Bitcoin mining and renewable energy: Navigating sustainability, profitability, and electricity market dynamics

Bitcoin mining's substantial electricity demand has raised environmental concerns, yet its operational flexibility offers potential alignment with surplus renewable generation. Using source-tagged nodal Locational Marginal Price (LMP) data from the California Independent System Operator (CAISO) for the pre-halving period (January 2018 – May 2020), this paper introduces and empirically quantifies the colocation premium—the realized electricity price advantage of renewable-tagged relative to fossil-tagged nodes. The results show that this premium is concentrated in the lower tail of the price distribution: at the 5th percentile, wind LMP reaches –$33.48/MWh, versus –$15.33/MWh for natural gas, while the difference largely vanishes at the median. A profit-maximizing model calibrated with two ASIC generations (Antminer S9 and MicroBT Whatsminer M31S+) demonstrates that wind-colocated mining achieves a substantially lower break-even Bitcoin price of $3200 than gas-colocated mining $5,800, but only under threshold-based dispatch. Post-halving dynamics approximately double break-even prices, narrowing profitability margins. Seasonal robustness checks confirm that renewable sources consistently offer lower LMPs. These findings suggest that Bitcoin mining can operate as a flexible demand-side resource that absorbs surplus renewable energy, although its economic and environmental benefits depend on tail-driven price advantages, selective operation, and enabling policy frameworks.