Editor's Note: This article comes fromZhikuang University (ID: gh_37c9e0eaf00a), reprinted by Odaily with authorization.

Editor's Note: This article comes from

Zhikuang University (ID: gh_37c9e0eaf00a)

Zhikuang University (ID: gh_37c9e0eaf00a)

, reprinted by Odaily with authorization.

In May of this year, at the Mining Conference held in Chengdu, park electricity became one of the hot topics discussed at the meeting. This year’s wet season has passed halfway, and Zhikuang University invited two mining industry leaders who did not want to be named to conduct In the interview, they talked about the origin, advantages, cost structure, scale, impact on the migration of mining machines, and the short-term and long-term impact on the mining industry, etc., and gave a very comprehensive and in-depth interpretation of the park power. The following text is compiled based on the sharing of the two mine owners.

Question 1. What is park electricity and what is the background of its birth?

The park power we are talking about is officially called the power of the Sichuan Provincial Hydropower Consumption Industry Demonstration Zone, because this power is consumed in the government-planned industrial park, commonly known as park power, and this year is the first year that Sichuan Province implements park power.

What is the background of the birth of park electricity? When it comes to energy, Sichuan cannot be avoided. Sichuan is a province rich in hydropower resources. The country encouraged the construction of small hydropower in the early years. Sichuan Province took advantage of its own advantages to build a large number of hydropower stations. However, the supporting industry and consumption did not keep up with In addition, Ganzi Prefecture and other places are in the power transmission section, so there is no way to export electricity. Although the power station was built at that time, the consumption could not keep up, resulting in a large amount of abandoned water and electricity. Until 2013 and 2014, the mining industry gradually emerged. Miners saw the cheap hydropower resources in Sichuan and gradually began to build mines in Sichuan.

With the outbreak of Bitcoin, the scale of mining has also skyrocketed, and the scale of electricity consumption for mining has naturally also skyrocketed. This has solved the problem of discarded water consumption to a large extent, but it has also brought many problems, such as electricity consumption. A series of issues such as compliance and security, and with the increasing scale of mining power consumption, it has affected the transaction order of the State Grid Trading Center to a certain extent.

In this context, the local government, State Grid, and these power generation companies have explored a model for power generation in parks, so as to regulate the consumption of abandoned water and electricity in Sichuan.

Question 2: Park power corresponds to direct power supply. Compared with direct power supply, what are the advantages and disadvantages of park power?

Let me first talk about what is direct power supply. Direct power supply refers to the electricity generated by the power station, which is directly transmitted to the demand side without passing through the national grid.

Compared with park power, direct power supply has obvious disadvantages.

First, there are compliance issues in direct power supply. Generally, hydropower stations have signed an online connection agreement with the State Grid Corporation of China. The agreement clearly stipulates that hydropower stations can only generate electricity and are not allowed to sell electricity. The industrial and commercial business license of the hydropower station also clearly shows that it only has a license to generate electricity, but not a license to sell electricity, so direct power supply itself is gray.

The second point is that the direct power supply is unstable. If the water is low, the power station must give priority to completing the grid connection plan of the State Grid, so it is difficult to guarantee the direct power supply; if the water is large, a large amount of silt will be generated, and in this case, there is generally a requirement to avoid flood peaks, and power cannot be generated. Situations like these will affect the stability of direct power supply.

In contrast, park electricity has significant advantages.

First of all, the biggest advantage of park power is stability. The power of the park comes from the national grid, so the stability is very guaranteed.

The second point is that the price of park electricity is transparent, and its cost structure is very clear and transparent.

The third point: park electricity is safer. There is a relatively serious "private connection" situation in direct power supply, and there is generally a lack of regulations in terms of safety and professionalism. There is no professional power design and formal safety inspection, which even brings a lot of impact on the safety and balance of the State Grid. destroy.

Why is park power safe? It is connected from the substation of the State Grid. If the power station wants to intervene in the State Grid, it needs to go through layers of screening and inspection, and the acceptance standard is very high. Take the brands of the power facilities involved as an example, which is clearly stipulated in the safety regulations of the State Grid, and the safety of the park power is reflected in these places.

Fourthly, park electricity means safer sites and more convenient transportation. The power stations in the park are planned by the government, have convenient transportation, and are less affected by geological disasters. The location of the direct power supply mine depends on the location of the hydropower station. Some direct power supply mines are located very remote and the transportation is extremely inconvenient, which has brought a lot of distress to the miners. It may take several days on the road, and there is no way for express logistics to arrive directly. During the wet season, geological disasters such as mudslides and falling rocks often occur in remote mountainous areas, posing considerable safety hazards.

If there are any disadvantages of park power, it is mainly for power station and mine owners that park power requires compliance, so there are many related procedures. For miners, it is a very good thing to host a compliant mine that uses safe and stable park power.

Question 3. The cost of electricity is the most concerned issue for miners. Will the price of electricity in the park be higher than the price of direct power supply? Can you break down their costs?

That's a very good question. Let’s first look at the cost of electricity in the park.

The cost of electricity in the park is uniform across the province. Let me first talk about the cost composition of the electricity in the park.

The cost of park electricity mainly includes four parts: transaction electricity price, transmission and distribution price, government funds and surcharges, and agency services of electricity sales companies.

For transaction electricity prices, the Sichuan Provincial General Office issued a document this year, stipulating that transaction electricity prices are not allowed to exceed 7.5 cents/kWh;

The second part is called the transmission and distribution price, which we usually call the network connection fee. This year, the State Grid specially approved a network connection fee of 4 cents/kWh for Sichuan Province;

The third part is government funds and surcharges, which are currently 2 points/degree;

The fourth part is the agency service fee of the electricity sales company. The electricity sales company sells electricity to the electricity consumption company. Most of them are 0.5 cents/kWh, and this part varies greatly from place to place.

Adding up the above four parts, the total cost of off-grid electricity in the park is 0.14 yuan/kWh.

Of course, it is necessary to mention here that this 0.14 yuan/kWh is the off-grid electricity price, which is the transaction electricity price of the electricity sales center, and the custody electricity price are two concepts, and there is a difference between the two.

It is necessary to explain why electricity sales companies are required to provide agency services.

If you do not purchase electricity through an electricity sales agency company, the power consumer must go to the Sichuan Provincial Power Trading Center to buy electricity every month, and the power consumer will go to the Provincial Power Trading Center to pre-purchase electricity according to their own needs. For example, it is the end of July, and power consumers have to go to the power trading center to purchase electricity for August. The power trading center's assessment index for power consumers is that the actual power consumption is a deviation of plus or minus 3% of the pre-purchased power. For example, if a power consumer pre-purchases 100,000 kilowatt-hours of electricity, the actual electricity consumption of the power consumer must be controlled at 10*(1±0.03) million kilowatt-hours. If it exceeds this range, there will be a punitive electricity price of 0.574 yuan/kWh receive. If there is an abnormality such as damage to the mining machine in the mine, it is easy to exceed the 3% deviation range. The mine directly buys electricity from the power trading center, and there is a great risk of exceeding 3%.

This risk can be avoided by purchasing electricity through an electricity sales agency company. Dozens of hundreds of companies buy electricity through electricity sales agency companies. Some companies use excess electricity, and some companies do not use enough electricity, which can form an effective hedge.

On the other hand, electricity sales agency companies are the embodiment of the interests of local governments. With the promotion of local governments, relevant policies can be better implemented.

Let's look at another question, is the price of park power higher than that of direct power? It depends. The price of direct power supply is very opaque. There are various prices. The price mainly depends on the relationship and scale. This issue cannot be generalized. There are often power station owners who see the profit, see the bitcoin market, and set the price on the ground. If they do not agree to the price increase, they will not provide you with electricity.

Question 4. Is the power supply of the park mainly for cryptocurrency mines? What other industries are big consumers? Do these companies have obvious commonalities?

As far as the entire Sichuan is concerned at this stage, the main supply object of the park's electricity is the cryptocurrency mine. Why is the supply target mainly cryptocurrency mining farms? The water and electricity consumption policy came out in August 2019. This policy largely originated from cryptocurrency mining farms. The mine owners have some understanding of relevant policies and have been following up on the release of relevant policies. It can be said that they have been prepared for a long time. The construction period of the mining farm is short, basically it can be built in 45 to 50 days, so the current power supply objects of the park are mainly bitcoin mining farms, and it is understood that cryptocurrency mining farms account for more than 80% of them.

Why are there so few companies in other industries? Other industries lack understanding of the park’s power policies. After they have been inspected, they have to go through project approval, government approval, and a relatively long construction period. These factors are the reasons why the park’s power supply to other industries is relatively small. The small amount of park power consumed by other industries is also a coincidence. Before the park power policy was issued, these companies happened to choose sites in the park. When the factories were built and caught up with the park power policy, they would naturally use them.

The electricity consumption companies in the park have a very obvious commonality. They are all high-energy-consuming enterprises, such as glass manufacturing enterprises, air separation enterprises, polysilicon and electrolytic aluminum enterprises, etc. Unlike these high-pollution industries, zero-pollution cryptocurrency mining farms are called green high-energy-carrying industries.

Question 5. How much load is there on the electricity in the park? What is the current scale of electricity consumption in Bitcoin mining? Is there any plan to increase power in the park in the future?

It is understood that there are currently about 1.4 million loads (ie 1.4 million kilowatts) of power in the park.

The power consumption scale of China's bitcoin mining industry is on the order of 10 million loads, which is 10 times the current park power volume. At present, 1.4 million kilowatts of electricity have been transmitted, and the distribution is roughly as follows:

Ganzi Prefecture: 500,000 kilowatts;

Ya'an City: 200,000 kilowatts;

Liangshan Prefecture: 300,000 kilowatts;

According to the follow-up plan to increase power in the park, about 3 million kilowatts may be added next year. Based on the scale of hydropower generation in Sichuan Province, there is still a huge room for growth in the scale of power generation in the park. The promotion of power generation in the park involves the interests of many parties, especially the interests of power generation companies have been impacted. There is still a lot of work to be done in the implementation of power generation in the park.

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Question 6: Can the existing scale of the power station in the park change the situation of miners migrating twice a year?

Let me talk about the conclusion first. The existing scale of the power park cannot change the situation of miners migrating twice a year. Why do you say it cannot be changed? This starts with the two signing forms of Sichuan Park Power.

At present, there are two types of contracts for electricity in the park: pure abundant electricity and year-round electricity.

The off-grid price of Chunfeng Power is about 0.14 yuan/kWh, and the time is from May to October every year. The annual electricity off-grid price is about 0.31 yuan/kWh, and the off-grid price of thermal power in Xinjiang and Inner Mongolia is about 0.28 yuan/kWh.

For miners, digging in Sichuan during the wet season and in Xinjiang and Inner Mongolia during the dry season is the plan to maximize the benefits. The emergence of park power has not changed this basis. Profit-seeking is the only motivation for miners to migrate, so as long as the price difference is still there, miners will migrate. Moreover, with the expansion of the park power scale, the migration scale of mining machines may increase; the park power cannot exchange time and space for scale.

Question 7. At present, only some areas in Sichuan Province have industrial park power, but Yunnan and Guizhou, which are both provinces with large hydropower resources, do not have it. Why?

This issue is related to local policies, and I just want to talk about it from a personal point of view. There is a saying in the industry that 70% of the world's Bitcoin computing power is in China, and 70% of China's computing power is in Sichuan. It can be seen that the scale of Bitcoin computing power in Sichuan is large. With such a scale effect, the local government has enough motivation to form regulations. The formation of regulations has many benefits for the local government: increasing jobs, driving local economic development, profits and taxes, and so on.

After the formation of the standard, many disadvantages can be avoided. The direct power supply stations that were not connected to the grid before had the phenomenon of private pull and random connection. After the formation of the standard and grid connection, the safety hazards are greatly reduced, and after the grid connection, it not only increases the transmission and distribution capacity of the national grid , but also bring benefits to the national grid. The grid connection of hydropower stations means that there is no need to build mines near remote hydropower stations. The mines can be built in more convenient and safer places, with no harm at all.

To put it simply, because Sichuan has the largest Bitcoin computing power and the various benefits brought about by the formation of regulations are very considerable, the park electricity model will first appear in Sichuan. If this model is implemented better in Sichuan, it may be possible to see Yunnan, Guizhou and other provinces follow up in the future.

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Question 8. The emergence of electricity in the park has dispelled the rumors that "the government suppresses cryptocurrency mining" and it can be regarded as a justification for cryptocurrency mining. What significant impact will this have on the entire industry, mines, miners and other groups? Woolen cloth?

The emergence of park electricity does reflect government support for cryptocurrency mining. Anything that is not prohibited by the law can be done, as long as it is not prohibited by the law, you can do it. The law does not say that mining is illegal, so you can do it boldly.

For hydropower stations, park electricity is an increment. What does that mean? Before there was no park power planning, the upper limit of power generation by hydropower stations depended on the users. As much as the users used, the power stations would generate as much. Due to insufficient demand, a large amount of water and electricity were discarded. After the hydropower stations are connected to the grid, they can be fully generated. It can go to the national grid, and will not abandon water and electricity due to the bottleneck of electricity consumption. After the implementation of the park electricity, the power generation of the entire Sichuan hydropower station has reached a record high.

In addition, the location of the electric mine in the park is located in a park with convenient transportation and avoiding geological disasters, which is more legal and compliant. It creates local taxes, creates jobs and drives local economic development. The mine has a very positive corporate image based on society .

For miners, the price of electricity in the park is transparent, which breaks the information barrier of opaque direct power supply prices. Miners have clear reference standards when choosing mines. The power supply in the park is more stable, which ensures the stable operation of the mining machine, reduces the loss caused by downtime and abnormal shutdown of the mining machine, protects the rights and interests of miners, reduces the risk of miners stepping on the pit, and to a certain extent, avoids miners and Disputes between mines.

Transparent electricity prices will intensify healthy competition among mining farms, which will help force mining farms to provide better hosting services, thereby improving the service level of the entire industry.

In general, for the entire industry, the emergence of park electricity has promoted the standardization and transparency of the mining industry, and also promoted the consumption of local surplus hydropower.

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Question 9: Park electricity has benefits such as power stability and compliance for miners. Is it only beneficial?

All the above mentioned are the benefits of park power, so is there any problem with park power? In fact, there are. Why did the miners not use the State Grid power in the industrial park at the earliest, but go to the hydropower station to mine with direct power supply? It is simply because direct power supply is cheap. The State Grid built a large number of transmission towers and high-voltage lines across mountains and mountains to send electricity from hydropower stations in the valleys to cities. The cost of building the power grid has to be spread on the electricity bill, which is what we call the network fee.

When hydropower is cheap during the high water season, the network fee will even exceed the electricity price itself, which is why direct power supply is born. Miners put mining machines directly in hydropower stations, without going through the national grid, and directly use electricity from hydropower stations. This is of great benefit to the hydropower station. It directly uses up a large amount of abandoned water and electricity during the previous flood period, and sells it for real money. If it gets bigger, the grid will not be happy.

As far as the power grid is concerned, your power station originally reported 50,000 loads to go online, but now you engage in mining, and the online load becomes only 40,000, or even 30,000. With less electricity being connected to the grid, the line iron tower invested by my grid was originally expected to pay back in 5 years, but now it has become 10 years, which damages the interests of the grid. Moreover, the hydropower station uses its own electricity, which also brings problems to the grid dispatching. For the government, there are no taxes or water conservancy funds attached to the mines of the hydropower station, so the government is also willing to take the lead in proposing the park power project.

Park electricity is essentially a redistribution of the big cake of bitcoin mining electricity fees. In the past, only hydropower stations could eat this cake. Now hydropower stations, power grids, and the government are all divided. As mentioned above, the transaction price does not exceed 7.5 cents/kWh, which is part of the power station. Don’t charge the electricity grid as high as before, otherwise the electricity fee will be high, and the miners will not want to use the electricity in the park, so a special approval of 4 points/kWh is far lower than the normal electricity fee. Government funds and surcharges also receive 2 points.