Global energy markets were notably volatile in 2022. Following the invasion of Ukraine by the Russian Federation, key energy metrics broke historic norms, such as the Brent Crude Oil spiking to $139 per barrell, the highest since 2008.
For Bitcoin miners, volatile energy markets proved to be momentarily disastrous. Companies like Argo Blockchain saw natural gas prices spike, crushing mining economics while debt payments became more expensive. However, this brief moment of turbulence has led miners to recognize that securing stable power rates is a critical factor for operational vitality. In other words, miners must secure cheap consistent power.
Today’s guest post comes from Hashlabs Mining consultant Muad Dib. A researcher at the Cambridge Alternative Center for Finance, Dib has extensive history writing on public Bitcoin mining metrics.
This period witnessed significant spikes in electricity prices for many miners. From March to September 2022, Bit Digital’s power cost per kWh increased by 30%. Cathedra, which relies on hosting providers, saw its rates rise by 45%. Core Scientific, which faced particularly challenging times due to its hosting operations, experienced negative margins as their fixed hosting costs increased from $0.042/kWh to $0.066/kWh. Similarly, CleanSpark’s power costs peaked at $0.059/kWh in Q4 2022, despite having paid only $0.032/kWh in Q1 2022 at their Georgia grid location (also include NY power costs operations in Massena).
The surge in power prices that characterized much of 2022 came to a halt towards the end of the year, with prices returning to previous levels in 2023 and 2024. This significant correction in electricity markets is particularly evident in the power rate curve of Hut 8, which highlights the dramatic shift. Interestingly, as natural gas markets stabilize power rates dwindle by late 2022 to reach their previous levels highlighting the relative grid mix profile and exposure to natural gas of miners studied.
(Riot experienced negative power rates, attributable to their participation in a curtailment program. By voluntarily reducing their power consumption to balance the grid, Riot was able to earn power credits, which effectively offset their overall electricity costs).
Note: power costs disclosed by public miners represent the average of power rates over a three-month period for their overall operations. In cases where monthly data is available, such as with Riot, TeraWulf, these have been used for more granularity. However, companies such as Mara, Riot, Digihost, and Hive were not disclosed on a consistent basis, leading to gaps in the data presentation.
