The price of electricity has fallen into negative numbers
Over the past calendar year, the price of electricity generated on sunny days has increasingly approached negative values. To build a solar power plant today without a guaranteed off-take and a guaranteed price under a PPA contract carries a high risk to the project’s payback.
In this article, we will therefore discuss some legal aspects of using solar electricity to mine crypto assets.
Crypto asset mining has become very attractive in recent days and there are devices on the market that can already consume electricity and generate crypto assets profitably at today’s electricity prices.
Required CE certification
The installation and operation of cryptoasset mining equipment is not regulated in any way in Slovakia as long as the wiring of the equipment itself meets the legal and technical requirements for electrical equipment. From the perspective of the law, mining equipment is governed by the same rules as any other electrical appliance.
In this respect, it should be pointed out in particular that cryptocurrency mining equipment needs the relevant CE certificate attesting the conformity of the product with the legal and technical regulations in the European Union, to be sold legally in the European Union market. Many mining devices do not comply with this requirement and are therefore it is illegal to sell them in the EU. Nevertheless, it is in fact possible to import such equipment from abroad.
Operation only (preferrably) during sunny hours
An unique challenge is to connect the mining equipment to the solar power plant in such a way that mining only takes place during hours when there is enough electricity generated from the sun, as cryptocurrency mining is not always profitable at today’s electricity prices. The mining facilities themselves do not allow such a connection and therefore their operation must be controlled by other devices that can be programmed with the appropriate logic.
Up to date, we have (i) first of all tried cooperation with several control unit providers, mainly in the form of PLC (Programmable Logic Controller) computers. These devices measure the output of the solar panels, either directly via modbus RS485 communication with the inverter to which the solar panels are connected, or indirectly via a separate smartmeter that measures the output of the solar panels at the inverter output.
The PLC unit then physically switches on the individual ASIC mining devices via a contactor, or sends a signal to the Arduino computer, which switches the individual mining devices on or off via a software API.
Control devices wired in this way are relatively inexpensive, exhibit high reliability, and are simple enough to exhibit low failure rates.
The second (ii) option for controlling the operation of mining equipment to use only electricity generated from the sun is the use of batteries, which store unused electricity during the sunny day and are used for mining even after sunset or during cloudy weather. Such an arrangement is considerably more expensive because of the relatively high cost of batteries to store sufficient electricity. A separate way of using batteries to store electricity from the sun is to use a virtual battery service, which is also offered by some companies on the Slovak market. However, with a virtual battery service, it should be taken into account that when drawing electricity from a virtual battery, the price of electricity distribution still has to be paid.
The third (iii) solution is to use only mining equipment that is profitable in mining cryptocurrency even after paying the current price of electricity. At today’s electricity prices and the price of some crypto assets, there are several facilities on the market that can profitably mine the relevant cryptocurrencies nonstop, but their disadvantage is the high acquisition cost. It is therefore important to consider over what period of time and at what market prices for electricity and cryptocurrencies the return on the investment in the mining equipment will be secured.
In this context, it is worth pointing out that some electricity sellers are flexible enough to provide very favorable terms for the sale of electricity to mining installations. Several of our clients have been able to build very profitable systems of mining facilities using the surplus solar energy generated by their solar panels, thanks to negotiated favorable electricity prices.
In (iv) the fourth option of using cryptocurrency mining facilities, it is possible to sell electricity from solar panels (on the electricity market, e.g. OKTE) when electricity prices are high and to use own electricity from solar panels for mining when electricity prices are low, or to buy electricity on the exchange and use it for cryptocurrency mining.
Such operation control can also be provided by a PLC computer in conjunction with an Arduino computer, at very low set-up costs. However, this option requires access to current electricity prices via an API provided by an electricity exchange or an electricity trader.
Heat production
In fact, the mining of cryptoassets itself is just a by-product of heat production. Mining produces a lot of heat when the electrical equipment is operating, and it is only by coincidence that this heat is generated when the equipment is used to calculate the relevant mathematical equations, which also results in the creation (“mining“) of the cryptocurrency. Due to the fact that in Slovakia it is necessary to heat for more than 6 months of the year, the heat generated during the mining of cryptoassets can also be utilised for heating. In most cases, it is not possible to use mining equipment directly in residential premises because they are noisy. However, they can be easily and efficiently used to heat other, commercialareas. To illustrate, some of our clients are currently having a good experience using, for example, the IceRiver AL0 to temper their garage, and as of the date of this writing, their operation is profitable even at current electricity prices, without the use of solar panels.
Liability for damage and immissions
When operating mining equipment, it should be borne in mind that its operation is associated with high noise levels and temperatures well above normal operating temperatures of residential premises.
They may therefore only be operated in premises adapted for this purpose. In particular, care must be taken to prevent fires and noise nuisance.
Tax aspect
The mining of cryptoassets constitutes income that must be taxed at the appropriate income / corporate tax rate. The cryptocurrency mined represents a gain when credited to a wallet owned by the operator, which is marked at the price on the date of crediting and separately each day when it is credited.
The tax deductible cost is the price of the mining equipment, its professional installation and the price of the electricity consumed. Equipment for the extraction of crypto-assets is to be depreciated in the appropriate depreciation class according to the nature of the equipment.
Posted on 12.11.2024
JUDr. Mag. Ján Čarnogurský
(the author is a lawyer)