Gas peaker plants are natural-gas-fired electricity plants that are needed only during peak electricity demand, and remain idle for the majority of the time. These plants are the main way of dealing with the high intermittency of renewable energy generation like solar and wind, but come with high setup and mainentance costs. For some time now, industry insiders have seen that coupling renewable energy generation with Bitcoin mining has helped stabilize electricity grids – we now have the data to back this up and show how Bitcoin mining obviates the need for gas peaker plants.
The Theoretical Advantages of Bitcoin Mining over Gas Peaker Plants
What are gas peaker plants?
A gas peaker plant is a power plant that uses natural gas to generate electricity during periods of high demand. They are used to balance the electricity grid by generating power when demand is high or supply is low.
As their name suggests, they are generally only used at times of peak demand, typically running less than 1,500 hours per year, with some running for as little as 250 hours per year (2.9% of the year).
Why Does Bitcoin mining provide an alternative to peaker plants?
Grid operators must constantly match supply and demand for electricity. If demand for electricity gets too high, the grid can fail, which leads to rolling brownouts or even rolling blackouts. Blackouts are catastrophic events which cost businesses billions of dollars. They also cost lives.
In 2021, winter storm Uri in Texas caused a peak demand for heating at the same time as generation equipment froze. The blackouts that followed caused $195 Billion of damage (only half of which were insured), and an estimated 246 deaths. This catastrophic event also caused Bill Magness, CEO of Texas’ grid (ERCOT), to be fired. He was replaced by Brad Jones.
Theoretically, increasing supply of electricity of power through gas peaker plants was known to be only one of two ways to stabilize grids in times of peak demand.
The other way was to decrease demand. However, grid operators had never found a reliable, fast, scalable way to do that. Traditional ways of reducing demand included consumer “opt in” programs, where residential consumers were paid to dial down their electricity. Other solutions involved paying large industrial loads such as aluminum smelters of steel plants to switch off.
However, neither had worked effectively in the case of emergencies. Residential consumers, typically enthusiastic at the time of signup, typically found that the option of staying cool in a heatwave, or warm in a winter storm was preferable to enduring nature’s extreme temperatures in return for a small dollar-kickback.
Steel factories and aluminum smelters took a long time to respond to the urgent need to shut off due to the number of safety checks they had to go through first. When they did shut off, it typically only bought grid operators a four hour window of opportunity, because after that, steel and aluminum starts to harden and it becomes cost-prohibitive to remain shut down.
After winter storm Uri, the new ERCOT CEO Brad Jones experimented with a new form of demand-side flexibility called Bitcoin mining. To the shock of Berkshire Hathaway lobbyists, he found that Bitcoin mining was the perfect demand-side resilience he needed as a grid operator, and said “thanks but no thanks” to Berkshire Hathaway’s proposal to build eight new gas peaker plants (see below for details).
Source - Dari
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