A New Renewable Energy Minigrid-Bitcoin Mining Co-Location Model

Gridless has proposed a new model for the profitable expansion of electric mini-grids into the rural communities of emerging markets.

In the new model, small-scale Bitcoin Mining data centers combine with renewable energy mini-grids to eliminate, at least early on, the need for government subsidy, charity, aid, gifts, and other forms of concessionary funding.

Co-locating small-scale Bitcoin Mining with renewable energy generation also addresses the massive amounts of stranded energy in Africa - the model contributes to a sustainable energy future while providing reliable, consistent demand for the stranded energy that we, until now, just pump into the ground as waste.

Context and On-going Problems

Access to energy is a key driver of human progress. Per capita GDP and a few other macroeconomic indicators correlate positively to per capita energy consumption. Basic life amenities remain out of reach to communities without electricity, like the 600 million people (43% of total population) in Africa living without access to power.

Compare this to Norway which consumes more energy than the whole of Africa combined.

Or the 330 million Americans who consume 19X more per capita energy than the 1.4 billion people of Africa. Just the kitchen appliances in the USA use more energy than the whole of Africa combined.

The developing world will usually not have sufficient electricity demand, neither from industrial use cases nor domestic appliances, to warrant the massive capital outlay required for large-scale power generation stations and their accompanying transmission lines.

Centralized grids go only as far as it’s profitable for them, leaving mini-grids to push last-mile electrification into the edges of rural Africa. It takes much longer than commercial investors would like for rural communities to build up sufficient energy demand to justify such significant capital expenditure, which is why the primary mode of energy development in Africa so far has been through concessionary funding - donations, grants, and low-cost debt.

Minigrids are the answer to this chicken-and-egg problem.

A smaller, more financially sustainable electricity grid supplies rural settlements, in effect meeting their low-yet-growing community energy demand. It’s a much more tenable proposition than the large CAPEX required to extend the national grid to these remote locations.

With access to power, communities improve their quality of life by a few notches.

Welding machines, cereal grinders, bandsaws, electric sewing machines, water pumps, refrigerators, electric chaff cutters, and a host of other industrial/domestic use cases start to pop up.

Mini-grids can be set up anywhere, provided they find just the right population density whose energy demand they can meet.

A proliferation of renewable energy sources across Africa also means that more energy-resilient use cases deploy closer to the point of power generation. Compare this to the national grid, where power is sometimes consumed thousands of kilometers from where it’s generated.

The Problem With Minigrids

Despite a high upfront CAPEX, mini-grids suffer slow, erratic ROI periods.

Commercial financiers often view mini-grids as not worth the investment effort. Under the current financing model, they are economically unsustainable, especially shortly after commissioning when community energy demand is still low.

Besides, energy developers typically have to overbuild in anticipation of the multi-year ramp-up to a sustainable community demand level. Minigrids are overbuilt also to withstand daily peak power demand happening between 6-8 am and 6-9 pm.

Enter Co-Located Bitcoin Mining Data Centers:

1. No wasted energy

Bitcoin miners at the mini-grid station can turn their energy demand on/off, and up/down immediately, depending on the adjacent community's energy demand.

The energy developer need not dispose of the stranded energy over-generated in anticipation of future community demand.

2. Financial sustainability

Co-located mini-grids and small-scale Bitcoin data centers can see financial ROI from the onset immediately after commissioning. The miners as anchor tenant supply the energy developer with a consistent, predictable, and paid-for energy demand, closing the risk-return expectation gap for energy developers and financiers.

3. Geography-agnostic co-location

The Bitcoin data center is set up anywhere with the mini-grid, reaching the most remote settlements excluded from the national grid. This is crucial for breaking the insufficient demand - inadequate supply vicious cycle prevalent in rural Africa.

Being the anchor client, the Bitcoin mining data center provides initial and ongoing power demand, converting mini-grids into profitable ventures even in the crucial initial stages.

This new financing model justifies the significant initial CAPEX into renewable power infrastructure, while the demand that the Bitcoin miners unlock benefits households and businesses that didn't have prior access to electricity.

?‘This symbiotic power-bitcoin-internet connectivity infrastructure can then also act as a metaphorical loom to start weaving together threads in the community into a richer economic and social tapestry.’ -GAMA

The Bitcoin miners’ remotely automated real-time demand-leveling mechanism ramps the miners’ power consumption up and down at a moment’s notice, allowing the data center to act as;

1. Buyer of First Resort – purchasing power when there is no other demand

2. Buyer of Last Resort – purchasing when nobody else has use for the power

3. Grid-balancer of Last Resort – keeping mini-grid power usage constant and stable via demand-response ancillary services

What’s the Total Addressable Market (TAM) For This Model?

ESMAP estimates that Africa must 50X its power capacity from 3,100 minigrids (2021) to 160,000 minigrids by 2030, to meet its energy demand. This represents a cumulative $91 Billion investment over a 9-year period.

Confirming this estimation, The World Bank asserts that many national grid systems start out as mini-grids which then end up connecting as national grids over time. Speeding up respective national regulatory approval processes will help expedite rural electrification.

Conclusion

Horizontally distributed, decentralized renewable energy mini-grids align favorably with the open-source decentralized ethos of neutral, energy-based money powered by these small-scale independent Bitcoin data centers. It’s a win-win-win scenario for all parties involved – energy developers, local community businesses and households, and the national utility grids to which these mini-grids eventually connect.

Energy infrastructure grows more resilient and robust when power generation is decentralized and horizontally distributed, much in the same way that the Bitcoin network grows more robust and resilient with the decentralized distribution of mining data centers.

Stepping in as anchor tenants, Bitcoin mining data centers catalyze the sustainably profitable private investments required to push electrification to the hundreds of millions of households across Africa that currently live in the dark.