Bitcoin energy consumption index slides from an all-time-high

The S&P Global Commodity Insights Bitcoin Energy Consumption Index has edged lower after reaching an all-time high of 1,312.07 MWh per bitcoin mined in early February.

Higher bitcoin energy consumption is indicative of growing on-chain activity as more bitcoin miners join the network, contributing to a rise in the hashrate. The hashrate represents the number of computations that mining hardware can perform per second while solving cryptographic puzzles. A higher bitcoin mining hashrate is generally perceived to enhance the security of the network, given the substantial amount of electricity consumed.

The Bitcoin Energy Consumption Index reflects the energy consumption per bitcoin mined using a standard graphics card, the Antminer S19 Pro, which operates at an average hashrate of 110 TeraHashes per second (TH/s) and consumes 3.25 kW.

Renewable bitcoin mining profitability in Norway's NO4 pricing region remained at a premium compared to the Texas ERCOT West Hub in recent weeks, according to Commodity Insights' Bitcoin Quarq Spread Indices.

Conversely, bitcoin mining profitability in Germany rebounded to negative $72.24/MWh after previously falling to negative $150/MWh in the latter half of January. This decline was driven by higher European power prices amid colder temperatures and increased demand.

Meanwhile, strong solar output in Spain at the beginning of the year led to lower power prices, which supported in-the-money bitcoin quarq spreads. This trend is expected to continue, with solar output surging from the start of Q2, weighing on power prices.

Bitcoin miners have the flexibility to curtail their power demand, thereby contributing to grid balancing mechanisms by participating in demand-response programs for a fixed fee during periods of tighter supply and elevated prices.

Additionally, miners can increase their consumption during times of higher renewable generation, helping to mitigate renewable output curtailments. Such curtailments from renewable technologies can add to grid costs, particularly during instances of negative hourly power prices.

Norway's recent decision to backtrack on EU power market integration is likely to maintain a power price differential compared to continental power markets.

The coalition government in Norway collapsed on Jan. 30 due to disagreements over energy policy, which may slow the integration of Norway's hydro-rich power system with that of continental Europe.

In Finland, bitcoin mining profitability has registered a premium over the Denmark DK1 region, as power prices in Finland have eased due to lower demand.

The Commodity Insights' Renewable Bitcoin Quarq Spread Index illustrates bitcoin mining profitability based on grid-based delivered electricity, accounting for renewable certificates across 43 regions in the US and Europe.