overview

Between December 20th and 29th, 2022, ERCOT saw substantial price fluctuations during the freezing winter storm. On a typical day, real-time electricity prices fluctuate between $25 and $35 per megawatt hour. Over this week, however, temperatures were uncharacteristically below-freezing, driving up demand for heating nationwide, and prices in EROT reached as high as $4,000/MWh and as low as $-(20)/MWh across all ERCOT zones on average.

The sizeable upward spike was driven by high demand. At the same time, the drop to negative electricity prices occurred due to an excess of electricity.

Break-Even Point

Before delving into the case studies, it is worth noting that every miner has a break-even point, where revenue equals costs. Anytime the cost exceeds the revenue, they’re mining at a loss. The below graph shows this calculated price point measured in MWh. The break-even point on this graph is the revenue per MWh. Every yellow and red bar is one hour of mining at a loss.

The below graph is in log form. The empty spaces were when electricity costs went negative.

Mining Through the Winter Storm

Case study #1: cumulatively mining throughout the week of the storm without implementing peak avoidance. Each bar is one hour, and the profits made are added into a total showing the end-of-week profits.

The average revenue for these machines was around $82/MWh, and at a 10MW facility, that is $820 per hour. But when the electricity cost passed the breakeven point, the cumulative profit dropped extremely quickly, losing close to $50,000 in two hours, almost $80,000 total.

There would be no profitability when mining through the storm with real-time pricing in ERCOT at 100% uptime. And the time it took to lose all profit would happen over two hours, and one would then need to recover those losses over the next few days. It is not the ideal scenario for a miner to knowingly mine through a loss, but missing price windows is a significant problem. If curtailing isn’t automated when prices spike, shutting down miners quickly can be tricky and easily missed.

Foreman allows miners to set a strike price, enabling automated curtailment, which shuts down the mine whenever profitability goes negative.

Automated Peak Avoidance

Case study #2: a miner utilizing a technique called “Peak Avoidance.” The below graph excluded all points when there was negative profitability and cumulatively stacked profits over that week.

Peak Avoidance is an automated response to unprofitability. Foreman customers calculate their specific strike price (break-even point). When electricity prices rise above that, they’re automatically curtailed.

While leveraging peak avoidance, users can continuously mine while being profitable, automatically curtailing without concern and ending the volatile electricity price period in the green.

Zooming out and showing the per-hour profit can help us understand how electricity prices could affect profitability. Granted, this will be different based on the block rewards and the pool one uses, but regardless, it shows how electricity prices throughout the day affect profit.

Comparison: Peak Avoidance vs. 100% Uptime

When comparing the two studies, the Peak Avoidance strategy ended in the green with a profit of over $90,000, while the 100% uptime miner with zero peak avoidance lost all of its gains and went in the negative in only a few hours.

Visualizing this strategy makes it easier to understand how a quick response time is needed when using real-time pricing. Study 1 didn’t have automated peak avoidance and lost over $100,000 in a few hours, amplifying the importance of knowing the strike price. With the capabilities of fast and responsive miners, there is no reason anyone mining on real-time pricing shouldn’t be utilizing peak avoidance.

Automated curtailment through a designated strike price can mean the difference between walking away from a weather event in the green or trying to recoup the losses on the backend. These events occur regularly, where small spikes in electricity costs rise high enough to cross the profitability threshold.

Our software can avoid peak pricing regularly, letting our users automatically bear the advantage over any competitor, bringing down costs and positioning them for a more competitive advantage.

Additional Information

There are other ways to maximize cost savings outside peak shaving on electricity. These include Demand Response as a Load Resource in ERCOT and outside. Foreman partners with CSPs to help users maximize their profitability and how they interact with the Grid.

When running a bitcoin mine, few places are more suitable than Texas. The electricity market deregulation is aligned with much of the free market attitude that accompanies Bitcoin, attracting more aligned actors. Not only is Texas welcoming to Bitcoin miners, but it is also one of, if not ‘THE’ energy capital of the United States.

The Electric Reliability Council of Texas (ERCOT) is building a one-of-a-kind power market in the US, and with that comes some rules to keep it organized. This article will clarify these rules and explain how to navigate ERCOT, giving a better understanding of the grid operations and programs.

Specifically, we will analyze Non-Spinning Reserves as a Non-Controllable Load Resource (NCLR), highlighting why someone might choose this program based on limits and capabilities. When people think of ERCOT Demand Response, they usually think CLR, but NCLR + Non-Spinning Reserves is a lesser-known program that paid out more in 2022. The article will go more in-depth on this subject in the analysis section below.

By breaking down the technical jargon and explaining the requirements and benefits of various demand response programs, this article outlines the options available to mining operations within the ERCOT power market.

If you’d like to simplify Demand Response and let Foreman and our partners do the work, contact us here or sign up for Facility Management Software.

Introduction to ERCOT

In the United States, most power grids are managed by Independent System Operators (ISOs) that maintain reliability through mechanisms that set prices at specific locations on the grid based on offers from the various Resources connected to the system.  They also manage reliability through “Ancillary Services” that aid in system recovery should an event occur, such as a Resource suddenly shutting down, but more on this later.  Inside these ISOs are utilities that are monopolies managed by “regulators” in each state, as well as the Federal Energy Regulatory Commission (FERC).  FERC ensures that the markets managed by the ISOs outside ERCOT and the regulated entities maintain open access to the grid and fair trade in the markets.

ERCOT is the only unregulated power market in the United States that is not regulated by the federal government and allows consumers to choose their electricity provider. As an ISO, ERCOT operates within Texas and is not subject to federal oversight. A board of directors in ERCOT sets regulations, and transactions between electricity providers and power generators are managed using free market mechanisms.  The Public Utility Commission of Texas (PUCT) has a role similar to that of FERC in other jurisdictions and ensures open access to the ERCOT market.

CLR vs. NCLR

In ERCOT, entities participating in Demand Response are known as Load Resources (LR). Load Resources are divided into two categories: Controllable Load Resource (CLR) and Non-Controlable Load Resource (NCLR). Specifically, CLR or NCLR is not a program but a designation by ERCOT. When applying to become a Load Resource in ERCOT’s Demand Response program, candidates can choose their preferred specific designation.

When someone signs up to participate in Demand Response, they are self-designated either as a CLR or an NCLR.

CLR provides quick response times from 5-minute responses to under a minute. CLRs must react fast to emergency events or conditions independent of ERCOT. ERCOT lists technical and strict requirements that CLRs must qualify for, like frequency response and ramp-up/down times. Each response time requirement is specific to the Ancillary Service, which we will discuss in the next section.

NCLR can perform manual deployments with a slower response and ramp time, usually between 15 and 30 min depending on the program. NCLR and CLR have specific advantages and disadvantages because of these differences in rules.

Ancillary Services

An Ancillary Service is a backup or reserve power resource that can be used in case of an outage or other disruption to the main power grid and can be provided by both Generation and Load Resources. Load Resources are a subset of Demand Response activities that provide additional power back to the grid in times of need as the load reduces its power consumption.  Resources can enroll in various programs within the Ancillary Service subset to contribute power to the grid. The programs tailored to the specific type and power capacity ensure that the grid has access to the resources it needs to keep humming along smoothly.

The definition of an ancillary is to provide secondary or reserve power in the case of downed systems. In Foreman’s Demand Response article, we touched on Peaker Plants, designated as ancillary/backup power requiring a much higher cost to spin up.

With Bitcoin miners utilizing Demand Response, electricity can become dynamically available by efficient, already-funded plants and provide relief to a distressed grid at a fraction of the cost and time of peaker plants. This mechanism taps into the power of the free market grid in combination with Bitcoin mining.

Ancillary Services and other Load Resource programs include:

• Responsive Reserve Service (RRS)
• Non-Spinning Reserves (NSRS)
• 4 Coincident Peak (4CP)
• Emergency Response Services (ERS)
• Voluntary Load Response

Responsive Reserve Service (RRS)

When people think of “Demand Response,” they think of CLRs in the Responsive Reserve Service (RRS) program. But it is also possible for NCLR to perform RRS.

When there is a significant frequency decay or drop in electricity relative to the demand, the Responsive Reserve Service arrests the frequency decay. It returns the frequency to its normal levels. RRS can be performed manually by both generation and load resources, and in the case of NCLR, can be actuated automatically through under-frequency relay control.

ERCOT also creates a buffer between expected and deployed MWs called “offers” and “awards.” The “offers” are the amount of Load Resources enrolled in the specific program. The “awards” is the number of MW awarded and deployed for Demand Response. For example, in 2021, the number of reserves got dangerously low in the winter storm of 2021, most likely because it was an unanticipated event. This buffer is provided throughout the Ancillary Services in ERCOT.

Non-Spinning Reserves (NSRS)

Non-spinning reserves are a lesser-known but equally important demand response program. For ERCOT specifically, Non-spinning Reserves need to be available between 10 and 30 minutes for response and, depending on the Load Resource type, sometimes as long as 2 hours. “Non-spin” refers to a generator that may be on standby, waiting to “spin up” and provide power to the grid. This can also refer to excess power from consumers with a Power Purchase Agreement.

In October 2021, NPRR1093 was approved, with an effective date of May 2022. NPRR1093 allowed the use of NCLR to participate in Non-Spinning Reserves. As a result of increases to this service brought on by Winter Storm Uri and ERCOT’s subsequent “Conservative Operation Plan,” Non-Spinning Reserves have paid more than CLR using Responsive Reserves in 2022 simply because the market has not yet adapted to the new implementation.

4 Coincidence Peaks (4CP)

In ERCOT, the requirement to pay for the transmission system is set on the four system-wide peak intervals in June, July, August, and September.  Thus, loads not consumed during those intervals will not be required to pay transmission costs for the next year for the amount of the load they reduced. During periods that represent the peak, participants should anticipate shutting down for at least one 15-minute interval to avoid the transmission allocation.

Emergency Resource Services (ERS)

ERCOT implemented this program to reduce system demand in times of emergency. It decreases the chance of systemwide load shedding (rolling blackouts) during emergency events through Demand Response. ERCOT will signal for two different response times, ERS-30 (30 minutes) and ERS-10 (10 minutes).

Voluntary Load Response

Customers can also opt into Voluntary Load Response, where Load Resources curtail when energy prices in ERCOT rise to a level where production is no longer profitable. One way is for the load to sign an electricity contract with a Load Serving Entity (LSE). Depending on how the agreement is structured, there may be opportunities to curtail during peak demand. This would be closer to peak shaving, where high prices in electricity can be avoided and sold back through curtailing during peak price, receiving credits or payment in return from the purchasing entity.

Cost Savings Analysis of Programs

To qualify for specific programs, miners need to be able to perform particular tasks in a designated time frame. Although many mining machines can spin up and down relatively quickly, some programs lend themselves better to specific mining machine manufacturer specs.

NCLR + Non-Spin vs. CLR + Responsive Reserves

In ERCOT, when people think of Demand Response, they usually think of Controllable Load Resource (CLR), not NCLR.

Specifically, if you want to register as a CLR, you need to perform ramp-up speeds that satisfy ERCOT and the requirements, and some miners will not meet those requirements. For example, newer generation Avalon miners can ramp down quickly, but ramping up takes upwards of 15 min, and when the window is 5 min for a CLR, you will not meet the requirements for Responsive Reserves.

But what if your machines cannot function at the quick and responsive level CLR demands?

For NCLR programs, miners have a window of 30 minutes, up to an hour, making it possible for them to perform in the Non-Spinning Reserves category.

In 2022, ERCOT paid more through Demand Response (gross) for NCLR in Non-Spinning Reserves than for Responsive Reserves as a CLR, according to multiple CSPs. The higher payment has much to do with NCLR now being available to run in the Non-Spinning Reserves program with less competition. This premium will likely subside and come back down to market pricing but could continue through 2023.

$/MW-year refers to the cost savings an electricity consumer can save in 12 months. So if you had a $50,000 $/MW-year cost savings at a 1 MW facility, the customer would theoretically save around $50,000 over the course of a year.

It is hard to say exactly what the coming year will look like in ERCOT, but as energy prices continue to rise, DR will likely increase as well. Within ERCOT, there are many ways to provide Demand Response, and 4 Coincident Peak is only one of many programs that can stack, providing higher payout in companies $/MW year. Some CSPs are estimated upwards of $300k per MW-year with additionally stacked programs. As a caveat to the graph above, 4CP is a combination of  ‘Cost Avoided,’ while RRS and NSRS are both ‘Services Rendered and Paid.’

“4CP numbers assume the load operates only during those hours and that actual operation may require additional hours of downtime to ensure hitting all 4.  June and Sep are usually easy, but July and especially Aug. pose challenges.”  – Clayton Greer

Management Software Enables New Demand Response Capabilities

Demand Response programs can change throughout the year. Regardless of where a mine is located, Foreman can provide fully automated, dynamic curtailment in all areas of the United States, especially ERCOT.  Our Facility Management Software is programmed to work for you, providing ramp-up and ramp-down speed and agility to optimize your Demand Response revenue.

If you are interested in learning more about the additional capabilities Foreman can add to your mine, contact us to learn more.

Choosing a management tool takes a lot of time and effort.  Not knowing which features matter most can make it impossible.  To help, we’ve sampled the industry, ranging from small-scale hobby miners to enterprise-grade publicly traded companies, and created this list: our take on the most meaningful features to successfully manage a Bitcoin mine at scale.

Management at Scale

Up front, it’s important to understand that if you’re simply looking for miner management software, you’ve narrowed your search too much.  Miner management died in 2019: now, it’s “Facility Management.”  The industry has matured.  Bitcoin mines aggressively participate in Demand Response programs while also relying on more sophisticated infrastructure, such as managed network switches, smart PDUs, auxiliary sensors, and even custom firmware.  The software you pick needs to grow and scale with you.  Most importantly, it should combine as many of these features as possible:

Automated Curtailment and Demand Response

As Bitcoin markets retract and electricity prices fluctuate, curtailment has become a staple to avoid peak electricity costs while securing revenue to help cover operational overhead. Automation is key to effective curtailment: often, the better you perform, the better you’ll be compensated. The management software you select must promote automated curtailments; otherwise, you’re at the mercy of operators and technicians running around the site trying to flip breakers as quickly as they can.  Putting aside the fact that continuously turning miners on and off via breakers will cause your ASICs to fail sooner, you’ll be left with your hands tied, unable to participate in the most aggressive, most rewarding, Demand Response programs.  For programs like Synchronized Reserves in PJM (a 10-minute response time), or DSASP in NYISO (following a linear curve down or up within 5 minutes), automation is a necessity.

Foreman communicates directly with Curtailment Service Providers (CSPs) and local utilities to streamline your Demand Response participation, automatically reducing or increasing your electricity consumption based on grid demand.  With automated curtailment, you’ll never miss a dispatch window, enabling you to maximize your Demand Response dollars.  Foreman enables your site, regardless of its capacity, to curtail in less than a minute, so you can finally participate in otherwise unobtainable curtailment revenue sources.

Most importantly, Foreman enables you to curtail safely.  Through Foreman, the machines are paused, which keeps their power supplies energized, but lets you achieve over a 97.2% power reduction in a manufacturer-approved way that doesn’t require opening and closing breakers.

Financial Auditing

When you mine as part of a pool, you’re relying on a middleman, the pool itself, to pay you fairly.  If you haven’t heard it yet, you will: a miner had their ASICs directed toward a pool and found that the pool was stealing hashrate (siphoning small amounts of revenue, hoping that a miner wouldn’t notice).  Sometimes, it’s an honest mistake; other times, it’s intentional. An independent third party in your corner can help answer the question: “How do I know I’m not being ripped off?”

Automated financial reporting is a necessity.  Reports should be automatically sent to you and your team as often as possible, providing peace of mind. As soon as there’s a deviation, you know immediately.

A unique Foreman success story: our reporting helped one of our customers find nearly six missing Bitcoin (~$270,000 when discovered), attributed to inaccurate transaction fees paid out (too few) from the pool they were using.

Interactive Mapping and Ticketing

Searching for a miner or facility-related issue is like continuously finding a needle in a haystack.  An interactive site map effectively providing precise coordinates to where problems reside is invaluable. The illustration below is an example of Foreman’s Site Map, depicting containers (a001, a002, etc.) and their corresponding racks (a001 – 0, a001 – 2, etc.).  Any miner with an orange or red border is either warning or failing (possibly overheating, not hashing, or missing a hashboard).  The caution signs show which miners are offline, and the colors show how the heat is distributed.

Combined with a built-in ticketing system, your operators can quickly resolve issues without stepping on each other’s toes.  If a miner has a problem, you can assign, open a ticket, and let your team know it’s being investigated.  Additionally, fully customizable roles and permissions allow a team of any size to collaborate on a single dashboard while allowing external partners to access some of the miners at a site, which is common when managing a large-scale hosting operation.

An added benefit: as a farm owner, you’ll also appreciate the ability to track operator productivity (who’s creating and resolving tickets).

Security and SOC 2 Type II

As mines scale, accountability quickly becomes one of the most common problems facilities face when relying on simple desktop applications like BTC Tools or WhatsminerTool alone. Most management tools provide no miner-level change tracking, so when a pool gets reconfigured in the middle of the night to a nefarious wallet address, quickly finding the culprit is a must.

Foreman provides a robust, in-depth audit log, tracking every change that’s made to any miner on the account. Armed with this, the malicious insider can be found in less than a minute.

Foreman is the only SOC 2 Type II (continuously audited) management tool in the mining space.  

For security-conscious businesses, SOC 2 compliance is a must-have when considering a software suite.  SOC 2 is an auditing procedure that ensures your service providers securely manage your data to protect the interests of your organization and the privacy of its clients.  The certification is issued by outside auditors, evaluating security, availability, processing integrity, confidentiality, and privacy.

Best Leading Tool Overall

In our opinion, Foreman is the leading tool to manage a mine at any scale. Through a single, collaborative dashboard, your team can control the entire fleet, promoting visibility over sites while enabling automation to secure profitability.

Our users, on average, realize at least a 5% increase in revenue, excluding any improvement in Demand Response participation.

The ability to remotely manage your full infrastructure while diagnosing and remedying problems saves time, energy, and makes you more profitable.

A Guide To How Bitcoin Miners And The Grid Mutually Benefit From Demand Response

The power grid is a complex system with diverse power production and fluctuating demand. For over a century, traditional power sources were responsible for providing predictable, flexible, and consistent supply to meet the demands of the power grid. With new power sources bringing more unpredictability, the grid has become fractured and unstable, leaving room for arbitrage. Demand Response (DR) incentivizes electricity consumers to adjust their behavior and better match their demand with the grid’s supply.

Bitcoin mining is changing demand response, and it’s happening with increased scale and volume. When and how Bitcoin miners adjust their energy usage is unmatched by any other industry. This article will discuss how Bitcoin mining is naturally symbiotic and synergistic with the evolving grid, how mining can resolve some of the grid’s pain points, and how it secures a reliable, flexible, and steady demand-supply balance.

How The Grid Works

The United States power grid system is nearly a century old, with its infrastructure designed around the reliance on power producers seeking to meet consumer demand directly. Power plants generate electricity, and transformers increase the voltage so electricity can travel long distances through transmission lines, then another transformer steps down the voltage to safely match consumer needs.

One major issue with this system is that it must always be in a constant balance; if the power produced on the supply side is not equal to the power consumed on the demand side in real time, the grid shuts down or is potentially damaged. Since there isn’t a scalable way to store excess electricity currently, energy must be consumed when it is produced on demand. If one side of the demand-supply equation is dynamic and fluctuating, the other must be flexible to maintain balance actively.

The primary indicator of this balance is the utility frequency. In the US, this is always maintained at about 60 Hz, slightly increasing with lower demand and decreasing with higher demand. One can think of this frequency as the heartbeat of the grid: minor deviations of this nominal frequency are standard, while large ones can lead to blackouts and disruptions.

Many variables must harmoniously coexist to sustain the frequency at a stable state. However, as more intermittent resources increasingly come online and replace traditional sources, maintaining the nominal frequency becomes more challenging, and more sophisticated solutions are necessary.

Current Grid Load Types

In the current grid, there are two major electric load types. The first, “base load,” delivers a consistent, continuous output needed to meet the minimum level of demand;  two examples are coal and nuclear. The other type is “intermittent load.” This intermittent load fluctuates, creating an unpredictable power supply, with solar and wind being two primary examples.

Daily fluctuations, mixed with the changing of the seasons, make these energy sources intermittent, introducing grid stress. Before widespread residential and industrial solar power, the energy demand curve was predictable, and power producers had a more predictable demand. With solar now producing a large amount of mid-day power, the curve has changed. It creates a dramatic period where production needs to ramp up quickly.

Peaker Plants

Times of unusually high or “peak” demand, such as during adverse weather events like a winter storm or a hot summer day, require fast and flexible additional power to supplement the base load. Peaker plants come online to help resolve dramatic fluctuations in the demand curve. Since they are quite expensive and less efficient than base load plants, peaker plants are typically used only occasionally.

What is Demand Response

Demand Response (DR) is curtailing or cutting back electricity consumption during peak demand. It is an opportunity for businesses to be compensated for providing power back to the grid. Currently, there are two sectors using demand response: residential and commercial.

Residential Demand Response

Power companies and utility providers often offer savings options, like decreased electricity rates during non-peak hours, to incentivize residential customers to limit consumption during peak hours. Some residential customers take advantage of DR through programs that give electricity providers access to their smart thermostats. Residential owners of solar often take this a step further, leveraging their household generation to reduce power bills during peak demand or even earning revenue by selling this energy back to the grid.

This new shift towards distributed power generation has some unintended consequences. Residential demand response and solar panels have resulted in what’s known as the duck curve, representing a reduction in net power production (explained more in a later section). Solar supplies power back to the grid mid-day, forcing other power producers to shut down. The duck curve represents significant disruptions in grids, making the demand curve steeper. That ultimately means other power producers must quickly ramp up power production, pushing some producers to their limits.

Commercial Demand Response

At the industrial level, demand response allows power consumers to curtail and reduce electricity costs at scale. High-power consumers can lower monthly overhead by opting to participate in DR programs. One way of doing this is through a Curtailment Service Provider (CSP).

Curtailment Service Provider (CSP)

CSPs allow electricity consumers to participate in demand response programs. Based on the program, they may pay energy consumers to reduce or be available for usage during particular events. A spike in demand causes high electricity costs, and the CSP helps those enrolled anticipate these emergency events through system alerts and monitoring.

Current Industries Using Demand Response

Only specific industries can effectively participate in DR, with four key factors to consider: the cost of reacting, the reaction time, availability, and granularity. Arcane Research goes into depth on these properties, but here are two short examples.

Data Centers are high-energy consumers that can struggle with curtailment. If the data center shuts down, essential processes will stop, assuming server workloads aren’t highly available. While data centers can quickly curtail with precision, they have a high cost to react.

Production Plants such as aluminum, steel, and industrial manufacturers can utilize DR, but not without cost. The price to curtail must offset the cost of production. The cost to curtail, reaction time, and where the plant is in the production process all factor into DR. Production plants will likely need additional time to perform if they curtail.

Bitcoin and Demand Response

Bitcoin mining has properties that few energy consumers have at scale. Miners can quickly turn off without affecting the Bitcoin network, providing power to the grid at a moment’s notice, and creating a reservoir of emergency electricity. Although curtailment isn’t new, it has not been available at this scale with such precision. Bitcoin mining, as a new tool for demand response, essentially upgrades and provides an operating system to the century-old power grid.

Mining facilities have an advantage where they can curtail because users aren’t directly affected. This allows for two sources of revenue: block rewards by supporting the Bitcoin network and demand response dollars.

Why Bitcoin Mining Is The Best Load-Balancing Tool

“Demand Response is the key to unlocking the power of flexible loads for our grid systems. Bitcoin Miners are more responsive and faster-acting than any other kind of industrial, commercial, or residential load, which makes them akin to a demand-side battery. Our Texas electric grid and others across the nation are adjusting to accommodate a more diverse energy mix, including more intermittent energy sources. Bitcoin mining can function as a better, faster demand response tool that can essentially act as battery storage or ancillary power plant, playing an important role in grid stabilization.” – Lee Bratcher, President of the Texas Blockchain Council

Cost Of Reacting

A company will typically only reduce its electricity consumption if it is financially beneficial for them to do so from the perspective of opportunity cost. In other words, the payouts from utility providers for reducing electricity consumption as part of demand response must be higher than their cost of reacting (or running their everyday business as usual).

Through curtailing, there is no actual accrued cost since the miners are simply powering down. People rely on cloud-based services, so if a data center curtails, consumers may be affected (imagine if Netflix went offline for 6 hours). With Bitcoin miners, there is no cost to the facility, and it is trivial to turn the miners on and off with the right software. There is no cost to the network as well; the difficulty changes (within two weeks), and other miners pick up the hashrate for the next block. Miners will switch between curtailment and mining based on which is more profitable.

Reaction Time

Bitcoin miners can immediately pivot when there’s peak demand. While it takes hours or days for some manufacturing facilities to curtail, a miner can shut down remotely in under 60 seconds. This reaction time lends itself to a new spectrum of fast-acting demand response, paving the path for more aggressive programs in ERCOT, PJM, and NYISO. If there is a weather event, miners can prepare to curtail while still mining. If there is a last-minute emergency shutdown on short notice, miners or facilities participating in demand response can quickly divert power to where it’s needed.  

Additionally, automated software layer solutions are improving reaction time even more.

Availability

When customers can reduce their consumption without disrupting their daily business, availability is at its peak. If a process is continuously running at full capacity, it will always be able to reduce consumption and provide that additional power back to the grid in times of stress. The more available the power is, the more stable and better suited the industry is for usage as DR.

Bitcoin needs mostly consistent power consumption for mining to be profitable. Miners are continually humming to hit their ROI. The economics of mining are such that every ten minutes, a block is mined based on luck, and if the miner is not plugged in, they miss out on potential profits. The continual growth rate in technology and competition also increases the speed at which a miner will get priced out by the market. Miners tend to plug in ASICs quickly for those specific reasons. When a CSP or another entity requests curtailment, the availability is almost always there, making it particularly high.

Granularity

At a mining facility, curtailments can be run individually on as many machines as desired and required. Hence it is very granular down to individual machine levels, as low as a few kilowatts. This control over the power and hashrate of each miner allows Bitcoin mines to adjust to the precise detail and power needed. If there is a 2-megawatt facility, and the grid needs only 1 megawatt, miner operators can either shut down 1 MW of machines or underclock them all to 50% power. If some machines are less efficient, those machines can be cut first, leaving the most efficient ones running.

The Best Load-Balancing Tool

Combining the low cost to react, quick reaction time, high availability, and an infinitely granular scale: you get an extremely powerful grid balancing tool. The continual growth of hashrate means an increase in the breadth and depth of the market. The breadth is a further outward spread and saturation of hashrate worldwide that lends the opportunity for more curtailment. The depth means an increased wattage and capacity in mines.

This quickly growing industry and the most powerful demand response tool known to date creates a new way to supply power to the grid in times of stress. Bitcoin mining expanding industry and precise demand response tool opens the door to a more stable and cheaper power grid.

Miners Benefit From Demand Response

Profits are highly volatile in the mining industry, and difficulty continues to rise as more miners plug in, driving down margins and creating a race to zero for power prices. This volatility makes it a difficult industry, so saving costs wherever possible is something that needs to be done for every participant.

Riot, the largest miner in Texas, published a report showing curtailment during a summer heat emergency response event brought much more profit than what could have been done with miners alone. In July 2022, the miner produced 318 BTC while at the same time curtailing and sending power back to the grid. According to Riot, the curtailment activity resulted in power credits of $9.5 million, or around 439 BTC. This totaled the equivalent of around 757 BTC and paid for the entire month’s electricity. That is a 180% increase from the month prior.

These emergency response events happen multiple times a year. Other curtailment techniques, such as Peak Avoidance, present opportunities weekly and could net more profit in the long run. Arcane Research’s report on Bitcoin mining and the energy grid studied the effect of percent power curtailment and what that does for miners’ profits. The study was done in west Texas using wind and solar power generation, showing that a 95% uptime resulted in significantly lower average power prices. With a 100% uptime, the electricity costs would have resulted in an ROI of 6,203 days, while 95% turned out to be a sweet spot of 502 days.

Why Should Miners Participate In Demand Response?

The simple answer is that it is cost-effective. In a new and booming industry, competition is always looking for an edge. Leveraging the ability to curtail during peak demand could impact the bottom line and save costs. This is just one of the tools in the tool belt that could change the trajectory of a mining operation.

The Grid Benefits From Miners

Because of its properties, Bitcoin mining significantly changes the power grid. It reduces the grid’s reliance on peaker plants and creates new ancillary power units.

Demand Response Disrupts Peaker Plants

Currently, Peaker Plants are performing the role of a reserve energy resource. They are expensive to run as they only turn on when the demand and electricity are high. The plants are also sometimes slow to get up to speed, needing a forewarning. Bitcoin miners could potentially replace peaker plants and reduce the cost of on-demand electricity reserves. Instead of expensive peaker plants only turning on when demand is high, ancillary power plants are low-cost and available to supply power to the grid in times of need.

Miners Create Ancillary Power Plants On The Grid

Stranded gas is an excellent example of Bitcoin miners creating and funding ancillary power generators. Because of location, if an oil well doesn’t have a connection to a gas pipeline, it’s very expensive to install one. The well is restricted by distance from a pipeline and how much it produces. So instead, Bitcoin miners such as Giga Energy have been dropping generators on-site to produce power and capitalize on what would have otherwise been wasted flared gas.

But that generator has another use. It can hook up to the electrical grid and provide demand response utility. When demand is high and power prices squeeze profit margins, miners can curtail and earn power credits to cut costs. Extrapolate this into every market area where there is arbitrage in power prices and an opportunity to cut costs through curtailment. Bitcoin miners create ancillary power plants, funding them and creating a more stable and cheaper grid.

The Changing Power Grid

“Bitcoin mining is an elastic load that can be incentivized to curtail and free up power in response to high electricity prices during any grid scarcity event. This load resource in conjunction with software companies like Foreman present an opportunity for grids to evaluate Bitcoins responsive load as additional tool for increasing reserves and resilience of grids with the right incentivizes. Higher intermittent renewable penetration, aging infrastructure, and increased electrification are stressing grids globally. Bitcoin minings’ off peak consumption and ability to curtail should be seen as a new funding mechanism to incentivize and pay for more generation and infrastructure. Texas has always been a world leader in energy innovation and ERCOT is showing the world how technology and mutually beneficial bottom up solutions lead to more reliable and affordable power for all. ”  – Gideon Powell

The world is changing, and with changes in energy production come new and unpredictable changes to the grid. Demand response for Bitcoin miners is highly economical and, in fact, one of the few industries that can supply power at scale when needed. No one saw it coming, but Bitcoin mining has become an industry that creates incredible opportunities for how the grid can function synergistically with more integrated renewables at scale.

New and exciting ways of dampening demand curves are presenting themselves. A more reliable and safe grid seems possible with demand response and nurturing funded ancillary power units through Bitcoin mining. Bitcoin mining is the best tool to protect our power grid now and for future generations.