Decisive battle for flood season: a large number of miners move to Yunnan, Guizhou and Sichuan

The rivers deep in the mountains of Sichuan are already surging. In another three months, they will usher in the flood season and the cost of hydropower will not exceed 20 cents.

Wang Shengli had already calculated the time and had already set out to grab a piece of land of his own before the arrival of hydroelectricity in Sichuan during the flood season.

He is a Bitcoin miner. Over the past year, the price of Bitcoin has fallen below $3,000 in the bear market. In addition, the government has tightened its management of mining farms. More than half of the mining farms have been either closed due to non-compliance with the regulations or shut down because the electricity cost is higher than the mining income.

Odaily Planet Daily made a simple calculation based on the decline in Bitcoin's computing power across the entire network. It found that at least 820,000 mining machines are currently on standby because their electricity costs are higher than the mining revenue.

Migratory birds chase food, miners chase profits. An authoritative source in the mining industry revealed that about 80% of miners in Inner Mongolia, Xinjiang, Gansu and other places are like Wang Shengli, and they urgently need to migrate to Yunnan, Guizhou and Sichuan before the flood season arrives, otherwise they will not be able to survive.

Find electricity

After the BCH fork, the price of Bitcoin plummeted. At that time, Wang Shengli was just a small mining farm owner with 5,000 mining machines in Anhui.

At the end of the year, many mining farms could no longer sustain and had to shut down. He took the opportunity to purchase second-hand mining machines and turned to Sichuan to build a medium-sized mining farm with 30,000 machines.

Before the flood season in June, Wang Shengli planned to build a mine in Sichuan.

Zhao Miao, the owner of a Sichuan mining farm, has an annual average electricity supply for 200,000 mining machines. Although some S9 mining machines are already shut down, he still negotiated for hydropower for 10,000 and 100,000 mining machines respectively at the end of the year.

Zhao Miao told Odaily Planet Daily: "Sichuan's hydropower is quoted in three stages: 1.6 to 1.8 cents in the flood season, 2.8 to 3 cents in the normal water season, and 3.4 to 4.1 cents in the dry season." Currently, the power design of Zhao Miao's 10,000-machine-station mine has been completed, and the 100,000-machine-station mine is still in the power design stage.

On the eve of New Year's Day, more than 10 miners from Xinjiang, Guizhou, Gansu and other places came to negotiate with Zhao Miao about the mine's custodial electricity price and the first-hand cost electricity price for cooperatively building a mine.

However, a miner who went to Sichuan to negotiate electricity told Odaily Planet Daily, "Although the electricity price during the flood season is attractive enough, the other party has not given a suitable price. We are a little anxious, but there is nothing we can do. It is a bit early to set the electricity price now. If the electricity price is one cent higher than that of our peers, it may be a loss."

Liu Anna, a mine owner in Beijing, has also received many miners who came to discuss cooperation recently. In order to welcome this year's flood season, Liu Anna started looking for electricity in October last year, and built two mines with a total of 100,000 machine positions in Sichuan and Yunnan in December.

We first obtained the qualifications and then built the mine. Liu Anna said: "Once you have chosen the electricity, you must first establish connections with electricity resources. How can you get the electricity construction site without strong connections? In the local area, getting electricity means money, and everyone wants to take advantage of this fat."

In addition to running a mine, Liu Anna also runs a mining company. She bought 50,000 second-hand Antminer S9 and T9+, and except for a small portion that she sold, she kept the rest in her own mine.

Wang Jie, a comprehensive hosting service provider for mining machines, is also setting up the Fengshui Power Mine with 150,000 mining slots. On the other hand, he is also purchasing second-hand Ant S9 mining machines.

Wang Shengli told Odaily Planet Daily that building a mine is mainly about financial resources. It is estimated that the investment in building a mine is about 13 million yuan. If there is no consortium to support it, the mine cannot be built.

In addition, a cooperative relationship with the local power department is also important.

"The power plant is still a very large interest group. For example, if the ex-factory price of hydropower is 0.18 yuan, but they only give you 0.22 yuan, 0.04 is their interest." In Wang Shengli's own words, negotiating electricity is a tortuous matter. If the cooperative relationship is not in place, it is easy for other powerful mine owners to snatch the negotiated electricity.

Wang Shengli was planning for a bear market, hoping that the bull market would pick up. He had expected a small rebound before the Spring Festival, but the market did not go as Wang Shengli expected.

Desperate to win

Sichuan's hydropower resources rank first in the country. According to the 2017 Sichuan Hydropower Directory, it has 6,633 large and small hydropower plants, which is 1.8 times the number of hydropower stations in Hunan that year and 2.17 times the number of hydropower stations in Yunnan that year.

At present, Sichuan has nearly 75 million kWh of hydropower installed capacity, and the annual power generation reaches 378 billion kWh (75 million hydropower installed capacity ✖️ 210 days of flood season ✖️ 24 hours).

Wang Jie said that due to the limited transmission channels in Sichuan, there are about 50 billion kilowatt-hours of surplus electricity that cannot be transmitted every year. If this excess electricity cannot be consumed, it will only be wasted.

Compared with hydropower, the approval of electricity use in Sichuan is not particularly difficult.

Large power supply, stable electricity, low cost and low risk have attracted miners from all over the country to move to Sichuan.

Odaily Planet Daily learned from several Sichuan mine owners that the cost electricity price during the flood season this year is expected to be between 0.14 and 0.19 cents. If the price difference and operating expenses are added, the hosting electricity price will be between 0.2 and 0.26 cents.

This is much cheaper than the managed electricity prices in Inner Mongolia and Xinjiang. According to Song Weining, the owner of a mine in Inner Mongolia, most of the electricity in Inner Mongolia and Xinjiang is thermal power, and the electricity prices are mostly between 3-3.5 cents.

Thermal power is expensive and not very flexible.

Miners who have signed contracts for hydropower during the flood season can choose to shut down their power during the dry season if the electricity cost is higher than the currency price. However, thermal power is not so flexible and cannot be shut down whenever they want.

Song Weining told Odaily Planet Daily that more and more miners and mine owners are heading to Sichuan to look for electricity. The miners hope to make back their previous losses when the flood season arrives.

But things are not that easy. The national electricity policy is still tightening, some non-compliant small hydropower stations have been shut down, the demand for electricity is increasing, and the power resources of the industry's leading companies are becoming increasingly limited.

Song Weining observed: "Miners with less strength tend to get more electricity from the secondary power market, which will also cause some miners to receive hosting electricity prices that are 10% higher than the average level."

Gaming

Song Weining also analyzed that abundant hydropower is indeed good for the mining industry, and even better for miners. However, there are four situations that will be bad for mine owners:

1. 80% of the miners in Xinjiang and Inner Mongolia are in urgent need of relocating to Yunnan, Guizhou and Sichuan before the flood season arrives. If this happens, it will not be good news for local thermal power mine owners;

2. Currently, the number of mining machines in mining farms far exceeds the total number of machines owned by miners. Supply exceeds demand. Mining farms with abundant hydropower are bound to engage in price wars in order to compete for customers.

3. If the cost electricity price is controlled below 1.8 cents, the corresponding hosting electricity price will not exceed 2.6 cents. Mining farms with cost electricity higher than 1.8 cents will hardly have a competitive advantage.

Regardless of whether they have already grabbed electricity resources or are in the process of grabbing electricity resources, although they estimate the cost of electricity to be between 0.15 and 0.18 cents, and some even say that they can get a cost price of 0.12 cents, before the flood season, the mine owners are unwilling to sign an accurate hosting electricity price with the miners.

The market is floating. If the electricity price drops during the flood season or other mines have cheaper electricity, it will be unfair to the miners.

How to prevent the risk of power grabbing during the flood season? Mine owner Zhao Chuan has a dynamic view. He believes that electricity prices change with the market. As long as you can ensure that your electricity price is lower than 90% of the electricity consumption in the mining circle, you can become the winner in this bear market. "It is useless to consider other complex factors. If you want to mine, you must compete with your strength and get cheap electricity."

For example, if the average electricity cost of the entire network is 0.3 yuan, then at the worst you have to get 0.2 yuan of electricity to hedge the risk. When the price of the currency drops by $100, a group of miners will shut down their machines, and the computing power will also decrease. So you have to make sure that you can be one of the 10% who do not shut down their machines, and then you win.