Bloomberg and several other news agencies have written about a power plant in the Finger Lakes region in New York state that has built its very own data center to mine Bitcoin. Capitalizing on its self-generated electricity, the plant mines virtual currency worth about $ 50 000 every day, depending on the exchange rate. Quite the side hustle, they got there.
Bitcoin mining using natural gas: How a New York-based power plant pioneered a new business model
The plant, owned and operated by Atlas Holding LLC Private Equity Fund, was the very first electricity provider in the United States to introduce Bitcoin mining as a commercial activity. More than 7000 servers have been put to work at the Greenidge Generation plant during the recent months that have the capability of mining 5,5 Bitcoins daily.
The 6000-square-meter facility in Dresden, New York, had originally been used as a coal plant and was only later converted into a natural gas plant in 2017.
The total investment is around 65m USD
However, this massive undertaking was not a one-man show. Bitcoin.com reported that the joint venture of Atlas and Greenidge meant an investment of no less than $65 million into the plant with only the 7000 servers worth more than $ 10 million. The rest of the cost covered the transformation of the facility into a natural gas and biomass plant, including the whole reconstruction of the infrastructure.
The server farms are fed directly by the plant, avoiding the connection to the power grid, thus, the costs of system usage fees can be cut completely, which results in additional cost benefits. Since the operation of server farms and Bitcoin mines both have huge electricity demands, the cost of power is one of the key factors in the cost structure.
Incredible pace: construction completed in less than 4 months
Apart from their own employees, business partners in the region have also contributed to the efforts of Greenidge. With a joint effort, they have managed to build and deploy servers for mining in only 4 months.
When we examine the global trends of mining companies, we may discover a tendency of migrating server farms to the cheapest source of power – typically hydro power plants. They may enjoy cost benefits around them, but the mines also become subjects of unpredictable state regulations.
The CFO of the company is a strong believer in the profitability of the operation. According to him, the predictable and low costs can be easily covered by power-related services, leaving space for further cost optimization even.
At this point, the server farm uses 15 Megawatts from the 106 Megawatt capacity of the plant, which they plan to expand further and provide hosting services for international investors.
Enterprise-class solution complies with regulation
Kevin Zhang, head of Blockchain Strategies at Greenidge Generation, is optimistic about the prospects of the new development. “A power plant generating electricity behind-the-meter to energize its very own mining operation allows investors to tap into the profitability of not only cryptocurrency markets but also energy markets,” Zhang said.
A strong vision into the future is just as important as the diligence to comply with regulations. However, the combination of the two can assure competitiveness over many years.
How accelerated ROI is achieved
While previously the operation of the plant was only profitable during peak periods, in the summer or in the winter, having a predictable base load consumptions makes it possible to operate all year round. This way, the utilization of the power plant has increased dramatically and the return on investment has accelerated.
What’s next in the industry? The success story of Greenidge Generation’s crypto mining operation is likely to encourage other natural gas companies to start minding. Plants with excess power and/or space can both capitalize on Bitcoin mines. While natural gas providers can theoretically sell their surplus power to other types of customers, they often end up rather having to decrease their production depending on market conditions. No wonder that power plans are quick to realize that the on-site surplus power could be a source of profits with Bitcoin.
Of course, the so-called halvening scheduled for May is going to affect all Bitcoin miners globally, but power plant owners remain optimistic. By optimizing their energy production and cost structure, their competitiveness is assured in the long run.
Enerhash strives to make the installation of mining farms easier and widely available for power plants in Central Europe and Russia.