2020 is a year associated with "negative". Since April 20, Canadian crude oil WCS futures and US crude oil WTI futures have fallen to negative prices one after another. At the same time, overseas electricity has seen more negative price moments. According to Zhibao Information, after the lockdown in March this year, France had more days with negative electricity prices than in the previous 20 years; on Tuesday, Belgian power producers had to pay 90 euros at lunch time to eliminate excess electricity within 1 hour; Germany's electricity price fell to -84 euros, and the number of days with negative electricity prices was also much more than in previous years. French electricity price change curve, image source: Zhibao This seems to be a great thing for miners who have been suffering from high electricity costs. In the past, high electricity costs caused miners to lose money as soon as they started up their machines, and a large number of low-performance mining machines became scrap metal and were eliminated. But now, miners have become the main force in absorbing excess electricity. It seems that mining does not require paying electricity bills, and they can even receive money. Is this really the case? Negative electricity prices are used to absorb excess electricity Among European countries, Germany has the most negative electricity prices. This year, due to the impact of the epidemic, the number of days with negative electricity prices has increased compared with previous years (in fact, negative electricity prices are not common in Germany). Under the "negative electricity price" situation, German residents do not have to pay for electricity, and can also receive corresponding subsidies. However, negative electricity prices do not mean that Germany has always had sufficient electricity. In fact, negative electricity prices are the result of the extremely unstable power resources in Germany. According to a report in January this year, Germany has more than 30,000 wind turbines and approximately 1.7 million solar photovoltaic power generation devices, but the utilization rate of these renewable energy devices is only 17% due to unstable climate. On "bad days", these devices can hardly generate electricity. It is precisely because of this instability that wind and solar power only account for 35% of Germany's total electricity. In order to ensure a stable power supply, Germany mainly relies on coal, natural gas, and nuclear power generation, and also needs to import electricity from European countries including France and Sweden. However, when solar and wind energy are abundant, the excess electricity becomes Germany's biggest problem. The storage cost is high, and the cost of shutting down and restarting traditional power generation facilities (coal, natural gas, nuclear power) is high. Germany can only transfer wind and solar power to other European countries, and even start selling it at negative prices. The mining industry, which consumes a lot of electricity, can absorb excess electricity and store the excess electricity value in the form of cryptocurrency, achieving a win-win situation. As DJ Bitwreck, a miner who mines with oil and electricity, said, "Excess electricity is a headache for power producers, but it is a gold mine for us." In fact, the attitude of the government towards cryptocurrencies is two-sided. On the one hand, they are actively promoting regulation to protect consumers from the harm of the crypto market; on the other hand, banks or governments also have a certain share in the financial market, and they want to benefit from the cryptocurrency industry, integrate this technology into the existing system, and maintain innovation. In March this year, the German Federal Financial Supervisory Authority issued new guidelines defining cryptocurrencies as financial instruments. Starting this year, German banks and other legal financial institutions are allowed to manage crypto assets on behalf of their clients. In April this year, the Ya'an Municipal People's Government issued a document to explicitly support mining during the flood season. The document states that "we must give full play to Ya'an's hydropower resource advantages, form a win-win situation of sufficient hydropower consumption and healthy and orderly development of the blockchain industry, and build Ya'an into an influential blockchain industry gathering place in the country." The encryption industry is like a primitive force. While various places hope to utilize it, they are also afraid that it will produce many by-products and eventually become difficult to regulate and uncontrollable. The mining industry is still in the primitive stage of using surplus electricity, and the instability of electricity resources is still a problem that miners need to solve urgently. "Miner migration", that is, miners go to where the electricity price is low, reflects the behavior of miners chasing low-priced electricity, and can also be said to be a survival form evolved by the mining industry. News source gtm reported in September 2018 that a German blockchain company called Blockchain Power Unit sold itself to a power plant and planned to place mining machines in wind turbine towers to use the power plant's excess electricity for mining. The report wrote that the German Renewable Energy Act will expire in 2020, along with the subsidies received by the wind farm. A total of 22,400 wind turbines across the country will lose 65% of their income (subsidies). The wind farm plans to use 20% of its electricity for crypto mining to maintain the profitable operation of these wind turbines. “Mining Paradise” will not always be “Mining Paradise” Even in areas where electricity supply is plentiful and reliable, miners face some instability. When we talk about mining meccas, Iceland is one of them. According to Spiegel Online, Iceland has a cold climate, which is naturally suitable for cooling the mines, and the local surplus geothermal energy provides mining electricity to miners at almost zero cost. Iceland is also rich in hydropower resources. According to E.ON, two small towns in the country, Plattsburgh, NY and Magog, Québec, benefit from hydropower resources from the St. Lawrence River in Canada. The town of Plattsburgh has reached an agreement with the hydropower plant to allow it to sell electricity at a price lower than the domestic average. This is beneficial to local residents, but it also attracts a large number of miners to come in. In fact, Iceland's mining energy consumption once faced "exponential" growth. Reports in 2018 showed that the country's mining activities consumed more electricity than its more than 300,000 households. Because of the alarming energy consumption of mining, Icelandic lawmakers have begun to propose a tax on mining activities. These small towns in Iceland have begun to ban more miners from entering. If the amount of electricity used exceeds a certain limit, miners need to buy high-priced electricity from the spot market. In addition to China, North America, and Europe, the Middle East can also be classified as a mining paradise because of its cheap electricity. The news that Iran’s electricity cost four cents per kilowatt-hour was widely circulated in the Chinese mining circle. The region was once a destination for domestic miners to migrate overseas. In January this year, tensions between Iran and the United States intensified, and miners began to evacuate. One miner said, "If a war really breaks out, people can flee, but the mining machines will have to stay in Iran." In Bao Erye's view, mining in Iran faces the risk of being sanctioned by the United States, "You can't do it, you will be sanctioned." Another miner said, "It's not good to go to Iran all the time, unless you don't want to go to the United States in the future. Those who have been to Iran before are afraid that the United States will not issue visas." The situation in Iran is unclear, and countries like Uzbekistan have become the first choice for miners to withdraw from Iran. In 2018, Uzbekistan established the legal status of cryptocurrencies such as Bitcoin. It is reported that the cost of mining a Bitcoin in Uzbekistan is only US$1,800, ranking third among the cheapest countries and regions in the world for mining. In October 2019, the Uzbek government suddenly changed its mind and issued a decree to increase the electricity fee for cryptocurrency mining by three times. Even so, overseas miners still regarded Uzbekistan as the next mining mecca. Iranian locals bought the mining machines from the evacuated miners at low prices and continued to mine during the war. "Mining for Bitcoins" by Amanda Gläser-Bligh "Germany's overdose of renewable energy" by Jonathan Tennenbaum "3 (More) Novel Plans to Mine Bitcoin With Clean Energy" by Jason Deign From triple electricity bills to "national mining", this Central Asian country may become a destination for overseas miners
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