(Bloomberg) — A cryptocurrency startup is teaming up with a Wisconsin hydroelectric plant owner to build a Bitcoin mine, the latest collaboration between the energy-intensive industry and a power generator.
Digital Power Optimization, a closely held firm that helps power generators mine cryptocurrency, said it partnered with Wiconi Hydro and an unidentified family office to form Cascade Digital Power, a venture that owns and operates a plant in Hatfield, Wisconsin and plans to buy more hydro assets to power crypto mines. Integrating mining with electrical generation is key, according to DPO founder and Chief Executive Officer Andrew Webber.
“If you don’t own your own power generation, the other guy will produce power cheaper than you and push you out of the market,” Webber said in a phone interview.
Electricity accounts for the bulk of a mine’s operating costs and miners are always searching for the cheapest supply. Miners that control their own power generation enjoy lower energy costs and higher profit margins than those that get electricity from outside sources. Traditional energy companies have built out their own mining operations, while partnerships like the one in Wisconsin aim to marry an inexpensive power supply with mining’s potential for big profits.
The Hatfield plant has a capacity of about six megawatts, which is small by the standards of those supplying energy to big cryptocurrency operations in Texas and other states with cheap power. About half of Hatfield’s power will be used for mining and the rest will be sold to the local power grid, according to DPO. Another advantage to the plan is the plant provides emission-free power, an important consideration as the mining industry is increasingly criticized for its climate impact.
Bitcoin mining uses computers that run complex calculations to maintain the cryptocurrency’s network, with successful miners rewarded in the virtual currency. Power sources that are suitable to run mining operations have been in intense demand since an influx of miners from China migrated to the U.S. after Beijing banned crypto mining last year. Hosting sites, where miners can hook up their machines, charge high fees and take a cut of the profits.
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