Tesla, Block, and Blockstream have teamed up to mine bitcoin in Texas using solar power

Blockstream and Jack Dorsey's Block, previously Square, have broken ground in Texas on a solar- and battery-powered bitcoin mine that will leverage Tesla's solar and storage technology.

The facility will be powered by Tesla's 3.8 megawatt solar PV array and 12 megawatt-hour Megapack.

On the margins of the Bitcoin 2022 conference in Miami, Blockstream co-founder and CEO Adam Back, a British cryptographer and member of the "cypherpunk" group, told CNBC that the mining operation is aimed to be a proof of concept for 100 percent renewable energy bitcoin mining at scale.

"People like to argue about the various aspects of bitcoin mining. Let's just prove it, we reasoned. Have an open dashboard so that anybody can play along, and perhaps it will alert other gamers to join in," Back added.

The dashboard will be open to the public and will display real-time project information like as electricity generation and total bitcoin mined. Solar and storage performance data points will be included to a later edition of the dashboard, according to the business.

Back stated, "This is a step toward validating our theory that bitcoin mining can support zero-emission power infrastructure and promote future economic growth."

Renewable energy's economics are improving

In the United States, West Texas is a renewable energy mecca.

"In West Texas, you get this perfect overlap with both sun quality and wind speed," said Shaun Connell, executive vice president of power at Lancium, a Houston-based software firm.

However, much of the state's wind and solar energy is located in rural areas. There is little motive to create renewable infrastructure to harness this energy if there is no financial incentive.

Here come the bitcoin miners. When energy consumers co-locate with renewables, it generates a financial incentive for expansion and improves the basic economics of renewable power production, which have been volatile in the past.

According to Nic Carter of Castle Island Ventures, miners offer demand for these semi-stranded assets, making renewables in Texas commercially viable.

West Texas has about 34 gigawatts of electricity, five gigawatts of demand, and only 12 gigawatts of transmission capacity. Bitcoin miners can be thought of as temporary customers who keep energy assets running until the grid can absorb them completely.

Back explained that the off-grid mine, which is slated to be completed later this year, exemplifies another essential concept of the bitcoin network: miners can "perform it from anyplace without local infrastructure."

Back stated that if the project proves successful in its pilot stage, the firms will add wind power to the mix and grow the project as a whole.

"You're sort of calculating the best economic blend of solar and storage," Back explained. "You can see you have to overprovision since the peak solar input varies over the day and, of course, it's not there at night," says the engineer.

Adding wind to the mix, on the other hand, would lower total expenses and assist to balance out the solar downtime.

Blockstream's ultimate goal is to enhance the bitcoin network by diversifying the cryptocurrency's energy sources, according to Blockstream.

"We hope to further accelerate bitcoin's synergy with renewables by collaborating on this full-stack, 100 percent solar-powered bitcoin mining project with Blockstream, using solar and storage technology from Tesla," said Neil Jorgensen, global ESG lead at Block and project lead for Block's Bitcoin Clean Energy Initiative.

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