What is Stranded Energy? Why it Matters to Bitcoin

In our day-to-day lives, energy is a fundamental part of our existence, driving everything from the daily commute to the operation of our industries and even the functionality of our homes. However, an often overlooked aspect is the stranded energy, a term that denotes energy that is available, but remains unused or under-utilised. From geographic isolation to inefficient energy grids, this blog post explores the different scenarios where energy is stranded and proposes a novel way of leveraging it through Bitcoin mining, turning a potential waste into a significant asset.

Table of Contents

• Stranded energy explained
• About harnessing stranded energy sources in Africa
• Why use stranded energy for bitcoin mining
• The benefits of using stranded energy in the bitcoin mining industry
• Stranded energy and hash rate, examples of real-world applications
• Bitcoin mining as a source of unused energy
• Challenges when using stranded energy to mine bitcoin

Stranded Energy Explained

The concept of stranded energy is frequently used within the energy sector. To understand what stranded energy is, one can generally refer to it as any energy that is accessible for use but does not get tapped to its fullest potential⁽¹⁾. This underutilization of available energy can occur due to numerous contributing factors, and some of these factors are explained in detail below.

Fluctuating Energy Demand

Take the case of hydropower for instance. The energy generated by a hydropower plant is closely tied to the speed and volume of water flowing through the system. Therefore, during periods of lower energy demand, hydropower systems can often overproduce, leading to excess energy. This results in what we've defined as stranded energy, which is effectively wasted energy.

Insufficient Infrastructure

A common scenario where stranded energy arises is on oil rigs, where natural gas leaks are a common occurrence. These escaping gases could be harvested and transformed into a valuable energy source. However, due to a significant lack of the necessary infrastructure to capture and utilise these gases, they are often simply burned (flared) and subsequently released into the atmosphere, adding to the total stranded energy.

Geographical Isolation

There are circumstances where remote, isolated areas have the capacity to generate considerable amounts of renewable energy, especially from sources like wind and solar power. Yet, due to the high costs of transporting this energy to populated regions, these isolated areas become ineffective for practical energy production, thus leading to more stranded energy.

Inefficient Energy Grids

Energy infrastructure, including power lines and substations, that is either aged or poorly maintained, often leads to substantial energy losses during transmission. These losses, in turn, add to the volume of stranded energy.

Wasted Heat

Large amounts of heat, which is frequently produced as a byproduct of industrial processes, is often deemed as waste and released into the atmosphere. This is another form of stranded energy, as this heat could otherwise be repurposed for productive use.

Geothermal Energy

Despite the vast reserves of geothermal energy available, it is difficult to fully utilise this potential due to the inefficiencies of existing geothermal power plants and drilling technology, resulting in more stranded energy.

Biomass and Biofuels

Every country generates waste - from plants, animals, and humans. This waste could be converted into biofuel, a process that simultaneously addresses waste reduction and energy production. However, due to logistical challenges, lack of infrastructure, and economic constraints, this potential energy source is often overlooked, leading to further accumulation of stranded energy.

Off-Grid Power Generation

Remote populations that aren't connected to a central power grid usually rely on local power sources, such as diesel generators or small-scale renewable energy systems like micro-hydroelectric dams. In these cases, surplus energy generated cannot be fed back into a larger grid and thus becomes stranded energy.

Harnessing Stranded Energy Sources in Africa

Africa possesses an impressive array of untapped energy resources, notably in natural gas. Recent offshore explorations in nations like Mozambique, Tanzania, Senegal, and Mauritania have uncovered vast gas reserves. Yet, these treasures largely remain untouched due to infrastructure deficits and prohibitive costs. Astonishingly, it's believed that over 100 trillion cubic feet of natural gas, identified within Africa, is still stranded⁽²⁾.

Furthermore, while Africa shines with potential for renewable energy sources such as solar, wind, and hydropower, these remain less exploited than in other continents. The bounteous renewable energy promise of the continent faces financial, technical, and bureaucratic challenges. To put things into perspective, a mere 5% of Africa's rich hydropower resources have been harnessed till date⁽³⁾.

In a broader sense, Africa is believed to hold approximately 125,000 MW of stranded energy. Alarmingly, this is nearly 68% of the continent's overall power generation capability, spanning both fossil fuels and renewable sources⁽⁵⁾.

Several critical challenges are at the heart of Africa's stranded energy scenario:

Infrastructure Gaps

A principal challenge in tapping into Africa's energy reserves is the glaring absence of essential power infrastructure - encompassing electricity grids, pipelines, and refineries. For instance, while vast reserves of natural gas are identified across the continent, their development is impeded by a dearth of requisite pipelines.

Capital Constraints

Embarking on infrastructure projects like power plants or expansive grids demands substantial capital. In a setting where investment funds are scarce, many promising energy projects remain conceptual.

Regulatory Roadblocks

Many African nations are ensnared in complex regulatory mazes, making energy project endorsements and developments an arduous task. Simplifying these regulatory processes might draw more investors.

Technical Skill Shortage

Africa's energy sector suffers from a shortage of technical expertise and trained professionals, hindering the efficient management of existing facilities and the establishment of new ventures. Empowering local talent can reverse this trend.

Political Volatility

In regions marred by political unrest and uncertainty, attracting long-term energy investments is challenging, leading to more resources remaining untapped.

Illustrating the above, here are some scenarios highlighting Africa's energy under-utilization.

Solar Potential in Desert Zones

The Sahara Desert brims with solar energy potential, boasting direct normal irradiance levels nearing 2600 kWh/m2 annually. Yet, this remains largely untapped. While Morocco's Noor Ouarzazate facility stands as a prominent solar installation in the Sahara, vast stretches in Egypt, Libya, and Chad have seen minimal solar ventures.⁽⁶⁾⁽⁷⁾

Wind Prospects Along The Seashore

Coastal regions of countries like Kenya, Tanzania, Mozambique, Mauritania, and Madagascar offer promising wind speeds, ideal for wind energy installations. Yet, such regions remain largely unexplored. Case in point, the anticipated 500 MW Ras Ngomeni project in Kenya faces postponements owing to funding complications^{(8a)(8b)(8c)(8d)(8e)(9)}.

Hydropower Waste

Countries such as the Democratic Republic of Congo and Ethiopia are endowed with abundant hydropower. However, the absence of energy storage facilities results in power wastage during low-demand hours. For instance, Ethiopia encounters nightly energy losses exceeding 400 MW due to the non-existence of efficient storage mechanisms.^(10)(11)

Why Use Stranded Energy For Bitcoin Mining?

Nonetheless, this does not exhaust all potential solutions aimed at mitigating the carbon footprint associated with Bitcoin mining. Other strategies, such as harnessing green, renewable energy or tapping into stranded energy, should also be considered. As we've previously discussed, stranded energy refers to energy that remains unused or wasted. Integrating such unused energy sources into Bitcoin mining can serve several advantageous purposes:

1) it provides a means to monetize this otherwise wasted energy
2) it helps to stabilise the power grid
3) it supports the sustainability and maintenance of the Bitcoin network.

By addressing these energy issues, not only do we tackle the commonly raised critique concerning the greenhouse gas emissions associated with Bitcoin and Bitcoin mining, but we also attend to another critical point often highlighted by critics: the strain exerted on the power infrastructure and the alleged misallocation of resources. Therefore, the recovery of wasted energy sources and their redirection towards Bitcoin mining activities represents a promising path for improving the energy efficiency and environmental impact of Bitcoin mining.

The critics of this energy-intensive process often propose a solution, suggesting a transition in the Bitcoin mining process from the existing Proof of Work approach to a more energy-efficient Proof of Stake model. Such a significant shift would indeed vastly decrease the energy demands of the Bitcoin mining industry. However, it's important to note that this transition would also impact the unique elements of Bitcoin and Bitcoin mining that render it such a valuable and equitable asset. The mechanism has the advantage of promoting decentralisation, allowing anyone with the necessary computational power to contribute to the network by mining. This also ensures a fair opportunity for every participant to discover the new block, maintaining the democratic ethos of Bitcoin.

Critiques aimed towards Bitcoin and its associated mining activities are primarily rooted in the high levels of energy consumption these processes necessitate. At the heart of Bitcoin mining lies the resolution of complex mathematical problems, which serve to validate transactions and consequently append them to the blockchain. This procedure, known as Proof of Work, requires the capabilities of high-performance computers, which in turn, consume a substantial quantity of electricity, leading to concerns over wasted energy and the need for unused energy sources recovery.

The Benefits of Using Stranded Energy in The Bitcoin Mining Industry

As mentioned earlier, there are numerous benefits to harnessing energy that would typically remain unused or go to waste, particularly when considering its application in powering the Bitcoin mining industry. This approach to wasted energy recovery serves as an innovative and profitable strategy for Bitcoin miners.

Enhancing The Profitability of Bitcoin Mining and Securing the Bitcoin Network

Firstly, the intertwined relationship between the profitability of Bitcoin mining and energy costs becomes evident when considering stranded energy. Utilising stranded energy, which is often more cost-effective, provides an avenue for more competitive energy pricing for Bitcoin mining. This efficiency not only enhances profitability but also democratises participation in the Bitcoin mining process. A broader and more decentralised participation pool further fortifies the Bitcoin network against potential 51% attacks.

Overcoming Capital Constraints and Supporting Economic Development

Secondly, as previously highlighted, the challenge of capital constraints hinders the reduction of stranded energy, particularly in the renewable energy sector, with Africa being a prime example. The consistent demand from Bitcoin mining provides an avenue to monetize otherwise wasted stranded energy, introducing a new revenue stream for power producers. This not only opens doors for regions like Sub-Saharan countries to bolster their renewable energy infrastructure but also harmonises with their ambitious renewable energy targets. To illustrate, Kenya aims for 100% renewable energy by 2030, Mozambique has set a goal of 62%, and Rwanda targets 60%⁽¹²⁾. In this context, Bitcoin mining operations could play a pivotal role in the realisation of these aspirations.

This financial boost not only benefits these energy providers by enabling more developmental ventures due to increased investment but also advantages the general populace. Energy becomes more affordable as costs no longer need to account for energy that goes unused. When energy prices drop, industries become more competitive, paving the way for the growth of energy-intensive sectors. Reduced operational costs enable businesses to channel funds towards expansion and innovation. For families, decreased energy bills translate to increased disposable income, which when circulated, can stimulate the local economy. These collective benefits can significantly drive economic progression and enhance the quality of life for many.

Reducing greenhouse gas emissions

Thirdly, this approach notably reduces resource wastage, which is particularly significant in contexts like natural gas flaring. As previously discussed, natural gas leaks are a common occurrence on oil rigs. The absence of effective infrastructure to harness this resource, however, often results in energy being wasted. What's more, this wastage carries a carbon emissions cost as the leaked gas, when flared, is released into the atmosphere as CO₂, methane, and other pollutants.

By using gas-powered generators, Bitcoin miners can transform this otherwise wasted natural gas into a valuable source of power. While this doesn't completely eliminate carbon emissions—since the operation of gas-powered generators still results in CO₂ release—it does decrease the overall carbon footprint by reducing emissions of methane and other pollutants. This strategy also repurposes a byproduct into a useful resource, aligning with the principle of waste-to-energy recovery.

Stabilizing Electrical Grids

Moreover, this approach offers the considerable benefit of stabilising power grids. Energy demand is not a constant, it fluctuates throughout the day, and these fluctuations can pose challenges to energy suppliers. These suppliers often face limitations in their capacity to flexibly match the changing demand levels. An inability to keep pace with rising demand can lead to service disruptions or even widespread blackouts. Conversely, an oversupply when demand falls can lead to over-frequency issues, which have the potential to damage generators and other electrical equipment. As Bitcoin mining operations can be readily scaled up or down to match periods of low or high demand respectively, they offer a viable solution for load balancing and grid stabilisation, thereby underscoring the importance of strategic wasted energy recovery.

Stranded Energy and Hash Rate: Real-World Applications

Case Study 1: Soluna Technologies - Dakhla, Morocco

Soluna Technologies, an American enterprise, is embarking on an ambitious venture in Morocco. The firm's objective is to capitalise on the abundant wind resources in the Dakhla region, which stands among the world's windiest locales. By constructing a wind farm, Soluna plans to produce enough electricity to power a 900MW Bitcoin mining operation situated nearby. With a vision to be the world's first utility-scale blockchain infrastructure driven entirely by its renewable energy, Soluna is charting a path towards a more sustainable and environmentally conscious Bitcoin mining future. The company has already secured the necessary land lease in Dakhla, and with ongoing fundraising efforts, they anticipate the project's fruition by 2025.^(15)(16)(17)

Case Study 2: Crusoe Energy Systems - Denver, Colorado

Founded in 2018, Denver-based Crusoe Energy Systems operates mobile, modular data centres powered by otherwise wasted natural gas from oil wells and landfills to mine bitcoin, providing beneficial base load demand and avoiding flaring. By deploying its computing at the source and dynamically matching consumption to gas flow, Crusoe has successfully monetized over 1 million cubic metres of stranded natural gas across U.S. states, generating over $2 million in bitcoin and expanding recently to Argentina. Through partnerships with operators, Crusoe's flare mitigation service pays for wasted gas while reducing emissions, demonstrating great potential to harness Africa's flared gas reserves for productive bitcoin mining as well. The company aims to minimise mining's carbon footprint by leveraging under-utilised energy sources like flared gas.^(14)(18)

Case Study 3: Gridless Compute - Sub-Saharan Africa

Gridless Compute is a Kenyan company that partners with operators of renewable energy mini-grids across Sub-Saharan Africa to install bitcoin mining rigs. The rigs absorb excess solar and wind capacity, providing the grids with a constant revenue stream from their stranded power while accelerating Africa's energy transition. Through pilots with local mini-grid operators, Gridless provides the mining hardware and operations to demonstrate the viability of powering data centres with stranded renewables. The company aims to leverage Africa's vast terawatts of excess renewable potential to rapidly scale up bitcoin mining operations across the continent in a sustainable manner, using only clean excess energy that would otherwise be wasted. By deploying its modular mining units at source, Gridless unlocks the continent's stranded renewables to enable greener and more profitable bitcoin mining.⁽¹⁹⁾

Bitcoin Mining as a Source of Unused Energy

While we've just thoroughly discussed the myriad benefits of utilising Bitcoin mining as a method for reducing stranded energy, it's worth noting that Bitcoin mining itself can inadvertently contribute to stranded energy, particularly in the form of waste heat. Anyone who has had the chance to visit a Bitcoin mining site can vouch for the significant quantities of heat that ASIC miners generate.

Often, this heat is considered a byproduct or a nuisance associated with Bitcoin mining that needs to be effectively managed to prevent potential harm to the ASIC hardware. However, while it's crucial to ensure the heat is effectively dissipated from the Bitcoin mining equipment to maintain its optimal function, there's also an opportunity to repurpose this byproduct as a resource itself.

Consider, for instance, small-scale at-home Bitcoin miners. The heat generated by their ASIC miners could be harnessed to serve practical purposes, such as heating homes or even swimming pools, of course, depending on the local climate. On a larger scale, this excess heat can be utilised in environments like greenhouses that require heat to facilitate the growth of fruits and vegetables.

Reusing the heat generated by Bitcoin mining operations does not just minimise waste in the form of excess heat, it also presents an opportunity for further energy conservation. By repurposing the waste heat, we can potentially reduce the energy typically expended to generate heat for these various applications. Therefore, this form of wasted energy recovery could prove to be a practical and environmentally-friendly solution that extracts additional value from the Bitcoin mining process.

Challenges When Using Stranded Energy to Mine Bitcoin

There are several notable technological and logistical challenges associated with establishing Bitcoin mining operations in remote locations where stranded energy is readily available. This may entail the transportation and installation of complex computer hardware in environments that are either harsh or difficult to access. To address these challenges, certain innovative companies, such as Upstream Data and EZ Blockchain, have taken steps towards creating mobile Bitcoin mining units. These units are designed with mobility in mind, allowing for straightforward transportation and setup in various locations. The capability to relocate these units as required enhances the feasibility of tapping into stranded energy sources, thereby simplifying the process of waste energy recovery.

Another significant hurdle is the current climate of regulatory uncertainty. The legal and regulatory landscape surrounding Bitcoin mining remains in a state of flux and can often be unpredictable. This could include potential restrictions on the use of certain types of stranded energy, or unforeseen changes in the legal status of Bitcoin itself. In light of these uncertainties, it becomes imperative for Bitcoin miners and other stakeholders to actively engage with regulators and lawmakers. This engagement should aim to inform and influence the development of a legal framework that encourages and facilitates the responsible and sustainable use of stranded energy. This active participation in shaping regulation can aid in mitigating the risks associated with the legal uncertainties in the Bitcoin mining industry.

Conclusion

In conclusion, the use of stranded energy for Bitcoin mining has emerged as an innovative solution that can transform how we perceive and utilise wasted energy. While providing a profitable avenue for Bitcoin miners and power producers, the use of stranded energy also proposes a sustainable path for the Bitcoin industry. It transforms waste into resources, reduces greenhouse gas emissions, and serves as a mechanism to stabilise electrical grids. It's evident that the potential of stranded energy in Bitcoin mining is vast. As we move forward, it will be exciting to see how this integration reshapes the narrative around Bitcoin's environmental impact and offers new avenues for sustainable and profitable energy use. While we must remain mindful of the complexities and challenges involved, the prospect of tapping into stranded energy certainly provides a beacon of hope for a more efficient and sustainable future.

References

1. (1) https://www.lse.ac.uk/granthaminstitute/explainers/what-are-stranded-assets/
2. (2) Making the Most of Africa's Commodities: Industrializing for Growth, Jobs and Economic Transformation, United Nations Economic Commission for Africa, 2013.
3. (3) Africa Energy Outlook 2019, International Energy Agency, 2019.
4. (4) Powering Africa’s Energy Potential, BCG Henderson Institute, May 2020.
5. (5) Africa Energy Outlook 2022, International Energy Agency, 2022.
6. (6) Where Sun Meets Sand: Solar Resource Mapping in the Sahara Desert, World Bank, 2019.
7. (7) https://www.npr.org/sections/thetwo-way/2016/02/04/465568055/morocco-unveils-a-massive-solar-power-plant-in-the-sahara
8. (8a) https://www.dailysabah.com/energy/2019/07/20/kenya-launches-biggest-wind-farm-in-africa-providing-one-fifth-of-energy-demand
9. (8b) https://www.power-technology.com/features/a-look-at-tanzanias-first-wind-farm/?cf-view
10. (8c) https://www.afrik21.africa/en/mozambique-eleqtra-starts-construction-of-the-120-mw-namaacha-wind-farm/
11. (8d) https://www.grupoelecnor.com/news/elecnor-wins-contract-to-build-its-second-wind-farm-in-mauritania-en
12. (8e) https://im-mining.com/2021/12/15/rio-tinto-breaks-ground-on-solar-wind-power-project-at-qmm-in-madagascar/
13. (9) https://www.evwind.es/2017/10/13/kenya-loses-offshore-wind-farm-to-tanzania/61402
14. (10) Pumped Hydro- Energy Storage System in Ethiopia: Challenges and Opportunities, Momona Ethiopian Journal of Science, 2022.
15. (11) Hydropower in Africa: Enabling Sustainable Investments, IRENA, 2020.
16. (12) https://energycapitalpower.com/renewable-energy-targets-in-africa-by-2030/
17. (13) https://www.climatepolicylab.org/communityvoices/2020/5/13/south-africas-2019-irp-renewable-energy-targets
18. (14) https://www.crusoeenergy.com/digital-flare-mitigation
19. (15) https://arstechnica.com/information-technology/2018/09/construction-to-begin-on-36-megawatt-moroccan-wind-farm-for-bitcoin-mining/
20. (16) https://www.bloomberg.com/news/articles/2018-07-27/bitcoin-mining-private-equity-build-wind-farm-in-morocco
21. (17) https://www.climatepolicylab.org/communityvoices/2020/5/13/south-africas-2019-irp-renewable-energy-targets
22. (18) https://www.businesswire.com/news/home/20180727005498/en/Soluna-is-Launching-the-World%E2%80%99s-First-Utility-Scale-Blockchain-Infrastructure-Company-Powered-by-Its-Own-Private-Renewable-Energy-Resources-in-the-Kingdom-of-Morocco
23. (19) https://gridlesscompute.com/
24. (20) https://ezblockchain.net/smartbox/
25. (21) https://northafricapost.com/24769-soluna-to-build-its-own-wind-power-plant-in-morocco.html
26. (22) https://twitter.com/CrusoeEnergy

‍

‍