Digital Assets: Greenidge Gen, Once A Coal Plant, Is Now A Profitable Crypto Miner
Since converted to natural gas, the highly efficient plant produces power at historically low costs.
Greenidge Generation, once a mothballed coal-fired power station located in the New York Finger Lake Region, has converted to a power plant-cum-mining hybrid business model that combines power generation with a blockchain mining facility. Greenidge commenced a large-scale cryptocurrency mining operation in January 2020 with a data center comprising 8,500 latest generation miners. (Forbes).
Dual business model
Greenidge Generation has the option to provide power to New York’s grid system or mine cryptocurrency, depending which is more profitable on the day.
The company found that as a standalone, power generation business it was economically unviable to assure the availability of power capacity and energy to the state grid round the year. This apart, the plant has a responsibility to provide employment opportunities to the local community.
In 2018, it commenced trial runs of crypto mining with a test pilot comprising a few hundred machines. After analysis of the results Greenidge setup its current large-scale data mining center.
Now, Greenidge bids daily to supply power in the competitive power market. This is profitable on days when the energy demand is high. However, Greenidge locks in the cost of its natural gas purchases through forward contracts. It, therefore, knows its electric power production costs. On any given day it can decide whether to mine crypto or sell power to the grid depending on prices. Greenidge claims it has access to the US’ lowest price of natural gas via the Empire Pipeline System.
The economics of power supply versus crypto mining
“Although there is no fixed threshold of revenue from selling power that would make us want to sell the power instead of mine crypto, currently that number would be over $100 per MWh of power that we generate,” said CFO Tim Rainey to Forbes.
“Without the crypto mining operation, we would not be running most of the time, but if we ran around the clock, year-round, we would generate revenues of about $20/MWh,” Rainey revealed. “Bitcoin mining revenue with the latest generation hardware ranges anywhere from $70/MWh to north of $200/MWh depending on price, global hashrate, and difficulty.”
Sale of computing power
In April, Greenidge announced the sale of 106 Petahash of computing power to an undisclosed buyer.
The deal was a part of its services allowing US institutional investors to benefit from its bitcoin mining operations.
The sale was consummated through the execution of a BitOoda Hash™ contract. It is a pioneering fully-compliant financial product launched in January 2020 allowing for the purchase and sale of large blocks of BTC hash power. Hash power is the computing capacity vital to validating and securing the bitcoin network.
Currently, Greenidge uses 20 MW of power to mine bitcoin. That makes it the largest energy company in the US with such a hybrid strategy.
It plans to hike the total capacity to 140 MW by next year.
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