If you’ve never heard of Muskrat Falls, strap in. We’re going into the boonies of Atlantic Canada. Specifically, Newfoundland and Labrador.

Muskrat Falls has so many red flags that it’s tough to know where to start. Basically, the province of Newfoundland and Labrador chained itself to an 12.7-Billion-Canadian-dollar hydro electric damn project that has no chance of paying for itself.

As a result, consumer energy prices for the residents of the province are set to double in the year 2020. This will help pay for servicing the debt on the project, but barely.

As a result, the entire provinces credit worthiness has been downgraded by Moody’s to A1 stable, from AA3 negative. This basically means that the provinces credit card interest rates have gone up. Making it more expensive to barrow money for financing social programs, schools, hospitals, pensions, firefighting. Just the non-essentials there, bud.

So, lets get into the numbers. Currently N&L exports a total of 93000 MWh of power per month. On average, they get paid about $40.69 CAD per MWh of power exported. So, in total they are obtaining 3.78 million Canadian dollars in revenue per month by exporting their excess power. This is the baseline current condition of the exported energy market of N&L.

Muskrat falls power generation is not included in these numbers, as it is not yet online, but will be soon. These numbers were taken from the last 17 months of energy export data from the National Energy Board.

In a January 2012 report and reconfirmed in a March 2014 report, it was estimated that Muskrat falls would add 4.5TWh/yr. This works out to 4500GWh/yr or 4,500,000MWh/yr or 375,000 MWh per month.

Keep in mind N&L already exports 93000 MWh per month…and it’s about to bring Muskrat falls online. This will mean that the province will have 4X times more power generation from Muskrat Falls then it already exports. They will need to sell this excess power to the export energy market as the province itself cannot consume even half of it at peak load.

So those $40.69 per MWh prices are going down. Oh and those are in Canadian dollars, so it’s more like $30.6 USD per MWh currently. If they are lucky, they will get an average of $30 CAD per MWh once Muskrat falls comes online, but that’s very doubtful.

So, their choices are to sell that excess power for sub 3 cents CAD per KWh to the export market, or simply leave three of their large turbines idle at Muskrat falls…seems like a waste.

Assuming they can sell all of their new excess power generated, they’d be selling 468,000 MWh per month for a revenue of 14 million Canadian dollars. Which when summed would equal the cost of Muskrat falls in 571 months, or 47 years. NOT GOOD.

In other words:

How does Muskrat Falls make you feel?

What’s going to happen when Muskrat Falls comes online is anyone’s guess. But from where I’m sitting, they have way too much power for sale, zero demand within the province itself, and export customers (like New England and New York) who already buy cheap energy from Quebec and Ontario.

N&L can buy time by selling excess power to New England and New York at reduced prices. But in some cases, Quebec exports power to the states, not just for free but they pay these same export customers to take their excess power. This happened in January of 2018 when Quebec paid New York 1.7 million Canadian dollars to take 751,054 MWh of power off their hands.

This presents an interesting opportunity for Bitcoin Miners, and possibly a solution for Newfoundland and Labradors debt problem.

For the non-bitcoiners out there, Bitcoin mining is an energy intensive process that outputs zero carbon emissions. All that is produced from Bitcoin is: digital gold; hot air from the CPU’s crunching numbers; and noise from the fans. Sounds like a good way to earn carbon credits?

In any case, Bitcoin mining is a way to bring energy consumption to land locked or hard to access power generators. The Chinese Bitcoin miners have been the biggest known opportunists in this regard, as they have an abundance of hydro electric damns sitting idle in baron regions of economic development.

It’s been reported that Bitcoin miners can operate effectively at around 6 cents per KWh, but things start to get very attractive in the 3 to 2 cents range (USD).

For instance, Hut8mining, a publicly traded Canadian Bitcoin mining company, can currently mine Bitcoin at a production cost of $2757 USD per Bitcoin, or for “40–30% below 6 cents per KWh”. So that’s somewhere in the 4 to 3 cents range and possibly lower if those numbers are in Canadian dollars, not bad.

And there are also private Bitcoin miners looking to expand their operations extensively in Texas who are claiming they can get sub 3 cent per KWh power (USD). I received the below email from an extremely reliable source a couple of weeks ago on this very subject. If this one large miner uses its entire energy supply to mine Bitcoin with the most up to date mining equipment, it alone could double the hashrate of the entire Bitcoin network.

And that’s just this one large Bitcoin miner in Texas. We haven’t even talked about Blockstream’s new mining operation, which boasts access to 300 MW of power in Quebec.

Therefore, I think it’s fair to say that the Bitcoin hashrate will double within the next several months as these and several other mining facilities expand operations.

The problem is access to hardware, as many of the newer Bitmain models are sold out for months to come. So we’ll see what happens, though Bitfury apparently has access to an endless supply of chips.

In summery, entrepreneurial Bitcoin miners should be watching Newfoundland and Labrador closely. At this point the province is in denial about their power situation. But as residential customers start to feel the burden of paying double for their power bill next year, heads will start to role.

Nelcor and the Provincial government will get desperate and be looking for alternatives, and Bitcoin mining might be it.