“Abandoned electricity” reaches 110 billion kWh, and only Bitcoin mines can save it?

There have been rumors about Bitcoin and digital currency mining farms recently, and some say that decision-makers should strictly supervise them. One of the core reasons is that they "waste a lot of electricity resources."

A Bitcoin mine is a model that uses computers (mining machines) to perform calculations and solve problems according to the rules of Bitcoin, consumes electricity, and obtains virtual currency rewards.

Before I start, let me first state my conclusion: As long as you understand the definition of “wasted power” and the scale of “wasted power” in China, you will know that the claim that Bitcoin mines are a waste of resources is untenable.

On the contrary, I am afraid that only Bitcoin mines can save China's "wasted electricity". Therefore, from the perspective of increasing local economy and employment, it is worth commending that decision makers take a moderate and restrained attitude towards mines.

The amount of “wasted electricity” in Northwest and Southwest China is as high as 110 billion kWh

There is no such thing as “wasted electricity” in traditional electricity production, but with the widespread construction of new energy facilities, “wasted electricity” has become a topic of great concern.

At the 2017 Economic Situation and Power Development Analysis and Forecast Conference, the China Electricity Council stated that in 2016, the country's "abandoned hydro, abandoned wind, and abandoned solar" electricity exceeded 110 billion kilowatt-hours. In comparison, the Three Gorges Power Station only generated 17 billion kilowatt-hours of electricity that year.

Specific categories and regions:

In 2016, the amount of wind power abandoned nationwide was 49.7 billion kWh, up 46.6% from 2015 and four times that of 2014. Wind power abandonment occurred in 11 regions including Xinjiang, Gansu, and Inner Mongolia, and Shaanxi was the first to do so.

Among them, the wind power curtailment rate in Gansu soared from 11% in 2014 to 43.1% in 2016. The wind power curtailment rates in Xinjiang, Jilin, Inner Mongolia and Heilongjiang reached 38%, 30%, 21% and 18.7% respectively.

In 2016, the average solar power abandonment rate in the western region reached 20%. The abandonment rate in Xinjiang was as high as 32.23%. In the first quarter of 2016, the abandonment rate in Gansu reached 39%, becoming the "double champion" of "wind and solar abandonment" in China. In addition to the serious idleness of installed capacity that has been connected to the grid, there are also some installed capacity that has been built but cannot be connected to the grid, and are basking in the sun in the Gobi Desert.

In 2016, abnormal water abandonment in the southwest region hit a new high, with power losses exceeding 70 billion kWh. The amount of abandoned water in Sichuan Province further increased to about 14.2 billion kWh, an increase of about 39% year-on-year, a record high in the past five years.

The provinces where "power abandonment" occurs frequently are mainly the relatively poor, low-power-consumption northwestern, southwestern and northeastern provinces, while the provinces with high power consumption are mainly the eastern provinces.

Experts pointed out that my country currently lacks a plan for absorbing and transmitting large-scale new energy bases, and has not yet established a market-based mechanism to promote cross-provincial and cross-regional consumption of new energy. In the current situation of insufficient electricity demand and excess installed capacity, provinces are not willing to absorb new energy from other provinces.

Bitcoin mining farms and “abandoned electricity” are complementary market resources

From the current situation, it is difficult to transport electricity from the west to the developed provinces in the east. Due to environmental constraints, it is difficult to quickly attract investment and introduce industrial enterprises that require large amounts of electricity.

The government's response is to let the market automatically adjust. Previously, the CPC Central Committee and the State Council issued "Several Opinions on Further Deepening the Reform of the Electricity System", emphasizing that power generation companies should directly enter the market, trade directly with power users, and determine the volume and price through competition.

Under the guidance of the "invisible hand" of market mechanisms, Bitcoin and other digital currency mines are naturally combined with "abandoned electricity" to become a "perfect complementary partner."

Bitcoin mining farms need to perform a lot of calculations, but apart from the basic mining equipment and electricity, they do not have any other requirements, and at the same time they can directly obtain profits through calculations. In comparison, there is no industry that can make use of "abandoned electricity" more easily than Bitcoin mining farms!

Driven by the "goddess of the market", major mines have begun to use a large amount of "abandoned electricity" in the southwest and northwest regions in recent years. Among them, Xichuan, where "abandoned electricity" has hit a five-year high, has become the center of the mines, and many mines are built directly inside hydropower stations.

It is reported that a mine consumes 40,000 kWh of electricity per hour, equivalent to nearly 300 million kWh of electricity per year, solving 2% of the total amount of abandoned electricity. In fact, it not only turns "waste electricity" into treasure, bringing tax revenue and wealth to local governments and enterprises, but also employs a lot of local operators, solving employment problems in some poor areas.

Speculation needs to be curbed, but we should not throw the baby out with the bathwater

In terms of handling "waste electricity", we can see that the advantages of Bitcoin mining farms are very obvious. However, some decision makers are also worried that a large number of mining farms will trigger Bitcoin speculation. The author believes that Bitcoin, as an emerging industry, does have advantages and disadvantages, and it should be viewed in two ways.

First of all, because the issuance and financing of various types of virtual currencies have also been irregular and speculative, the central bank has taken emergency measures to curb it, banning domestic ICOs and transactions, which has largely cut off speculation at the source.

In contrast, after mining digital currencies, they are mainly traded overseas to obtain foreign exchange. A large amount of new funds flow back to China for consumption and investment, which promotes domestic consumption to a certain extent, but does not bring about speculation in China.

Secondly, mining operations do need to be standardized in terms of taxation, environmental protection, electricity, etc. Otherwise, the spread of a large number of small-scale mines will also lead to some emergencies.

Of course, decision makers can choose to regulate or follow market rules. After all, there are a large number of new mining farms in the United States, Canada, Iceland and other places, and more foreign companies and individuals are entering the digital currency mining industry. Since the total amount that can be mined is fixed and decreasing, personal income will naturally decline, and the hot market of mining farms will return to rationality.

Currently, Bitcoin has been recognized by many developed countries such as the United States, the European Union, and Japan, and has also been banned in some countries. In my opinion, its future development trend is more positive than negative. Putting aside Bitcoin and digital currency itself, the mining industry can perfectly solve the problem of "waste electricity" to a certain extent without causing any crisis.

Why don’t policymakers give some space, as the central government report says, “let the market play a decisive role in resource allocation”? Otherwise, Chinese mines will move to Russia, Canada, Iceland and other places with similarly serious waste electricity problems, handing over tax revenue and wealth to others, which will lead to a huge waste of resources.