Cloverland Electric is involved in data mining projects to strengthen our energy consumption profile and revenue.
So what is data mining and how does it benefit the cooperative and our membership?
We use the word data mining versus crypto mining because recently there have been concerns about the crypto market. The data mining organizations looking to expand to our territory and ultimately grow our electric load are data miners paid for their services in the form of “bitcoin.” Many use the word crypto to mean digital currency. In many ways this explanation is accurate, but it may be confusing to those just starting to learn about the process.
Data miners are tasked to solve complex mathematical equations using very powerful computers and are rewarded with bitcoins once their tasks are complete. The bitcoin is much like a piece of stock. It has value to those willing to pay for it. In the past year, the bitcoin market value has dropped considerably. The difference between bitcoin and traditional stock is that people are willing to use bitcoin to buy goods and services, hence, it’s a currency. In recent months, the bankruptcy of FTX and its alleged misdeeds have put crypto in a negative light. Bitcoin, which is the payment form of the data miners with whom we have been interacting, was not the underlying mechanism in the FTX bankruptcy.
Why are is Cloverland looking at data mining?
- Data mining is attractive because when implemented correctly, it can grow electric use, or demand, in a positive way – it has the potential to generate additional revenue through load growth.
- Many rural cooperatives are experiencing a decline in electricity demand, causing negative impacts to their members and rates. Cloverland views the electricity demand increase offered through data mining as way to fight off negative impacts associated with electricity demand loss.
- We are structuring sales to these data miners in a way that will not add to our capacity charges with Wisconsin Energy Corporation (WEC), yet add to electricity consumption, or kWh. Ultimately, this structure increases our load factor, which is simply a measure of efficiency of overall electricity consumption relative to peak electricity consumption.
- Cloverland remains in a long term power supply contract with Wisconsin Energy to 2029. Due to market volatility over the over the past few years, our kWh charges from Wisconsin Energy are favorable relative to current market rates. Through careful management, aiming to avoid excess capacity charges while growing kWh allows for strong revenue potential.
- To protect our co-op from a default by the data miners, we require the mining organizations to pre-pay. When their deposits are gone, or in the event of payment failure, we can disconnect them prior to passing this default on to our membership.
We are actively working on the 2 MW site in Dafter. We continue to work with a miner looking at a similar facility at our new Garden substation. As plans solidify, we will keep our membership updated.
This process has highlighted our current system vulnerabilities. Many of our substations have limited opportunity to add load without increasing capacity. We will use that knowledge to improve as we move forward with future system planning to harden our infrastructure to the benefit of all members. Again, we are looking at this concept to enable economic growth in our service territory.
I hope this explanation helps clarify our intentions and the protections we are using to assure our members are not impacted negatively by the data mining facilities – instead, it is a unique way to strengthen our cooperative.