If you have read my previous article you probably wonder how can mining be still possible with this costs. Keep reading and you will understand why.
Electricity cost
If you mine with a normal contract for the supply of electricity, you will be probably out of the market of bitcoin mining. In fact if dealing directly with electricity producers you could find some deals that divide by 3 the actual cost of the MWh.
If you live in an european country you probably pay around 120-200 €/MWh or 0.12-.0.2 €/kWh. In many of these country the 40-60% of the price are taxes, and the rest is the real price of the electricity produced. Electrical production costs vary a lot by sources and by installation, but since the miners need a constant supply of energy we can exclude wind, solar and small hydro from the game.
The energy that will create the best stable and high quality energy for the datacenter will be a hydro dam. Usually, especially old dams can produce energy at price of 25-40 €/MWh and they have the capability to produce more power than what explicitly asked by the national grid (i.e.: their marginal cost could be even lower)
Doing a direct deal for a big miner farm can be an option to save almost 50-60% of the electrical costs.
Thermal power option
In reality all the power used by the miners is converted in heat by the miners itself. I don't have any information of any miners farm that sells the heat of miners, but it is certainly possible investigate this aspect. By having the possibility of doing a big investment, in cold countries the heating could be 'sold' increasing the mining incomes.
In case of doing the same in hot country trigeneration (a particular case of co-generation) could be theoretically an option. But I think that the added profit will never justify the investment.
Wasted energy
I've never heard about some miners that contacted directly the big power producers for obvious reasons, but a certain number of electrical power plants and control mechanisms use some electrical resistance to dissipate the energy in excess.
If you want you can think about it this way. The electrical transmission system is like a wheel that turns at the exact frequency of 50Hz (or some other frequency), the production of energy will make this will accelerate and the consumption decelerate. All the power production problem is to produce exactly the amount of energy that is needed to keep the wheel spinning at that precise frequency (i.e.: produce only what is consumed). That is why, especially since green power come into the business there is a high need of consuming energy in some moment.
If you are producing energy for stabilizing the national grid, you will be asked to switch off your production in moments when the wind and the sun is going up (mainly wind). If the reduction of power is so high that you have to switch off your equipment you will have an enormous cost of stopping-starting your big power plant again. Mining could be used to ask constantly for the base power, avoiding the use of electrical resistance and helping the green people to still think that they can switch on as many wind and solar power plants without seeing their lump bulb going mad...
Bulk purchase of hardware
The obvious way to make mining more profitable is to decrease the cost of hardware. A huge purchase can lead to 5-10% discount or more. And if we add this to the previous point this can make a lot of difference.
A lot of big miners pool are run by the hardware producers that try to mine using all the value from their miners.
Debt leverage
We didn't talk about this because I think that it will be really difficult to convince a bank or a financial institution to give a loan to miners, but it is true that some financial leverage will, of course, increase mining profitability.
This issue is not a problem in my part at all. I dont have to worry about electricity cost because it has already been answered.