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Power Bitcoin Supercomputing

Utility Targets Bitcoin Miners With Power Rate Hike (datacenterfrontier.com) 173

Posted by timothy from the meet-the-supply-and-demand-curve dept.
1sockchuck writes: A public utility in Washington state wants to raise rates for high-density power users, citing a flood of requests for electricity to power bitcoin mining operations. Chelan County has some of the cheapest power in the nation, supported by hydroelectric generation from dams along the Columbia River. That got the attention of bitcoin miners, prompting requests to provision 220 megawatts of additional power. After a one-year moratorium, the Chelan utility now wants to raise rates for high density users (more than 250kW per square foot) from 3 cents to 5 cents per kilowatt hour. Bitcoin businesses say the rate hike is discriminatory. But Chelan officials cite the transient nature of the bitcoin business as a risk to recovering their costs for provisioning new power capacity.
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Utility Targets Bitcoin Miners With Power Rate Hike More

Utility Targets Bitcoin Miners With Power Rate Hike

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  • Seems reasonable (Score:5, Insightful)

    by omnichad ( 1198475 ) on Tuesday February 02, 2016 @04:05PM (#51423439) Homepage

    Bitcoin miners are only making money speculatively. No reason the power company shouldn't treat servicing them the same way.

    • Re: (Score:3)

      by crtreece ( 59298 )
      Are they going to apply this same logic to data centers? How many other business types do they wish to micro-manage?

      I can understand that the Utility Company wants to get back what they would spend to upgrade the infrastructure to support the BTC miners. Why can't they just state that up front, bill them for the upgrades, and work out some sort of contract for payment? That's what they do if you want utilities run to some place where they don't exist.

      • Why can't they just state that up front, bill them for the upgrades, and work out some sort of contract for payment?

        I can guarantee that will be more expensive for BTC miners - they aren't a long term sustainable business, at least at that level. It really sounds like the utility was doing them a favor in working it into the kWh cost.

      • Re: (Score:3)

        by drnb ( 2434720 )

        Are they going to apply this same logic to data centers?

        They are not targeting miners specifically. They are targeting "high density users (more than 250kW per square foot)".

        I can understand that the Utility Company wants to get back what they would spend to upgrade the infrastructure to support the BTC miners. Why can't they just state that up front, bill them for the upgrades, and work out some sort of contract for payment? That's what they do if you want utilities run to some place where they don't exist.

        That have stated it up front. They are billing/contracting for the infrastructure costs, using a higher rate. As they point out miners can come and go pretty quickly so they need to recovers costs more quickly than usual.

        • They are not targeting miners specifically. They are targeting "high density users (more than 250kW per square foot)".

          Yeah, right. The rule may not say "bitcoin mining" in so many words, but even the utility company itself said that this was targeted at miners.

          The real issue is that kW per square foot is a arbitrary and meaningless metric. It has nothing at all to do with the cost of delivering the electricity or the risks associated with building out new infrastructure. It's not unreasonable that the utility wants some compensation in exchange for the risk of building out expensive distribution infrastructure, especially

          • but they need to come up with a more equitable basis for sharing the risks than "power density"

            Especially considering that the square footage of our homes and businesses is none of their fucking business.

          • To keep entire proposed 220 MW addition under the 250kW/ft^2 threshold you only need to add 880 square feet, which would be far less expensive than paying the 2c/kWh surcharge, over $3M per month for 220 MW.

            Never mind that; the summary just got the units completely wrong, and consequently was off by four orders of magnitude. The actual threshold from the linked slides is 250 kWh/ft^2/year, which is a long-winded way of saying 28.5 W/ft^2. Ergo, 220 MW would need a bit over 7.7 million square feet of operating space, or about 177 acres, to stay below the threshold, which makes the rule a bit harder to game. (Partner with a local farming operation, perhaps?)

            Power density is still a stupid way to decide electric

            • Cool, I just couldn't rap my head around 250KW/ft^2, that would be like getting hit by a continuous bolt of lightning.

            • The question is what is a reasonable metric. They have a buisness model for building out new capacity that assumes that said capacity will be in use for many years. Usually this works quite well, for commercial property it doesn't really matter who is in the builiding as long as someone is and for heavy industry once the facility is bought and paid for it's likely to keep working for years (even if it's original owner goes bankrupt).

              Bitcoin mining is different, the system is rigged so for a given size of bi

              • So if the utility wants to deter bitcoin miners from moving in to their area (or at least charge them more to make up for the risk) they need to work with the local government to draw a line in the sand somewhere. That line needs to be drawn in a way that non-technical lawyers, judges and politicans can understand and that can be enforced using information the utility has access to.

                I don't disagree with any of that, but whatever "line in the sand" they pick ought to have some relationship to the risks they're trying to mitigate. Power density is simply too arbitrary, and thus discriminatory. Do your bitcoin mining in a traditional data center drawing 220 MW and you pay an extra $3M/month. Colocate your mining operation at a low-energy farm operation spanning a few hundred acres, using the same amount of power, and you pay the normal rates. The risks haven't changed at all, but the pow

      • they targeting density not bitcoins directly, so if a datacenter is using a similar footprint then yeah they will get hit too. I imagine that this is actually targeting Datacenters that focus on bitcoin mining.

    • Do you think the power utility ought to audit everyone to determine whether or not their business (well, not just business, but their use of electricity) is speculative, then I can see how your position makes sense and doesn't single you out as a Very Special Person.

      OTOH if you start backpedalling and claim that you don't want the power utility to adjudicate whether or not you are a speculative user, then you just outed yourself as a Very Special Person.

      • Do you think the power utility ought to audit everyone to determine whether or not their business (well, not just business, but their use of electricity) is speculative

        No. They received a huge number of requests to increase capacity. It's completely fair to look at who is requesting that and how they can mitigate their own financial risk.

        OTOH if you start backpedalling and claim that you don't want the power utility to adjudicate whether or not you are a speculative user

        I'm not moving to Washington or asking for new power to be provisioned. I'm not sure how that's relevant.

    • Re: (Score:3)

      by drnb ( 2434720 )

      Bitcoin miners are only making money speculatively.

      Actually they tend to lose money speculatively.

      • Even more reason for the power company to not want to build out infrastructure for nothing.

        • Their excuse sounds like bullshit to me. If the BC people move away after the electricity company have built the extra capacity then there's a thing called a "national grid" that allows them to sell it to other electricity companies. If they are really worried that the extra capacity is only a temporary fad then theu could use the same grid to buy the extra power at wholesale.There is no electricity company in the US that sells exactly the same amount of power it generates, The grid is a giant electricity

          • Actually it's a pretty common problem, sometimes the utility has to build a substation [wikipedia.org] it's a rather large capital expense. A local paper plant has their own electrical generation plant and they pay the local utility as much in lease payments on their substation to maintain backup power as they would to buy the electricity, they save on waste ligin disposal fees and get a tax credit for being powered by a renewable power source (they burn a ligin/diesel mixture) to make it worthwhile.

    • It takes an investment to supply customers that have unusually high power demands compared to their (geographic) neighbors.

      It's not about selling kilowatts, it's about ensuring that your grid can deliver them to the customer.

      In other words, you may well have to adjust the grid in an area to accommodate just one high-density user.

      And who's going to pay for that adjustment? The energy company? His neighbors? Or the more-intense-than-average user?

      If it concerned e.g. a bakery, you might amortise the ch

  • A new nuclear powered bitcoin mining rig has just been announced . Pre-book now. Deliveries expected by the end of this century.

  • Discriminatory? (Score:5, Insightful)

    by bws111 ( 1216812 ) on Tuesday February 02, 2016 @04:11PM (#51423483)

    Bitcoin businesses say the rate hike is discriminatory

    So what? There are only a very few things (race, ethnicity, etc) that you can't legally use to discriminate. Being a bitcoin miner is not one of them.

    • Re:Discriminatory? (Score:4, Insightful)

      by bhcompy ( 1877290 ) on Tuesday February 02, 2016 @04:15PM (#51423517)
      And, really, if you use more power, you should be charged more. Tiered power rates based on use are pretty much universal in the bulk of the west

      • Yeah, but the tiering goes the other direction. The people who use the most power pay the least per MWH for that power.

        • Re: (Score:2)

          by bws111 ( 1216812 )

          Not always. Places with excess generating capacity may charge less as usage goes up to encourage usage. Places with insufficient capacity do the opposite. This is the second case.

        • That's not how it works in California. Be interested to see where that pricing platform would be in effect

          • Re: (Score:2)

            by dbIII ( 701233 )

            That's not how it works in California

            California - vast established economy but still brownouts just like a developing nation yet you use the word "works"?
            That "energy market" with Enron etc then probably worse since is an international joke.

            • Which has what to do with tiered pricing?

              • Re: (Score:2)

                by dbIII ( 701233 )
                The "market" structure in California was famously fucked up and has been, possibly still is, outright corrupt. It was crony capitalism preserved by law, hopefully it is recovering from that now.
                In general terms worldwide however pricing is arranged to encourage large customers to consume at night to result in "base load" and avoid the very expensive and wasteful process of having to shut down a lot of thermal capacity at night. There are also price incentives to encourage very large customers to site thei

        • Re: (Score:2)

          by anegg ( 1390659 )

          I live in Washington, a couple of hours away from Chelan. My local utility (Puget Sound Energy) residential rate for electricity is $0.095539/kWh for the first 600 kWh, and $0.114361/kWh for each above the first 600, for the 31-day period 12/9/2015 through 1/8/2016. The tiering gets more expensive when you use more power.

          I don't know if they adjust for shorter months or not.

        • Re: (Score:2)

          by jrumney ( 197329 )
          There's normally a peak in the middle somewhere. Exceptionally high users get to make their own deals, which usually involves agreements to spread their load in a certain way in return for low rates. For the rest of us, the standard tiered rates start low with low usage, and go up as the usage increases.

          • Re: (Score:2)

            by cob666 ( 656740 )
            I worked for a manufacturing facility in CT that had several offices as well as an actual manufacturing plant. During the summer and other peak usage times, the local power company would give us massive reductions in cost or provide credits of tens of thousands of dollars, JUST to turn off half of the fluorescent lights in the offices for at least 4 hours.

            Where I live now, the local pulp mill can generate power with residual steam that normally runs the paper machines. During high load times when the pow

  • BitCoin vs. Global Warming (Score:3)

    by xxxJonBoyxxx ( 565205 ) on Tuesday February 02, 2016 @04:14PM (#51423511)

    Someone please tell me why we don't hear from the climate change crowd whenever there's another BitCoin mining story posted. If anything would seem to be a needless waste of energy, BitCoins would seem to top the list...

    • Re:BitCoin vs. Global Warming (Score:5, Funny)

      by mspohr ( 589790 ) on Tuesday February 02, 2016 @04:22PM (#51423573)

      Hear! Hear!
      Climate change crowd here.
      We're up in arms about bitcoin mining... it's a needless waste of energy!
      (Is that good enough for you?)

    • The other option is state-controlled currencies, which enable warfare, which is far more environmentally damaging.

    • Because BitCoin is old news now, and people stopped bothering to complain about it years ago

    • Two reasons. First, the insane competition to mine bitcoins is a temporary phenomenon. We will hit 75% of the 21 million total this July. At that point the reward for mining a block will drop in half, and so will the incentive to mine. Every 4 years half the remaining coins will be mined, and the reward will drop in half again. It was set up this way to encourage early adopters for the initial distribution of coins. Eventually transaction fees, which are ~1% of miner income today, will be the only inc

  • "citing a flood of requests for electricity to power bitcoin mining operations. "

    Tell the electric company you have to power an iron lung, and an electric kidney. What were you thinking?

    • Re: (Score:2)

      by sims 2 ( 994794 )

      They have electric kidneys now? How did I miss this? Last I heard people were still using those gigantic dialysis machines.

      • Nobody ever said they were small (or portable) electric kidneys.

        • Re: (Score:2)

          by sims 2 ( 994794 )

          Well personally I wouldn't call a dialysis machine a electric kidney. But then again I wouldn't call a miniature Segway a hover board either.

          Here's to hoping medical tech catches up with the rate of advancement of the rest of our electronics. I really was hoping I had just missed out on the announcement as that would have been a huge leap.

  • bitcoin subsidy seeking... (Score:5, Insightful)

    by harvey the nerd ( 582806 ) on Tuesday February 02, 2016 @04:16PM (#51423531)
    Any new capacity probably actually costs more than 5 cents per kWh for customers of under 5-10 yrs duration, depending on energy source.
    • Last I checked, the only thing more popular than crying when your subsidy gets cut is coming up with rationalizations for why your subsidy is morally justified and the other guy's is just parasitic laziness.

  • that 250,000 watts/sqft power number (Score:1)

    by Anonymous Coward

    More than 1 MEGAWATT per 4 square feet?

  • Ah, risk shuffling... (Score:4, Insightful)

    by fuzzyfuzzyfungus ( 1223518 ) on Tuesday February 02, 2016 @04:23PM (#51423589) Journal
    This seems like an issue of how you want to allocate the costs of risk, not a terribly uncommon problem: Building the additional capacity will cost the utility a nontrivial amount of money, and if the demand that originally justified the buildout dries up, they won't exactly be able to return it for a refund(and, if they can't operate it profitably, its resale value is unlikely to be very exciting).

    Unless one simply wishes to deny that, and pretend that this sort of capital investment is risk free, which is silly; the question is really just how the cost of the risk is paid: If you want the utility to bear the risk, giving you the ability to purchase or not purchase power from month to month as you see fit; they'll want to make up the cost of the risk by increasing the price. If you offer to take on the risk; but making a long-term commitment to purchasing a given amount of power, I'm sure they'd be happy to offer you a suitably lower rate.

    This is only 'discriminatory' if, in fact, 'bitcoin businesses' are not a more volatile and hard to predict customer base than other electricity users; but the utility is just treating them as though they are. If they are in fact more unpredictable, it is only reasonable that the utility would want them to pay more: the rate you pay is basically their operating costs, plus the cost of the initial investment in building the generating capacity. If you are highly predictable, they'll be content to be paid back for that over the long term. If you might be gone in six months without a replacement, they need to be repaid faster. Not fundamentally different from paying more for credit if you are considered a lousy repayment risk.

  • Would it make sense to price power per kilowatt usage blocks? As an example: 0-9.9 kW is 5c/W, 10 kW - 19.9 kW 6c/kW, 20 kW - 29.9 kW 7c/kW, etc. Ignore the actual values, but instead think of the tiers. The idea would be to encourage people to try to keep within a certain threshold and 'penalizing' people "who just don't give a damn". For the people who can afford to buy less power hogging equipment or adjust the demand, then they can do so and for those below a certain income level, well they can probably

    • Re: (Score:2)

      by bws111 ( 1216812 )

      Tiered pricing is already being done. For instance, by PG&E [pge.com].

    • Just replying to myself, since I decided to check whether this already being done, and indeed it is in some places. The first search hit turned up the Ontario Energy Board: http://www.ontarioenergyboard.... [ontarioenergyboard.ca]

    • Would it make sense to price power per kilowatt usage blocks?

      Tiered pricing can work to keep usage lower for people who can actually vary their usage and whose profits aren't tied almost directly to energy used. These miners have a pretty fixed energy requirement and the only way to reduce energy consumed is to scale back on the processing, lowering the potential for profit. The whole scheme also relies on sufficient existing capacity, which appears to be an issue here. Tiered pricing can be used to lower demand, but if that demand still exceeds generating capacity t

  • Really? I thought my electric pricing was pretty cheap at somewhere around $.10/kWh. I wonder if they're a co-op and how much they're marking it up to get it to 3 cents.

    • It's hydroelectric power and probably old dams that have already been paid off. There's no fuel costs. So far that area still has pretty good water levels so they haven't need to build out a lot of backup power sources. Their biggest expenses are maintaining the grid, expanding it to new areas, upgrading capacity, and payroll.

      • Re: (Score:2)

        by DewDude ( 537374 )
        That's a good point; I figured they would have rolled the expenses in to any markup.

        My provider is non-profit; so I pay wholesale prices. They did just build a new bio-fuel plant; but they're burning the scrap left over from logging operations, so no fuel costs there. Hell, they had to get approval from the state to lower the cost after they revamped their purchasing and started saving a whole bunch; I'm still getting a refund every month for electricity I paid for 5 years ago.

  • high density users (more than 250kW per square foot)

    Holy shit! That sort of power density puts a nuclear power plant to shame. Or has some journalist again mixed up their units?

  • Jeez, here it can cost $60K to get cable TV run a mile - WA electric will drop a few megawatts of capacity for free?

    Higher rates seem much easier to handle, as long as restaurants and other high-risk businesses get the same deal, and there are sunset provisions.

    • I guess that in that region, the legislation doesn't allow the utility to charge the customer the capital costs of new capacity. In the UK, the utility can charge the customer the capital costs of a network upgrade (on a pro-rata basis - e.g. if a network provider chooses to replace a 10 MW transformer with a 20 MW transformer in order to service a new 5 MW customer, then they can bill the customer for 50% of the capital costs prior to agreeing the connection).

      We had this issue recently at the hospital

  • probably really for grow-ops (Score:3)

    by xombo ( 628858 ) on Tuesday February 02, 2016 @05:21PM (#51424179)

    The increased power capacity is probably really for indoor, environmentally controlled grow-ops in the areaâ"and not bitcoin mining. I suspect this is just a cover story.

    • Actually the weed industry is a lot smaller here than I'd expected, it's regulated a lot more tightly, and there is a LOT of police activity focused on shutting down unlicensed grow operations. I moved here from Humboldt County, California and I was shocked to find weed here is scarcer and more expensive than it is there.

  • An extra 1.6 cents per Kilowatt hour, 250kW, 720 hours in a month,
    $0.016/kWh * 250 kW * 720 hours / month = $2,880 / month.
    Monthly rent is high, but no where near $2,880 per square foot.

    • The units are all wrong in the summary. It is 250kwh/square foot/per year. So the density per square foot is exponentially lower as is the extra monthly cost per square foot.

  • High density users (Score:3)

    by PPH ( 736903 ) on Tuesday February 02, 2016 @06:11PM (#51424709)

    Perfect timing for my new business model. Self storage warehouses and Bitcoin mining.

  • AMD / ATI got a huge influx of sales thanks to BitCoin mining 3 or 4 years ago, it lasted for 12 to 24 months, sales figures perked up, manufacturing probably had to be increased, cost of procurement of components maybe slightly dropped - all kinds of factors, due to an artificial increase in sales.
    When mining with GPU's became a poor option, sales returned to normal, just for gamers. Many high end used cards hit the market, further reducing sales.

    This was positive and negative for AMD - so if a power comp

  • The Grant Public Utility District is a public -- meaning government -- agency. Do you really want government agencies deciding some businesses should pay higher rates than others? Maybe under very specific circumstances, but I'd be very skeptical of this in general.

    While the PUD talks about 'recovering costs,' there is a very good argument that what this is about is about the incumbent business interests -- in this case agriculture -- making the newcomers subsidize them by paying higher rates. These guys

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