Without a Bitcoin mining plant in Norway, will the price of electricity rise?

According to media reports, the municipality of Hadsel in the province of Nordland in northern Norway has withdrawn the permit for the local company Stokmarknes Datasenter to operate a Bitcoin mining facility. Because the operation of the plant has been suspended, the residents of the municipality now have to pay 20 percent more for their electricity.

For many Bitcoin supporters and mining activists, this news is further proof of the benefits of Bitcoin mining. According to them, Bitcoin mining facilities would reduce electricity prices for everyone.

Bitcoin and environmental activist Daniel Batten even praises the journalistic work of the two authors, who correctly portray Bitcoin mining.

But if you take a closer look at the topic, you might question the general validity of some of the comments.

It is correct that the residents' electricity costs were cheaper with the Bitcoin mining system than without the large electricity consumer. However, it is not clear from the available sources that this is also due to the special energy consumption pattern or the flexibility of the mining facilities, which can also be used to stabilize electricity price fluctuations. Fluctuations in the price of electricity occur primarily when there is a shortage of electricity and bottlenecks in the transmission lines (high price) or when there is an oversupply (low price). The miners are flexible enough to react precisely to this, thereby stabilizing the price fluctuations and could also ensure lower prices for other participants.

However, the stabilization of the network and prices or demand reduction in demand response programs with the help of the Bitcoin mining company, as used in Texas, for example, are not mentioned in the press release from the network operator Noranett.

The flexibility of the miners, which distinguishes the industry from other large electricity consumers, is also not necessarily decisive, as Noranett primarily uses energy from hydropower, which does not have such a pronounced intermittent character as solar or wind energy.

It seems to be solely about the financial losses incurred by the grid operator due to the loss of a large customer. The mining plant had an annual consumption of around 80 gigawatt hours. This corresponds to around 3200 households. Since the general rise in electricity prices in the region is ultimately “only” due to the lack of electricity being purchased, it could also have been another large electricity consumer, such as a data center for artificial intelligence (AI) or an aluminum processing plant.

The Norwegian Water Resources and Energy Directorate (in Norwegian: Norges vassdrags- og energidirektorat), or NVE for short, is the authority in Norway that regulates and monitors the electricity grids. It also sets the annual income caps for the grid operators. So if there are large electricity consumers, the prices of the others must be reduced accordingly. If these consumers disappear, the losses are distributed.
As the grid operator Noranett in the municipality of Hadsel will lose 20 percent of its income when the mining company closes down, which will then be used to manage and maintain the facilities, all other participants will have to pay between NOK 2,500 and 3,000 (200-300 US dollars) more per year until an alternative major electricity customer is found.

If we lose the largest customer in Hadsel, this will unfortunately have consequences for all of us.
_{Robin Jakobsen, grid manager at Noranett}

If the grid operator did not insist on its income, the residents would no longer have to pay. In addition, another electricity consumer could reduce the increased costs. However, this does not necessarily have to be a Bitcoin mining company, although the municipality is already quite remote. Mayor Kjell-Børge Freiberg is already looking for an alternative and is confident. Whether other companies will choose the site for their projects remains to be seen. However, the comment by Jaran Mellerud, co-founder of Hashlabs Mining, that “people's electricity bills would skyrocket without the miners” is perhaps a little exaggerated.

In their comments, the Bitcoin activists also ignore the fact why the mining company had to cease operations in the first place. The community was still very positive in 2022 when operations started. However, the noise pollution from the air-cooled ASIC miners was unbearable for many community residents. They became "angry and desperate" and even specially erected noise barriers did not help them. Apparently, the mining company was no longer able to find the funds to switch to virtually silent immersion cooling. It is therefore more than understandable that the Bitcoin mining company was unable to continue its operations in Hadsel.

The case of the small Norwegian municipality of Hadsel shows that Bitcoin mining companies can reduce electricity prices for other grid participants due to their high electricity consumption - especially in a system that predetermines the annual income of the grid operators. However, other large electricity consumers can also fulfill this function. In this case, the grid operator is not dependent on the special features of the mining systems - i.e. their flexibility. It is therefore wrong to justify the lower electricity prices solely on the basis of the mining facilities, as Bitcoin activists have done in the social networks.

The Bitcoin mining company in Hadsel certainly acted as a consumer of surplus energy, which generated additional income for the grid operator. Due to the fixed income caps for grid operators, the entire municipality of Hadsel was able to benefit from lower electricity prices. However, this does not necessarily apply to other regions.

The example in Hadsel is generally valid with regard to incorrect urban planning. It should have become clear that when planning such facilities, the potential noise pollution should also be taken into account to avoid conflicts between the mining companies and the population.

Nevertheless, the work of Bitcoin activists deserves great respect. However, it is a pity that some topics are sometimes viewed in a very one-sided way and inaccuracies creep in.

Another example could be some of Daniel Batten's comments on the mining ban in China. In contrast to many experts, Batten believes that the Western media is conducting a disinformation campaign against Bitcoin and China in this regard. However, he has ignored some aspects or taken them out of context to fit his own narrative.

To ensure that your own credibility is attacked as little as possible, it is helpful when spreading your own narrative not to artificially whitewash or denigrate things or to ignore certain facts that do not fit into your own narrative. This puts Bitcoin activists in a light that doesn't really do them justice. The benefits of Bitcoin and Bitcoin mining for the environment and society speak for themselves.