CleanSpark wants to make bitcoin mining sustainable
Motivated by its roots in renewables and energy storage, CleanSpark is making the notoriously energy-consuming process of bitcoin more planet-friendly.
Designing a new, resilient microgrid
A microgrid is an energy system that uses distributed energy resources. Often, these include renewables like solar or wind, generators, and geothermal energy.
In 2016, CleanSpark Inc., then known as Stratean, began developing a new kind of microgrid for military applications—one that could use software to combine existing renewable energy generation processes with the ability to store unused power.
“We were tasked to provide more resiliency,” says Matthew Schultz, co-founder and executive chairman of CleanSpark. “Our patented software and controls enabled the end-user to sell surplus energy back to the utility, meaning that if a facility made an investment in renewable energy, they could realize revenue in addition to having resilient power.”
Successful tests produced an award-winning result: resilient microgrid designs that could island from the main grids if the central power experienced disruptions. With the ability to store excess energy in the battery in case of outages, or even sell the energy back to the utility for revenue, the company knew this technology could reach further than military applications.
So on the heels of this success, they acquired CleanSpark, took its name, and turned their full focus to renewable energy.
The problem with solar power
This shift in focus decidedly left out solar power, though. The microgrid developments were instead a “concerted effort by the utilities to devalue solar,” Schultz says.
“The recent shift in utilities ‘time-of-use’ charges devalued existing solar infrastructure,” he says. “Microgrid developments enabled the implementation of energy storage to preserve the value of installed renewable energy resources. By shifting the cost of energy based on time, the utilities made traditional electricity more expensive in states like California, Utah, and Nevada after the sun goes down.”
In contrast, CleanSpark’s microgrid technology is a solution that offsets the user’s carbon footprint while also decreasing capital expense.
“We help our clients to be able to buy cheap power during the day and then deploy saved energy—whether in the form of multiple different battery chemistries, kinetic energy, or something else—later in the day and into the evening when it makes more financial sense,” Schultz says.
With this slew of benefits, their microgrid designs soon garnered huge amounts of attention from energy-intensive users of all kinds.
The decision to go all-in on bitcoin
CleanSpark’s first foray out of the military space was with cannabis growers.
“When we got into contact with energy developers that handled markets with unusually high energy consumption, we heard a lot from control distribution agriculture companies who were struggling with sustainable power usage,” Schultz says.
After entering talks, they decided it wasn’t the right fit. Their search for a high-consumption marketplace ended a month later, in January 2018, when they landed a deal to design a microgrid for a bitcoin miner.
“If you’re wondering how an energy company fell into the bitcoin space, it’s simple: mining bitcoin takes a tremendous amount of power,” Schultz says.
Bitcoin is the result of processing data on a blockchain. Bitcoin miners are issued the cryptocurrency after completing blocks of verified transactions, adding them back to the blockchain. “The energy expense is the single biggest cost of doing business as a bitcoin miner,” Schultz says.
The bitcoin market is presently dominated by miners who generate this energy using unclean sources or drain the energy sources around them. Even with widespread negative impacts sprouting from following the status quo, individuals and companies alike continue to mine cryptocurrency because the external demand for the currencies is simply too high.
“As we watched the greediness of some users and the methods that some companies were using to generate the power, we knew our resilient microgrids, if applied to this market, could really make a difference.”
The longevity of bitcoin and the ability to make the process more sustainable led to CleanSpark’s decision to expand its bitcoin mining operations. In June 2021, the company acquired ATL Data Centers and appointed Bernardo Schucman as SVP. Mining more than 50,000 bitcoin throughout his career, Schucman is lauded as a bitcoin expert and now leads the company’s mining data operations.
“[I am a huge advocate] of furthering our energy management strategy and initiatives to deploy the cleanest energy mix of any miner in the country,” he says. “The type of energy, equipment, processes, and strategy we use all contribute to our low cost of production, which is a significant competitive advantage,” he explains. “At our initial mining facility, we currently utilize an energy mix that is 95 percent carbon-free and includes both hydroelectricity and nuclear power [along with] the incorporation of microgrids”—something that draws a clear line of separation from the other miners in the industry.
Something old, something new
The first step to changing the bitcoin mining practices? Acquiring existing mining facilities.
“Our focus is taking these existing broken systems and evolving them to be worthy of public trust again,” Schultz says. “People have blinders on when it comes to distributed energy resource management,” Schultz says. “The basic backbone of the US power industry is antiquated, and honestly, broken. It’s not reliable, and we’re changing that.”
CleanSpark added a large asset to its portfolio in December of 2020 by acquiring the ATL Data Center for $19.4 million. Since then, the microgrid company has generated more than the entire cost of the acquisition by mining bitcoin with their 95 percent carbon-free approach. The profitable revenues are largely thanks to the company’s approach to energy efficiency, Schultz says.
“Bitcoin mining rigs are connected to a mining pool which supports the blockchain,” he says. “If a rig or the facility that’s hosting them were to discount from the pool or the pool from the blockchain, the whole system would have to reboot and reconnect.”
Schultz says even short blackouts can cause cryptocurrency miners to miss hours of hashing, losing significant revenues due to energy disruptions. “That’s where the resilience of microgrids really comes into play for bitcoin mining,” he says. “In the event of those disruptions, we have energy storage that can bridge the interruption of the system, supporting the facility even when the power goes out. This approach can mitigate the loss of revenues and add to the lower carbon footprint while it keeps the systems running.”
On top of their advanced systems, CleanSpark is investing in more efficient rigs. “Just like how a newer MacBook has a faster processor and better graphics cards than an earlier iteration, rigs become faster and better over time,” he says. “Squeezing out the inefficient machines to match our new technologies just boosts our efficiency even more.”
Taking out the power pigs
After the series of acquisitions, CleanSpark’s next step in building a cleaner bitcoin mining industry was rebuilding the public’s faith in the power grid systems.
“The entire system of bitcoin mining is built on trust,” Schultz says. “As a miner, you’re trusted to do the work, to validate the information, and the system itself is predicated on energy certainty. We have to trust that the energy will continue to turn out.”
Of course, the bitcoin miners aren’t the only people putting all their eggs in the power grid’s basket. “Communities put a lot of trust in their local power systems,” Schultz says. “When you flip a light switch, you kind of expect the room to be flooded with light, that when you turn the dial on the stove the gas will catch a flame.
“The antiquated utility systems are failing at increasing rates. Many industrial and big-tech operations are energy pigs. By committing to purchase larger amounts of clean power, bitcoin miners can positively impact communities by incentivizing local utilities to invest more in renewable, sustainable energy sources.”
Large mining operations have a history of overwhelming big city and small residential areas alike, though already high-risk communities often suffer the biggest negative impacts. Oftentimes, it’s more than just a dead light switch: the sheer amount of power needed to mine is enough to knock out a community’s power grids—their whole source of energy.
“In Georgia, we do business with two utilities, Georgia Power and a local municipal supplier,” Schultz says. “Our company’s cryptocurrency mining facility is the second-largest customer of the local utility, behind only the Atlanta-Hartsfield Jackson International Airport.”
CleanSpark signed a five-year power purchase agreement with the local utility with a substantial financial commitment to enable the guarantee of an off-take for the power and incentivize the city to invest more in renewables. This approach further decreases the carbon impact for the entire community by replacing fossil-fueled utility energy sources with sustainable, renewable power.
“The objective of the blockchain is to create a decentralized verification system for all types of transactions; the peer-to-peer approach creates greater trust,” Schultz says. “Some less-efficient bitcoin operations can burden local utilities, further increasing energy insecurity, draining poorer communities, and leaving people without necessary power.
“Our work with the utilities can become a shock-absorber on the system, helping to add cleaner power, add energy storage, and participate with the grid by discontinuing mining activities during times of power failure to enable residential customers the energy certainty they can rely on.”
The ability of CleanSpark to do good wasn’t contained within local power grids, though. According to Schultz, the redesign of bitcoin mining is necessary for the health of the environment worldwide. “Recently, one of the biggest publicly traded US companies announced plans to recommission a decommissioned 100-megawatt coal-fired power plant in Montana,” he says. “And for what? To mine bitcoin.”
This dated approach is far from CleanSpark’s sustainable energy generation, Schultz says. “Our Atlanta facility is focused on non-carbon emitting power,” he says. “We’ve incorporated their existing energy mix of nuclear and hydroelectric, getting the use of coal down to five percent, into ‘peak’ plants that support the system during moments of high demand.”
Schultz says that each partnership and agreement they enter incentivizes the facilities to be greener. “Our facilities invest in other renewables to displace that carbon-emitting power, generate more clean energy, and balance the loads of power they’re using on top of giving them solutions for possible short-term power descriptions,” he says. “We take a holistic approach to promote a reinvestment in communities.”
The global impact of bitcoin miners
As the facilities in the US begin to adopt these new approaches to bitcoin mining, Schultz says other companies and countries are lagging, especially on the environmentalism angle.
“When China’s miners were pulled offline by their government, many of their data centers were using antiquated, less-efficient bitcoin mining rigs and purchasing cheap hydroelectric power,” he says. “Hydropower in China is abundant and inexpensive during the rainy seasons, so those rigs using excess power cost next to nothing to operate. Given the current cost of power in the US and other countries focused on environmental impact, there isn’t economic value to deploy those same rigs here due to their inefficiency.”
These old rigs weren’t taken out of commission, though. Many found their way to Kazakhstan. “Kazakhstan has cheap power, but that’s because up to 97 percent of their energy mix is coal and non-renewable,” Schultz says. “On the global stage, bitcoin continues to face a negative image due to perceived environmental concerns. CleanSpark has a focus to operate all of our facilities following ESG principles, and to be responsible corporate citizens, understanding how industries and countries treat the earth affects everyone, no matter where we live.”
The answer, Schultz believes, is not eliminating bitcoin or other cryptocurrencies, but prioritizing the addition of renewable energy and working in conjunction with utilities to invest in sustainability for the benefit of both the industry and the local utilities.
“Bitcoin is here to stay,” he says. “Many countries and economies have experienced massive inflation and currency devaluation, and to provide access to a stable, global currency that offers financial certainty is really critical. Cryptocurrency operators can be a huge benefit to communities and the Earth by stimulating more rapid adoption of clean energy—the right kind of energy infrastructure—not smokestacks burning coal to support industry. It’s about creating a profitable focus on responsibly generating and storing energy. If more companies and countries were to adopt this approach, that rising tide would lift all the ships. We’d benefit globally.”
Even with the clearly outlined benefits, plenty of countries around the world, and US companies alike, have decided to not sign on. “The overriding emotion is fear of change,” Schultz says. “I spent some time in the oil fields, and when you talk to a petroleum engineer about why they do something, the answer is usually something like, ‘That’s the way we always did it.’ It’s an uncertainty of fully relying on renewables.”
The shift away from traditional energy generation methods also requires a level of flexibility that’s relatively unprecedented. “In the oil business, ‘Drill, baby drill!’ is the motto. It’s the same in cryptocurrency: the more rigs you can plug in, the better,” he says. “So when we stand up and say that it may make sense to add more renewables, collaborate with local utilities, and be willing to take rigs offline in times that require more energy, we get some resistance.”
None of the hesitancy has stopped CleanSpark from growing. “Our ESG-focused and holistic approach to sustainability gives our version of bitcoin mining longevity,” Schucman says. “There are numerous benefits associated with [our] microgrids, including energy cost savings, decreased reliance on the grid, reduced fossil fuel emissions, and enhanced energy security. We all value the importance of mining cryptocurrency efficiently and sustainably.”
For Schultz, his commitment to his work at CleanSpark is deeply personal. “I had a career handling wastewater trucks, and the logo on our vehicles read, ‘We didn’t inherit the planet from our parents. We borrowed it from our children,’” he says. “That’s always stuck with me, and I’ve carried it into my position here. I’m a father of six, and anything I or we can do to leave the planet better than we found it is something we’ll try. We’re on a mission to evangelize the idea that you can be more profitable by being more responsible.”