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Bitcoin mining, the practice of verifying bitcoin transactions on the blockchain using heavy duty computing technology, consumes a lot of electricity. In fact, it was reported by Fortune.com that Bitcoin energy consumption far outpaces traditional financial transactions. Each bitcoin transaction uses approximately 1,173 Kilowatt-hours (kWh) of electricity, which can equate to $100-200 depending on your state’s utility rates. When compared to more traditional financial transactions, such as credit card processing, bitcoin transactions consume 500,000 times more energy. If you are running a bitcoin mining operation and you are concerned about your energy costs, we don’t blame you! It’s an expensive venture that can pay dividends when planned properly. Here are some great ways to reduce electricity costs at your bitcoin mining rig.

Understand How Your Consuming Power

Understanding your total electric bill is paramount to being able to effectively reduce power costs at your rig operation. Here are several things to understand when trying to get ahold of your electrical expenses.

Know Your Rig

The first step to reducing electricity costs at your bitcoin rig is to truly understand what’s consuming the power, when it’s being consumed, and how to better plan your usage. Since bitcoin mining rigs are becoming more and more robust to tackle harder transactional equations, more energy consumption is needed to sustain the computing power. Understanding the total power needs of your rig is a great first step towards reducing costs. Here are some questions that need to get answered:

  • When is the rig running?
  • How many rigs are running? Are they on at the same time?
  • Does it need to be on standby 24/7?
  • Can you shift operating hours to different times of the day?


Electric Demand

Understanding how electric utility companies calculate your electric bill will help breathe life into some of these questions. First, you need to understand that your electric bill has two major components: demand and supply (see electricity demand vs. supply here). The demand portion of your bill makes up approximately 30-40% of the total invoice (depending on your state). Demand is measured based on your total electricity usage at any given period throughout a billing cycle. So, if you’re running several rigs at one time, your total power consumption will spike your demand costs on your bill.


Electric Usage

Next, we need to understand electricity supply – the payment for the physical electricity commodity. Electric power, like other commodities, trades on the open market and fluctuates with supply and demand. In deregulated states, many markets offer an hourly electricity product where the price will change throughout the day. In other markets, you might be tied in to paying the local utility company’s supply rate – which still might fluctuate daily, monthly, or seasonally. Understanding your local options is imperative to constructing your bitcoin mining energy cost containment plan.

Things to Consider to Reduce Your Bitcoin Electricity Costs

There are several factors to consider when setting up a bitcoin mining operation or when trying to make yours more cost effective. Understanding your electricity costs can help reduce your cost of goods and increase gross margins at your rig operation. Here are some things to consider when trying to curtail bitcoin mining electricity costs.

Stagger Rig Run Times

If you are running multiple rigs or even machines, it is important to try and stagger their use. If you cannot, we understand; however, if you have the luxury of not using all machines at once, this can drastically reduce your power costs. Since electrical demand is the total measure of power being consumed at any given moment in time. And since your electric delivery charges are measured in demand units (see here), then staggering machine run times can help reduce your peak power consumption. It is also very important to understand your local utility company’s tariff and how they measure demand figures. In some utilities, special demand tariffs are available for large power consumers where you can pay less for demand during certain off-peak periods. Check your utility’s website for their tariff and read it!

Try Mining At Night

60-70% of your total electric bill is for the physical supply of electricity. In many markets, electricity trades as a commodity on an open market and is typically cheaper during off-peak hours. If hourly electricity pricing is available to you in your market, then mining at night and during off-peak hours can help reduce your supply costs since power is less expensive during those times. If you are not willing to float your electricity supply costs on the hourly market, and you are looking to hedge in the future, consider a multi-hedge strategy. In a dual-hedge strategy you can lock-in once price for on-peak futures, while locking-in a lower price for off-peak futures. This gives you more price certainty than floating the hourly market and also allows you to take advantage of the on-peak/off-peak arbitrage. You can also purchase a blended combination of futures hedging and hourly products.

In many regulated states, where open market shopping is not available, utility companies often offer a Time of Use Rate (TOU), where prices are less expensive during off-peak hours. Understanding those tariffs and hours is important to your mining operation so you know how to take advantage of low-cost power.

Know The Future

In deregulated states, consumers have the option to purchase electricity many years into the future. While this might not fit into your financial strategy, having some sort of hedging in place is always a responsible idea. Hedging in the futures market allows you to eliminate the immediate risk of floating spot, and can even ease the minds of potential investors. When the market is prime, locking-in prices well into the future can help solidify your margins (especially if you are selling BTC put options on your coins). Having a trusted energy advisor in your corner who can explain the relativity of futures prices is always a good idea when considering a hedge.

Interested In Learning More?

At EnergyPricing.com, we offer bitcoin mining energy advisory solutions that will save you money at your rig operation. Our energy experts have decades of experience advising clients on various energy supply products and effective strategies. Call us today to speak to one of our expert energy advisors who can guide you through your options!

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