Bitcoin & Nuclear | Part 2 - Can Nuclear Energy & Bitcoin Mining make electricity abundant & near free?
Deep Dive into the Economics of Nuclear Power Plant (NPP) Constructions, with and without bitcoin mining co-location.
Welcome to part-2 of this series on ‘Bitcoin & Nuclear’. The second part to this series is titled ‘Can Nuclear Energy & Bitcoin Mining make electricity abundant & near free?’ and is co-authored by Tina, a fellow Berkeley graduate, physicist and a strong bitcoin & freedom advocate like myself.
Let us recap what we went through in part-1 of this series on ‘Bitcoin & Nuclear- Future of Energy Grid’ before we dive deeper into topics we’ll cover in part-2
Key Takeaways from Part-1
Bitcoin has great utility & is important for humans. Not everyone may use or appreciate its utility today, which is fine, but that does not mean it holds no utility to others. Currently, close to $0.5 trillion of world’s wealth is stored in it, that’s a lot of monetary energy to disregard.
Bitcoin uses only ~0.1% of global energy. Current energy usage is between 100-200 TWh/yr and per the projections, bitcoin’s energy usage will always be a rounding error with regards to global energy consumption. It would most likely be sub 1% for a long time to come.
Bitcoin, in fact, may use too little energy for the value it may store in the future. Considering bitcoin grows over this coming decade and stores $20T of world’s wealth, maybe even $50T, or dare i say $100T, that’s a lot of monetary energy to be secured safely and protected. We should invest & use more energy to protect the network than what we do currently.
Bitcoin miners are highly mobile, look for the cheapest & lowest cost energy to mine and do not compete with other industries or your personal use for energy.
Energy usage is a good thing. You want to live in a place where there is a good amount of energy available to use and enjoy, rather than too little. We need to use & harness more energy to become a Kardashev Type-I civilization which will take decades.
Nuclear Plants have always fascinated people over the years but very few till date actually understand the economics behind constructing a nuclear power plant at scale. Today we deconstruct this very topic and in a fun & innovative way.
“ There are only two things that matter in construction of a nuclear power plant - capital cost & cost of capital ”
Part-2 Contents
A tale that begins in 2009
Economics of Nuclear Power Plants (NPPs)
Free Electricity - A thought experiment
A tale that begins in 2009
All good tales need to start from the very beginning. Why should we do it any differently, so here we go.
The year is 2009. There are two nuclear reactor technology companies in the market competing to bring their technology online, deploy reactors and sell electricity. We’ll call these companies Alpha Labs & Beta Labs. Both companies are currently in their R&D phase and going through their conceptual design for the reactor deployment. The next six or so years would be grueling. Both these companies will go through an extensive R&D, engineering decision making process, supplier & vendor selections, component testing, hardware testing, conceptual design reviews & iterations and a thorough licensing review by the Nuclear Regulatory Commission (NRC) before they get a construction permit for building a nuclear reactor site. This period will be filled with challenges both technological in nature and otherwise. Like working on any deep technology, there are always things that need detailed design & engineering to be worked through and iterated upon before you’re ready to bring that technology to reality. Nuclear is no different.
Although, another thing happened around 2009, the invention or discovery of Bitcoin. In the initial years no one took any notice, at least not in the nuclear industry since they were pretty occupied in their technology work and bitcoin was only heard about or really found in the weeds of the internet and who was really busy searching for that in those days. But this changed. In 2012, one engineer working at Alpha Labs discovered bitcoin by chance, going through a reddit blog post. This engineer was intrigued and started looking into it more. Being from an engineering background with deep experience in energy markets, he started thinking about bitcoin as a commodity with a production cost associated with it like any other commodity. He discovered Proof of Work Mining. This led him down a rabbit hole which changed the very nature of Alpha Labs’ history and more importantly the future of nuclear, power markets, the energy grid and humanity forever. This is the story of that one engineer.
The engineer started with mining bitcoin at his home in the beginning. He figured there was no better way of learning about mining than to do it himself and be in the trenches. The year was now 2013 and he had been mining for good six months and had developed deep thinking about mining. He soon realized the repercussions of this innovation, how mining could be used to monetize energy that could otherwise never be monetized. Bitcoin Mining offers a buyer of first resort for any energy that is low cost - wasted, stranded, curtailed, surplus or underutilized. The engineer realized this. He was way way ahead of his time, the world would not figure out the profoundness of this innovation until about 2030.
The engineer having realized this in 2013 started pitching the idea of a co-location of bitcoin mining site on the nuclear island that Alpha Labs was designing for its first site. He received severe push back in the beginning since no one was aware of bitcoin, forget about bitcoin mining. But he was persistent and did not give up. Bitcoin had also started to get into the mainstream news because of the price surge, then a subsequent crash due to Mt. Gox debacle and people were at least becoming aware of it. He started giving talks and presentations to the executive team and orange pilled a few of them. After six months of thorough design & engineering work in early 2014, Alpha Labs announced its plan to co-locate bitcoin mining center on its nuclear island site which was supposed to begin construction in 2016. The engineer got switched to a newly created bitcoin mining division inside the company and starting leading that group now. Over the next year, they worked through the details of the build out and integrated the mining center co-location design into their nuclear island design. Alpha Labs went with a highly mobile construction design for mining center so in case they had to move or shift the mining center elsewhere it would be relatively easy to do and it limits their risk of owning an asset which cannot be moved if the circumstances demanded it. They realized the footprint that the mining center took as part of the nuclear island itself was not substantial and did not have a huge impact (increase) to the size of land they would need to get to build the site upon.
Alpha Labs received the permit approval for construction of Alpha-1, their flagship nuclear plant with bitcoin mining co-location in second half of 2016. They were now ready for construction.
All this while, Beta Labs were themselves busy developing their own technology for the nuclear reactor and were making amazing progress. They had gone through design process, completed their entire hardware and component testing by 2014 and had themselves been keeping engagements with the NRC around the licensing piece as early as 2012. Beta Labs went with a traditional nuclear plant with no bitcoin mining co-location, since they were not sold on the idea of this innovation by anyone particular, even though they had heard about the announcement of Alpha Labs in the early part of 2014. They had held some preliminary discussions to understand Alpha Labs’ decision making but decided against pursuing a similar strategy, partly due to the fact that there were no resources out in the public markets to guide them around the use case for bitcoin mining colocation with their reactor build out. Beta Labs themselves received their permit approval for construction in the second half of 2016 and were ready for their own build out.
Both Alpha Labs and Beta Labs were pursuing a nuclear plant construction of 1GWe (or 2.5GWth, 40% efficiency) capacity from the very early days. In 2014, Alpha Labs shifted track and announced a 2GWe (or 5GWth, 40% efficiency) reactor deployment and construction plan, with 1GWe to be used for selling electricity to the grid while the balance 1GWe to be used solely for mining bitcoin onsite.
So, to recap here is the construction plan for both companies-
Alpha Labs - 2GWe cap | 1GWe sell to grid wholesale, 1GWe mine bitcoin onsite
Beta Labs - 1GWe cap | 1GWe sell to grid wholesale
Economics of Nuclear Power Plants (NPPs)
We’re in the second half of 2016. Both Alpha & Beta Labs have announced their Nuclear Power Plant (NPPs) constructions and are actively looking to raise capital.
NPP financing can take many different, exotic forms and arrangements. The structure of financing for NPPs is not part of the scope for part-2. Here we would assume that both Alpha Labs and Beta Labs get funding on equal terms for their construction plant, so as to do an ‘apples to apples’ projection of their capital costs, revenue & P/L.
Assumptions
Let us assume that NPP construction for both companies will take six years to complete. So 2016-2022. This is in line with construction times of most NPPs till date.
Let us assume that the capital cost for NPP construction for both companies are $5000/kW. This ballpark estimate is in line with construction cost of NPPs till date.
Based on this number, here are the capital requirements for both companies -
Alpha Labs - $ (5000*2GW/KW) = $10 billion (or $10B)
Beta Labs - $ (5000*1GW/KW) = $5 billion (or $5B)
Now keep in mind that Alpha Labs would also require capital to buy miners and deploy onsite at their co-located mining center. But this would only be required when they are ready to produce electricity which would not happen until 2022. So they decide to get a higher limit of capital line which they can draw upon when needed six years down the line. At this point in 2016, bitcoin ASICs were going mainstream, new and more efficient machines were expected to come to market over the coming years which Alpha Labs were keeping a track of. They were still quite a few years away from placing order for miners that would consume 1GWe of nuclear generation, so only thing to do right now was to track the mining industry and see it evolve.
Here are the funding terms received by both companies -
Alpha Labs - $10 billion at 3% interest rate with a debt service period of 25 years. The capital line would be extended upto $15 billion at the same terms if needed in the future. Alpha Labs would draw $2 billion in each year for the first five years of NPP construction.
Beta Labs - $5 billion at 3% interest rate with a debt service period of 25 years. Beta Labs would draw $1 billion in each year for the first five years of NPP construction.
Now based on the terms, Beta Labs would need to pay ~$57 million every year for the next 25 years for every $1 billion they draw from their capital line during the first 5 years of construction.
And on similar lines, Alpha Labs would need to pay ~$114 million every year for the next 25 years for every $2 billion they draw from their capital line during the first 5 years of construction.
Now, we’ll use blocks of capital to represent the economics of both Alpha Labs and Beta Labs over the next many years so as to compare what their debt & profit would look like.
Let us assume ~$57 million is one block. We’ll represent this as a green block on the graph going forward.
So its mid 2016 and both NPP constructions are about to begin.
Year 1 | 2016
Beta Labs - Takes out its first $1 billion in capital to begin construction. Based on this they would need to pay 1 block of debt which is added to their balance sheet below.
Total capital drawn - $1 billion
Total debt - 1 block
Alpha Labs - Takes out its first $2 billion in capital to begin construction. Based on this they would need to pay 2 blocks of debt which is added to their balance sheet below.
Total capital drawn - $2 billion
Total debt - 2 blocks
Year 2 | 2017
Beta Labs - Takes out another $1 billion in capital. Based on this they would need to pay 2 additional blocks of debt in year 2 which is added to their balance sheet below.
Total capital drawn - $2 billion
Total debt - 3 blocks
Alpha Labs - Takes out another $2 billion in capital. Based on this they would need to pay 4 additional blocks of debt in year 2 which is added to their balance sheet below.
Total capital drawn - $ 4 billion
Total debt - 6 blocks
Year 3 | 2018
Beta Labs - Takes out another $1 billion in capital. Based on this they would need to pay 3 additional blocks of debt in year 3 which is added to their balance sheet below.
Total capital drawn - $3 billion
Total debt - 6 blocks
Alpha Labs - Takes out another $2 billion in capital. Based on this they would need to pay 6 additional blocks of debt in year 3 which is added to their balance sheet below.
Total capital drawn - $ 6 billion
Total debt - 12 blocks
Year 4 | 2019
Beta Labs - Takes out another $1 billion in capital. Based on this they would need to pay 4 additional blocks of debt in year 4 which is added to their balance sheet below.
Total capital drawn - $4 billion
Total debt - 10 blocks
Alpha Labs - Takes out another $2 billion in capital. Based on this they would need to pay 8 additional blocks of debt in year 4 which is added to their balance sheet below.
Total capital drawn - $ 8 billion
Total debt - 20 blocks
Year 5 | 2020
Beta Labs - Takes out another $1 billion in capital. Based on this they would need to pay 5 additional blocks of debt in year 5 which is added to their balance sheet below.
Total capital drawn - $5 billion
Total debt - 15 blocks
Alpha Labs - Takes out another $2 billion in capital. Based on this they would need to pay 10 additional blocks of debt in year 5 which is added to their balance sheet below.
Total capital drawn - $ 10 billion
Total debt - 30 blocks
Year 6 | 2021
Beta Labs - No additional capital. So they would need to continue paying 5 additional blocks of debt in year 6 which is added to their balance sheet below.
Total capital drawn - $5 billion
Total debt - 20 blocks
Alpha Labs - No additional capital. So they would need to continue paying 10 additional blocks of debt in year 6 which is added to their balance sheet below.
Total capital drawn - $ 10 billion
Total debt - 40 blocks
Year 7 | 2022
This is where things get interesting now. Both Alpha Labs and Beta Labs have completed their NPP constructions and are now ready to produce electricity. At this point both companies’ balance sheet has nothing but a massive compilation of debt obligations based on the amount of capital they have taken out for their respective constructions.
Assumptions [General]
Let us assume that the all in revenue from selling 1GWe electricity per year in the wholesale power markets is ~$525 million with a clearing price of 6c/kWh. This means, based on our block model, both Alpha Labs and Beta Labs would make ~9 blocks of revenue each year going forward from selling electricity. We would assume that both companies will run their NPPs at full power or capacity factor of 100%.
Let us assume that the operating cost of running the NPP per year is ~$100 million per GWe. This includes the yearly fuel cost & variable O/M. This means, based on our block model, both Beta Labs would spend ~2 blocks in covering opex every year going forward while Alpha Labs would spend ~4 blocks in covering opex every year going forward.
Assumptions & Estimates [Mining Specific]
Mining Numbers & Profitability Analysis was done on June 18th 2022 where the bitcoin price was ~$20k, network difficulty was 30T, network hash rate (30 days) was 215 EH/s. The mining revenue projections take into account the halving in 2024 and take an assumption that both bitcoin price & difficulty would increase 50% on average every year for the next 5 years.
Let us assume that Alpha Labs is able to secure latest generation ASIC miners at the cost of ~$10,000 each for their 1GWe mining colocation center. Based on the average power draw from a single miner, Alpha Labs would need around 300,000 miners. The total capital cost for this side of the operation would be ~$3 billion which they would draw from their existing capital line at the same terms as before. This means that they would need to pay an additional debt of ~$172 million (or the equivalent of 3 blocks) every year going forward for this new capital draw.
Let us assume that the mining hardware would have a life of 5 years.
Let us assume that Alpha Labs keeps no bitcoin on their balance sheet from this exercise and therefore converts all mining revenue into USD.
Let us run some mining profitability numbers using Braiins OS to get a projection of how much revenue Alpha Labs would make over the next 5 years of mining with this mining equipment.
Here are the mining revenue results that Alpha Labs would make each year-
Year 7 - $1.5 bil or ~27 blocks
Year 8 - $1.6 bil or ~29 blocks
Year 9 - $970 mil or ~17 blocks
Year 10 - $1.1 bil or ~19 blocks
Year 11 - $1.25 bil or ~22 blocks
Now let us continue with our block analysis of both companies’ balance sheet.
Beta Labs - 20 blocks in debt already, 5 additional blocks in debt for year 7, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 20 blocks - 2 blocks = 18 blocks
Alpha Labs - 40 blocks in debt already, 10 additional blocks in existing debt for year 7, 3 additional blocks in miner debt taken for year 7, 4 blocks in opex, 9 blocks in 1GWe to grid revenue, 27 blocks in 1GWe mining revenue
Yearly P/L = (9 blocks + 27 blocks) - (10 blocks + 3 blocks + 4 blocks) = 19 blocks
Total debt = 40 blocks - 19 blocks = 21 blocks
As you can now see that Alpha Labs is moving up from the trenches of debt collection much quicker than Beta Labs who would take a long time to turn profitable.
Year 8 | 2023
Beta Labs - 18 blocks in debt already, 5 additional blocks in debt for year 8, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 18 blocks - 2 blocks = 16 blocks
Alpha Labs - 21 blocks in debt already, 10 additional blocks in existing debt for year 8, 3 additional blocks in miner debt taken for year 8, 4 blocks in opex, 9 blocks in 1GWe to grid revenue, 29 blocks in 1GWe mining revenue
Yearly P/L = (9 blocks + 29 blocks) - (10 blocks + 3 blocks + 4 blocks) = 21 blocks
Total debt = 21 blocks - 21 blocks = 0 blocks
Alpha Labs has broken even in year 8 in just their second year of NPP operation while Beta Labs still has 16 blocks in debt remaining on their balance sheet. The difference on balance sheet between the companies has suddenly become astonishingly wide. Alpha Labs has been able to wipe off 40 blocks of debt over just two years of operation.
Year 9 | 2024
Beta Labs - 16 blocks in debt already, 5 additional blocks in debt for year 9, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 16 blocks - 2 blocks = 14 blocks
Alpha Labs - 0 blocks in debt already, 10 additional blocks in existing debt for year 9, 3 additional blocks in miner debt taken for year 9, 4 blocks in opex, 9 blocks in 1GWe to grid revenue, 17 blocks in 1GWe mining revenue
Yearly P/L = (9 blocks + 17 blocks) - (10 blocks + 3 blocks + 4 blocks) = 9 blocks
Total Profit = 9 blocks - 0 blocks = 9 blocks
Year 10 | 2025
Beta Labs - 14 blocks in debt already, 5 additional blocks in debt for year 10, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 14 blocks - 2 blocks = 12 blocks
Alpha Labs - 9 blocks in profit already, 10 additional blocks in existing debt for year 10, 3 additional blocks in miner debt taken for year 10, 4 blocks in opex, 9 blocks in 1GWe to grid revenue, 19 blocks in 1GWe mining revenue
Yearly P/L = (9 blocks + 19 blocks) - (10 blocks + 3 blocks + 4 blocks) = 11 blocks
Total Profit = 9 blocks + 11 blocks = 20 blocks
Year 11 | 2026
Beta Labs - 12 blocks in debt already, 5 additional blocks in debt for year 11, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 12 blocks - 2 blocks = 10 blocks
Alpha Labs - 20 blocks in profit already, 10 additional blocks in existing debt for year 11, 3 additional blocks in miner debt taken for year 11, 4 blocks in opex, 9 blocks in 1GWe to grid revenue, 22 blocks in 1GWe mining revenue
Yearly P/L = (9 blocks + 22 blocks) - (10 blocks + 3 blocks + 4 blocks) = 14 blocks
Total Profit = 20 blocks + 14 blocks = 34 blocks
As you can now see very clearly that it would take Beta Labs around 16 years to break even (around 2031) while Alpha Labs broke even in only their second year of operation (in 2023) and year 8 from the start of NPP construction in 2016.
Co-location of a bitcoin mining center onsite was truly a game changing decision for Alpha Labs, thanks to that one visionary engineer who has now been promoted to the executive team. Well deserved indeed.
As we get to see from this case study, co-location of bitcoin mining onsite at the NPP improves both the project revenue & pay back period, which makes the investment capital more attractive. Could bitcoin mining actually help push nuclear into mainstream again? Something to think about.
Near Free Electricity - A thought experiment
Now, how about we do a little thought experiment and see if Alpha Labs can sell their 1GWe electricity to the grid half the price it was selling in the case study before. How would their balance sheet look like in this case?
Till year 6, there would be no difference as NPPs are just finishing construction, so we’ll pick up from year 7 onwards. Here’s how both companies’ balance sheet looks like at the end of year 6.
Year 7 | 2022
This is where things get really interesting now. Both Alpha Labs and Beta Labs have completed their NPP constructions and are now ready to produce electricity.
All our assumptions from the previous case study remain valid for this thought experiment. The only difference is that Alpha Labs are monetizing 1GWe of their electricity generation by mining bitcoin the exact same way while their 1GWe portion which they were previously selling to the grid for ~$525 million or 9 blocks of revenue is now making them half of it so ~$267 million or 5 blocks of revenue. This would mean selling at a clearing price of 3c/kWh instead of the 6c/kWh.
Beta Labs - 20 blocks in debt already, 5 additional blocks in debt for year 7, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 20 blocks - 2 blocks = 18 blocks
Alpha Labs - 40 blocks in debt already, 10 additional blocks in existing debt for year 7, 3 additional blocks in miner debt taken for year 7, 4 blocks in opex, 5 blocks in 1GWe to grid revenue, 27 blocks in 1GWe mining revenue
Yearly P/L = (27 blocks + 5 blocks) - (10 blocks + 3 blocks + 4 blocks) = 15 blocks
Total debt = 40 blocks - 15 blocks = 25 blocks
Year 8 | 2023
Beta Labs - 18 blocks in debt already, 5 additional blocks in debt for year 8, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 18 blocks - 2 blocks = 16 blocks
Alpha Labs - 30 blocks in debt already, 10 additional blocks in existing debt for year 8, 3 additional blocks in miner debt taken for year 8, 4 blocks in opex, 5 blocks in 1GWe to grid revenue, 29 blocks in 1GWe mining revenue
Yearly P/L = (29 blocks + 5 blocks) - (10 blocks + 3 blocks + 4 blocks) = 17 blocks
Total debt = 25 blocks - 17 blocks = 8 blocks
Year 9 | 2024
Beta Labs - 16 blocks in debt already, 5 additional blocks in debt for year 9, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 16 blocks - 2 blocks = 14 blocks
Alpha Labs - 18 blocks in debt already, 10 additional blocks in existing debt for year 9, 3 additional blocks in miner debt taken for year 9, 4 blocks in opex, 5 blocks in 1GWe to grid revenue, 17 blocks in 1GWe mining revenue
Yearly P/L = (17 blocks + 5 blocks) - (10 blocks + 3 blocks + 4 blocks) = 5 blocks
Total Debt = 8 blocks - 5 blocks = 3 blocks
Year 10 | 2025
Beta Labs - 16 blocks in debt already, 5 additional blocks in debt for year 9, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 14 blocks - 2 blocks = 12 blocks
Alpha Labs - 18 blocks in debt already, 10 additional blocks in existing debt for year 9, 3 additional blocks in miner debt taken for year 9, 4 blocks in opex, 5 blocks in 1GWe to grid revenue, 19 blocks in 1GWe mining revenue
Yearly P/L = (19 blocks + 5 blocks) - (10 blocks + 3 blocks + 4 blocks) = 7 blocks
Total Profit = 7 blocks - 3 blocks = 4 blocks
Alpha Labs has broken even in year 10 in this case instead of year 8, or 4 years after beginning operation. Still quite amazing considering Beta Labs would not turn profit until year 16 and Alpha Labs is selling 1GWe electricity at half price compared to them.
Year 11 | 2026
Beta Labs - 16 blocks in debt already, 5 additional blocks in debt for year 9, 2 blocks in opex, 9 blocks in 1GWe to grid revenue
Yearly P/L = 9 blocks - (5 blocks + 2 blocks) = 2 blocks
Total debt = 12 blocks - 2 blocks = 10 blocks
Alpha Labs - 18 blocks in debt already, 10 additional blocks in existing debt for year 9, 3 additional blocks in miner debt taken for year 9, 4 blocks in opex, 5 blocks in 1GWe to grid revenue, 22 blocks in 1GWe mining revenue
Yearly P/L = (22 blocks + 5 blocks) - (10 blocks + 3 blocks + 4 blocks) = 10 blocks
Total Profit = 4 blocks + 10 blocks = 14 blocks
Co-location of a bitcoin mining center onsite was truly a game changing decision for Alpha Labs and even if they sold their electricity at 1/2 price compared to Beta Labs, they are considerably more profitable compared to them at this stage.
Here is a sensitivity analysis on clearing price of electricity sold by Alpha Labs and their balance sheet based off of it in block increments-
As you can see from the table above, in all cases upto 2c/kWh, Alpha Labs would turn a profit by year 11 (all highlighted in yellow).
Having worked through the math on both Alpha & Beta Labs’ balance sheet, here are some important things to point out and keep in mind -
Raising north of $10B at 3% with the terms outlined in this article for constructing NPPs with bitcoin mining co-location (two heavily misunderstood industries) is no easy task in today’s environment. NPP constructions are very sensitive to the capital cost and cost of capital and it is imperative to get the best terms to build NPPs with mining colocation for long term profitability.
NPP constructions can take a long time, around six years for full construction, given there are no delays caused due to multiple reasons possible, including public outcry and protests. Compared to this a natural gas power plant can be up and running in 2 years. NPPs are costly to construct and incredibly cheap to operate while the natural gas power plants are the other way around. Given how cyclical and evolving the mining industry is and how competitive it could become over time, it is difficult to project mining revenues six years down the line with any given certainty for raising capital and building capacity expansion upfront for mining onsite.
Bitcoin Mining is going to become incredibly cost competitive over time and revenues are going to shrink to the point where running large mining centers would only be possible behind the meter in some form. Nuclear provides the best case base load for building mining centers for 24/7 reliable energy and no tie in to the grid required. Even if you are co-locating your mining center with solar or wind, you’ll need some tie in to the grid since solar and wind are both intermittent sources of generation unlike nuclear.
NPP construction costs and timelines might both go down considerably with the advent of modular reactors and next generation reactor types which do not require design & materials of the past which had led to cost & construction times both ballooning previously.
NPP + Bitcoin Mining - model of electricity generation could be adopted by nation states at scale as a matter of energy & national security, especially given what we’re seeing off late in Europe. These projects could receive state funding and subsidies/credits to make them even more attractive for investment capital.
The intention of part-2 was to do a thorough case study on what bitcoin mining co-location with a nuclear power plant construction could look like and how much of a difference could it actually make to the balance sheet of the company owning that generation asset. As we see, you’d rather take the strategy of Alpha Labs than Beta Labs. All you need is one engineer in your company to understand this and pitch it to you.
References
The Economics of Nuclear Energy - Real Engineering
Economics of Nuclear Reactor, Illinois Energy Professor
Disclaimer- The information provided in this article is based upon our forecasts and reflects prevailing market conditions and our views as of this date, all of which are subject to change. The article contains forward looking projections which involve risks and uncertainties. Any statement made in the article are based on our current knowledge and assumptions. Various factors could cause actual future results, performance or events to differ materially from those described in these statements.
We hope you enjoyed part-2 of this series on Bitcoin & Nuclear and we look forward to taking up another interesting topic for part-3 of this series soon.
Cheers.