Power Surplus Leads to Soaring Electricity Bills and Blackouts... Bitcoin Steps In as a Saviour [Tech Talk]

A Clever Solution for Pakistan's Unstable Power Grid
Using 'Bitcoin' as a Management Tool
Can Cryptocurrency Improve the Stability of Renewable Energy?

At the end of last month, the Pakistani government announced that it would allocate 2 gigawatts (GW, with 1 GW equal to 1,000 MW) of surplus electricity to Bitcoin mining and artificial intelligence (AI) data centers. The government has decided to actively utilize the energy-intensive Bitcoin mining industry to efficiently use excess electricity production.

Mining Bitcoin using electricity generated from solar panels at a farm in Europe. Screenshot from Case Western Reserve University website, USA.

Pakistan Allocates 2GW of Electricity to Bitcoin Mining and Data Centers

The 2GW of electricity allocated by Pakistan to Bitcoin mining and data centers, which are considered energy-intensive facilities, is enough to supply power to 1.5 to 2 million ordinary households. The Pakistani government’s allocation of electricity should not be interpreted as support for cryptocurrency investment. The underlying rationale is to efficiently utilize surplus electricity, stabilize the power grid, and secure jobs in emerging industries.

A barbershop scene during the massive blackout in Pakistan in 2023. Photo by Yonhap News

Currently, Pakistan is struggling with excessive electricity production. According to official data from the Economic Coordination Committee (ECC) under the Pakistani government, the number of solar panels installed in Pakistan reached 283,000 at the end of last year. This figure has doubled in just six months, and the generation capacity is close to 4.12GW.

While Pakistan’s transmission lines remain unchanged, the sudden increase in electricity supplied by rapidly expanding solar power facilities has destabilized the power grid. As a result, blackouts have become frequent, and despite the increase in electricity production, consumers are facing higher electricity bills.

Typically, a power grid must match real-time supply and demand to maintain stable frequency and voltage. If supply suddenly surges, the frequency of electricity can spike, damaging the transmission and distribution network.

The massive blackout that occurred in Spain and Portugal in April was also primarily attributed to extreme frequency fluctuations caused by unstable output from solar power facilities.

Can Bitcoin Help Stabilize the Power Grid?

Ultimately, Pakistan is facing a paradoxical situation where an oversupply of electricity is driving up electricity prices, and is therefore using Bitcoin as a means to stabilize the power grid.

Bitcoin. Photo by Asia Economy DB

In fact, the idea of using Bitcoin as a power grid stabilization measure is not new. The biggest vulnerability of renewable energy sources such as solar and wind power is the difficulty in accurately predicting output. Therefore, there is a need for a way to distribute electricity during periods of sudden surges in generation, and by operating large-scale Bitcoin mining machines during these times, it is possible to consume excess electricity while also earning cryptocurrency.

Although the value of cryptocurrency is unstable, this is considered a far more attractive alternative than shutting down power plants or damaging the transmission and distribution network. This strategy is sometimes referred to as “energy load management through Bitcoin.”

Bitcoin load management is now being actively pursued in the private sector. Wind power in Texas, geothermal power in Iceland, and hydropower in Canada are all supplying energy to Bitcoin mining. The Bitcoin industry emphasizes that “Bitcoin load management is a way to ensure the effectiveness of renewable energy,” stating that “it can help ease the burden during grid peak hours (when electricity supply is at its highest) and provide an additional source of revenue.”