Energy companies frequently find they have a surplus of electricity relative to demand. This is often referred to as stranded or curtailed power — energy that they have the ability to generate, but no market to sell to due to either low demand or the location of the power source.  Relationships with cryptocurrency miners have become a favorable solution for energy companies to sell this energy and increase their revenue.

In order to facilitate the efficient sale of energy between the Retail Energy Provider (REP) and the crypto-miner, the parties frequently develop a Private Purchase Agreement (PPA).  When energy companies have PPAs in place with crypto-miners, they can expect constant predictable revenue because mining for cryptocurrency requires a constant, predictable draw of energy. Entering these contracts generally requires the crypto-miner and the REP to establish a mutual understanding. Miners can agree to use a consistent level of electricity, which makes the demand, and revenue, much easier for REP’s to forecast. In return, REP’s will agree to sell their power to the crypto-miner at a fixed rate that is generally lower than the standard industrial tariff.

Horseshoe Power in Alberta, Canada has recognized this benefit and is partnering with Sazmining Inc. and Drillbit Crypto on a mining project with a Private Purchase Agreement.  Horseshoe Power was attracted to working with crypto-miners due to the consistent predictable revenue. They like that regardless of the fluctuating demand they see from other customers, their crypto-mining partners will have a constant draw of energy.  Creating a positive working relationship with the crypto-miners by locking in the price of electricity for them through the PPA allows Horseshoe Power to have predictable revenue and usage. Sazmining Inc. and Drillbit Crypto also benefit from having consistent, predictable energy costs to factor into their profitability.

In entering these contracts, both the crypto-miners and the REP’s need to be aware of how much cryptocurrency has to offer the energy industry.  While crypto-miners typically use a consistent draw of energy, they also have the ability to scale power consumption up and down at will.  This practice is often referred to as load shedding, an exercise for crypto-miners that allows their electricity demand to be reduced to free up space on the grid. In most cases, this may be done when the REP can earn a premium for selling their power to the grid, generally times when grid demand is high.  In some markets, power rates can increase by 3,000% during peak periods. For example, in Alberta, Canada, where Horseshoe Power is located, the “grid rate” can go from $0.03 to $0.99 per KwH during peak periods. Unlike traditional data centers that require a very high uptime, the crypto-miners can quickly scale their consumption to get the power to the grid the moment it is needed, and allowing the REP to capitalize on the higher rates. Quickly scaling electricity consumption is unique to crypto-mining, and this situation has the potential to revolutionize the efficiency of electrical grids around the world.

With fluctuating grid demand and prices, Private Purchase Agreements are an excellent way for power producers to ensure they have predictable sources of revenue.  In comparison to businesses that only operate for 10 or so hours per day, data centers like those used for cryptocurrency mining are positioned to be a greater benefit for the power producer as they often operate 24 hours a day with a steady draw of electricity.  Additionally, REP’s that work with crypto-miners can easily create a well aligned partnership where the REP receives additional revenue by selling power to the crypto miners during off peak periods and selling to the grid to capture the high premiums during peak periods. As cryptocurrency mining continues to expand, we’re likely to see more agreements such as the one between Horseshoe Power, Sazmining Inc., and Drillbit Crypto as these agreements are truly beneficial to each of the parties involved.

The post Energy Companies Can Improve their Bottom Line by Entering Private Purchase Agreements with Cryptocurrency Miners appeared first on Zex PR Wire.