As part of my mini-series on why Bitcoin Is An Energy Solution, Not An Energy Problem, I would like to take some time to touch on a problem facing renewable energy known as “energy curtailment” and how bitcoin eliminates the need for energy curtailment.
What Is Energy Curtailment?
With all sorts of new energy being produced from renewable energy sources such as solar, wind, and even hydro, one of the newest challenges that is facing these energy producers is actually an overproduction of electricity.
While overproduction might not seem like a bad thing, it has actually given birth to a problem commonly known as energy curtailment. In short, energy curtailment is when energy producers need to reduce their production either to prevent damage to the grid or because there is simply not a buyer for the electricity being produced.
In the energy sector, energy curtailment is commonly known as “too much of a good thing” but to put things simply, it’s a waste of energy.
There are two basic kinds of energy curtailment: grid curtailment and production curtailment.
1. Grid Curtailment: Overload
Grid overload is exactly what it sounds like. When solar, wind, or hydroelectricity production is particularly high, the energy grid needs to be able to transport that electricity from where it’s produced to where it’s consumed.
If the amount of electricity that is being produced at any given point in time is greater than what the grid is able to transport, energy producers need to reduce or “curtail” their production to prevent grid overload. If they don’t curtail production, they run the risk of damaging the energy grid and cause blackouts. Neither energy producers nor grid operators want that.
In short, the energy grid can only transport a certain amount of electricity at a time and sometimes there’s too much electricity being generated by renewables. Since there’s not currently a way to effectively store that surplus energy, production needs to be turned down.
2. Production Curtailment: No Buyer
The other form of energy curtailment isn’t caused by physical limitations of the grid itself. Instead, the other need to curtail electricity production is because there is simply nobody to purchase and consume it when it is produced.
In the middle of the day, energy demand is actually at one of its daily low points but solar generation is at its peak. This results in more solar energy being produced than is consumed and thus a surplus is generated. Without a buyer for this electricity, this is effectively lost revenue for the solar energy producer.
Wind energy producers are facing the same problem at any point in the day or night because there’s no way to control when the wind blows. Oftentimes there is a surplus of wind energy when people are sleeping and energy demand is at the lowest point throughout the day.
Even hydroelectric dams face energy curtailment during a particularly rainy season or during months when snow runoff is at its peak. Without the ability to store all of the water in a hydroelectric reservoir, they need to let some of the water through the spillway and waste perfectly good gravitational energy.
The obvious solution for dealing with surplus energy would be to store it until we need to use it. Unfortunately, there’s not currently an economical way to store any of this surplus of electricity at scale so it gets completely wasted.
In order to better understand how energy supply and demand function, there’s a popular graph that is gaining some attention within the energy sector known as “The Duck Curve”.
Understanding The Duck Curve
The Duck Curve is an energy demand graph that shows the demand for electricity at different times of the day.
- In the morning, demand spikes as people wake up and prepare for work, school, etc.
- In the middle of the day, demand flattens out (and even dips a little) since the sun is shining bright and the need for electricity is diminished.
- In the evening, demand reaches its daily high point as people come home from their daily lives and begin to turn on lights, appliances, etc.
This video does a really good job of describing the problems facing renewable energy production and how the duck curve works.
You can see that each and every year, the amount of electricity being generated by renewables is increasing, which results in a reduced consumption from the existing energy suppliers.
Energy Supply vs. Energy Demand
Managing energy is something that we often take for granted because we don’t truly realize all of the work that is involved when we use electricity in our homes, offices, schools, and entertainment venues.
When you produce electricity, it either needs to be consumed at the time of production or stored so that it can be consumed later. If neither of these happens, the energy gets wasted
It’s actually an incredible balancing act that the energy producers and grid operators have down to a science but that balancing act is being disrupted as energy producers become more decentralized. With more renewables popping up all over the world, it’s become much more difficult to predict the supply and demand curves that have historically been quite reliable. Now, one of the issues that we’re facing is how do we store surplus energy (eliminate curtailment) so that we can use it later.
Storing Surplus Energy
The first thing that comes to mind when you think of storing energy is probably a lithium battery like the one in your phone, right? Well, it turns out that lithium batteries are actually one of the most costly (least efficient) ways of storing energy for long periods of time.
Here’s how engineers, scientists, governments, and businesses are working to store surplus energy so that we can eliminate energy curtailment.
- Pumped hydro storage: When renewables produce a surplus of electricity, they may be able to route that electricity to pump water upstream to a hydroelectric reservoir where it can be stored until its potential energy is let through a water turbine to generate hydroelectric energy.
- Gravity batteries: Similar to pumped hydro, gravity batteries raise heavy weights and store the gravitational energy until it needs to be used at which point it is lowered and used to power an induction generator to generate electricity.
- Thermal batteries: Salt is heated up to the point that it becomes a lava-like consistency. After the sun goes down, this molten salt is then used to boil water to produce steam that powers a turbine.
- Hydrogen batteries: Surplus energy has also been used to split water molecules (H2O) into Hydrogen and Oxygen using a process called electrolysis. That hydrogen is then stored, transported, and later used as fuel to power a generator.
- Compressed air batteries: Surplus energy is used to compress air in massive underground caves/air tanks. When that air is released, it pushes water through a nozzle that spins a wheel similar to how a hydroelectric dam works.
- Kinetic batteries: Energy is used to run electric motors that spin large flywheels. When there’s a need to harness the energy from these flywheels, a magnetic induction generator is engaged which causes the flywheels to slow down. This is the same science that is used in regenerative braking in electric cars like Tesla.
- Mineral & chemical batteries: Minerals like lithium are used to make batteries that store electricity until it is needed at a later time and location. Chemical batteries are also being developed to be able to hold electrical energy in a liquid form.
All of these sound like cool science theory but in practice, none of them have proven to be very effective yet.
In the book Bitcoin: Sovereignty Through Mathematics, the author Knut Svanholm refers to bitcoin as a “mathematical battery”. Svanholm calls it “a way to store energy to be put to use doing something else at a later time”.
If we could mine bitcoin with as close to 100% of curtailed energy as possible, energy producers could use that revenue to subsidize the costs of their production or invest it into other energy storage solutions mentioned above.
How Bitcoin Eliminates The Need For Energy Curtailment
Since none of the above solutions are available at scale (and won’t be for at least another decade), there’s a massive opportunity for Bitcoin miners to convert this wasted energy into something of value.
Naturally, I am talking about Bitcoin mining as the solution for energy curtailment, for both grid overloads as well as production curtailment.
Bitcoin Mining At Grid Bottlenecks
Since grid overload is a risk to the power grid itself, installing shipping containers equipped with Bitcoin miners is an immediate solution that can be deployed at choke points within the energy grid. When energy production from renewables fluctuates throughout the day, these miners can convert surplus energy into bitcoin to reduce strain on the grid while not having to curtail their production.
There’s also a substantial economic incentive for renewable energy producers to harness Bitcoin miners because 100% of surplus electricity can be “sold”.
Buyer Of Last Resort
In parts of the grid where energy curtailment is caused by a lack of consumer demand rather than grid congestion, Bitcoin miners can be deployed to convert surplus electricity into bitcoin via mining.
During the middle of the day when solar electricity generation is at its peak, Bitcoin miners can be throttled up to convert surplus solar electricity into bitcoin. When consumer demand begins to increase in the evening and solar production begins to slow, these Bitcoin miners can be throttled down for the evening as more of that electricity is being purchased by consumers.
Bitcoin mining also solves the problem of energy curtailment for hydroelectric dams during rainy seasons since 100% of surplus energy that would otherwise just be let through the spillway could instead be diverted through the turbine and used to mine bitcoin with hydro energy instead of going to waste.
In other words, whenever there is a surplus of electricity that gets wasted because there is nobody to purchase and consume it, we can use that surplus to mine bitcoin.
Final Thoughts
With governments around the world subsidizing renewable energy production, electricity from these sources is not likely to slow down in the coming decades. Without an immediate solution to store this surplus electricity, energy curtailment is not likely to go away anytime soon. Until there is an economically viable solution for surplus energy storage at scale, Bitcoin mining is an obvious option to eliminate energy curtailment at the grid level and provide energy producers a buyer of last resort for every watt of electricity they produce. Bitcoin can also be used as a sort of digital battery to convert that wasted energy into something of value so that it can be stored and put to use at a later time and location.
It’s critical that we have more citizens and politicians of the world understand how bitcoin eliminates energy curtailment and how bitcoin is a critical component of the energy conversation at large. We can’t move towards a sustainable path for renewable energy without bitcoin, and the sooner people understand that, the sooner we can improve the world and achieve hyperbitcoinization.
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