The core of the Bitcoin mining controversy has never been about whether it consumes electricity, but rather whether we are willing to acknowledge it as a "legitimate existence."
Written by: Liu Honglin
I originally did not understand electricity
During the "May Day" holiday, I drove through the Hexi Corridor, from Wuwei to Zhangye, Jiuquan, and then to Dunhuang. Driving on the Gobi highway, I often saw clusters of wind turbines silently standing on the Gobi, quite spectacular, resembling a sci-fi version of the Great Wall.
- Image source: Internet
The Great Wall from a thousand years ago guarded the borders and territories, while today, these wind turbines and photovoltaic arrays guard a nation's energy security, the lifeblood of the next generation of industrial systems. Sunlight and wind have never been so systematically organized, embedded in national strategy, and become part of sovereign capability as they are today.
In the Web3 industry, everyone knows that mining is a fundamental existence, one of the most primitive and solid infrastructures of this ecosystem. Behind every cycle of bull and bear markets, every on-chain prosperity, there is the continuous sound of mining machines operating. When we talk about mining, we often discuss the performance of mining machines and electricity prices—whether mining can be profitable, how high the electricity price is, and where to find low-cost electricity.
However, upon seeing this long stretch of power lines, I suddenly realized that I did not understand electricity at all: Where does it come from? Who can generate electricity? How does it get transmitted from the desert to thousands of miles away, who uses it, and how should it be priced?
This is my cognitive gap, and perhaps some partners are equally curious about these questions. Therefore, I intend to use this article to do some systematic homework, re-understanding a kilowatt-hour of electricity from China's power generation mechanism, grid structure, electricity trading, to terminal access mechanisms.
Of course, this is the first time Lawyer Honglin is encountering this completely unfamiliar topic and industry, so there will inevitably be shortcomings and omissions, and I welcome valuable feedback from partners.
How much electricity does China really have?
Let's first look at a macro fact: According to data released by the National Energy Administration in the first quarter of 2025, China's total electricity generation in 2024 reached 9.4181 trillion kilowatt-hours, a year-on-year increase of 4.6%, accounting for about one-third of global electricity generation. What does this mean? The total annual electricity generation of the entire European Union is less than 70% of China's. This means that not only do we have electricity, but we are also in a dual state of "electricity surplus" and "structural restructuring."
Not only does China generate a lot of electricity, but the way it generates electricity has also changed.
By the end of 2024, the total installed capacity nationwide reached 3.53 billion kilowatts, a year-on-year increase of 14.6%, with the proportion of clean energy further increasing. The newly installed photovoltaic capacity was about 140 million kilowatts, and wind power added 77 million kilowatts. In terms of proportion, in 2024, China's newly installed photovoltaic capacity accounted for 52% of the global total, and newly installed wind power accounted for 41%, making China almost a "dominant player" in the global clean energy landscape.
This growth is no longer concentrated solely in traditional energy strongholds but is gradually tilting towards the northwest. Provinces such as Gansu, Xinjiang, Ningxia, and Qinghai have become "new energy powerhouses," gradually transforming from "resource exporters" to "main energy producers." To support this transformation, China has deployed a national-level new energy base plan in the "Shage Desert" area: concentrating over 400 million kilowatts of wind and photovoltaic installations in desert, Gobi, and barren areas, with the first batch of about 120 million kilowatts included in the "14th Five-Year Plan."
- Asia's first, Dunhuang's first energy-saving 100-megawatt molten salt tower solar power station (Image source: Internet)
At the same time, traditional coal power has not completely exited but is gradually transforming into peak-shaving and flexible power sources. Data from the National Energy Administration shows that in 2024, the installed capacity of coal power nationwide increased by less than 2% year-on-year, while the growth rates for photovoltaic and wind power reached 37% and 21%, respectively. This indicates that a pattern of "coal-based, green-dominant" is taking shape.
From a spatial structure perspective, the overall balance of energy supply and demand in 2024 is maintained nationwide, but regional structural surpluses still exist, especially in the northwest, where there are periods when "there is too much electricity to use," providing a real background for our later discussion on "whether Bitcoin mining is a way to export electricity redundancy."
In summary: China currently does not lack electricity; what is lacking is "dispatchable electricity," "absorbable electricity," and "profitable electricity."
Who can generate electricity?
In China, generating electricity is not something you can do just because you want to; it does not belong to a purely market-oriented industry but is more like a "franchise" with policy entry points and regulatory ceilings.
According to the "Regulations on the Management of Electricity Business Licenses," all units wishing to engage in electricity generation must obtain an "Electricity Business License (Generation)." The approval authority is usually the National Energy Administration or its dispatched agencies, depending on the project's scale, region, and technology type. The application process often involves multiple cross-evaluations:
Does it comply with national and local energy development plans?
Have land use, environmental impact assessment, and water conservation approvals been obtained?
Does it meet the conditions for grid access and absorption capacity?
Is it technically compliant, with funding in place, and safe and reliable?
This means that in the matter of "can generate electricity," administrative power, energy structure, and market efficiency are all involved in the game.
Currently, the main electricity generation entities in China can be roughly divided into three categories:
The first category is the five major power generation groups: China Energy Group, Huaneng Group, Datang Group, Huadian Group, and State Power Investment Corporation. These companies control over 60% of the country's centralized thermal power resources and are actively laying out in the new energy sector. For example, China Energy Group added over 11 million kilowatts of wind power installations in 2024, maintaining a leading position in the industry.
The second category is local state-owned enterprises, such as Three Gorges New Energy, Beijing Energy Holding, and Shaanxi Investment Group. These enterprises are often tied to local governments and play an important role in local electricity layout while also undertaking certain "policy tasks."
The third category is private and mixed-ownership enterprises, with typical representatives such as Longi Green Energy, Sungrow Power Supply, Tongwei Co., and Trina Solar. These companies show strong competitiveness in photovoltaic manufacturing, energy storage integration, and distributed generation, and have also obtained "priority rights" in some provinces.
However, even if you are a leading new energy enterprise, it does not mean you can "build a power plant whenever you want." The bottlenecks usually occur in three areas:
1. Project indicators
Electricity generation projects need to be included in the local energy development annual plan and must obtain wind and solar project indicators. The allocation of these indicators is essentially a form of local resource control—without the consent of the local development and reform commission and energy bureau, you cannot legally start the project. Some regions also use a "competitive allocation" method, scoring based on land-saving degree, equipment efficiency, energy storage configuration, funding sources, etc.
2. Grid access
After the project is approved, it must apply to the State Grid or Southern Power Grid for access system evaluation. If the local substation capacity is full or there are no transmission channels, then the project you build is useless. Especially in regions where new energy is concentrated, such as the northwest, access difficulties and scheduling challenges are the norm.
3. Absorption capacity
Even if the project is approved and the lines are available, if the local load is insufficient and cross-regional channels are not opened, your electricity may still be "unusable." This leads to the issue of "curtailment of wind and solar." The National Energy Administration pointed out in its 2024 report that some cities and counties have even been suspended from adding new energy project access due to excessive project concentration and overload.
Therefore, "can generate electricity" is not just a matter of the enterprise's capability; it is also the result of policy indicators, the physical structure of the grid, and market expectations working together. In this context, some enterprises have begun to shift towards new models such as "distributed photovoltaic," "self-supply in parks," and "commercial and industrial energy storage coupling" to avoid centralized approval and absorption bottlenecks.
From an industry practice perspective, this three-layer structure of "policy access + engineering thresholds + scheduling negotiation" determines that China's electricity generation industry still belongs to a "structural access market." It does not inherently exclude private capital, but it is also difficult to allow purely market-driven operations.
How is electricity transported?
In the energy sector, there is a widely circulated "electricity paradox": resources are in the west, while electricity consumption is in the east; electricity is generated but cannot be delivered.
This is a typical problem in China's energy structure: the northwest has abundant sunlight and wind, but low population density and small industrial loads; the eastern region is economically developed and has high electricity consumption, but the locally available renewable energy resources are very limited.
So what to do? The answer is: build ultra-high voltage (UHV) transmission lines to transport wind and solar power from the west to the east using "electricity highways."
By the end of 2024, China had put into operation 38 UHV lines, including 18 AC lines and 20 DC lines. Among these, the DC transmission projects are particularly crucial because they can achieve low-loss, large-capacity directional transmission over extremely long distances. For example:
The "Qinghai-Henan" ±800kV DC line: 1587 kilometers long, transmitting electricity from the photovoltaic base in the Qaidam Basin to the Central Plains urban agglomeration;
The "Changji-Guquan" ±1100kV DC line: 3293 kilometers long, setting global records for both transmission distance and voltage level;
The "Shanbei-Wuhan" ±800kV DC line: serving the Shanbei energy base and the industrial hinterland of Central China, with an annual transmission capacity exceeding 66 billion kilowatt-hours.
Each UHV line is a "national-level project," uniformly initiated by the National Development and Reform Commission and the National Energy Administration, with the State Grid or Southern Power Grid responsible for investment and construction. These projects often require investments of hundreds of billions of yuan, with construction periods of 2 to 4 years, and often require cross-provincial coordination, environmental assessments, and land acquisition and relocation cooperation.
So why build UHV? Behind it is a resource redistribution issue:
1. Spatial resource redistribution
China's wind and solar resources are severely misaligned with population and industry. If spatial differences cannot be bridged through efficient transmission, all slogans about "sending electricity from the west to the east" are empty talk. UHV is about using "transmission capacity" to exchange for "resource endowments."
2. Electricity price balancing mechanism
Due to significant differences in electricity price structures between the resource side and the consumption side, UHV transmission has also become a tool for adjusting regional electricity price differences. The central and eastern regions can obtain relatively low-priced green electricity, while the west can realize energy monetization benefits.
3. Promoting renewable energy absorption
Without transmission channels, the northwest region can easily experience "too much electricity to use" situations. Around 2020, the curtailment rate in Gansu, Qinghai, and Xinjiang exceeded 20%. After the completion of UHV, these numbers have dropped to below 3%, which is structurally alleviated by the increase in transmission capacity.
At the national level, it has been made clear that UHV is not just a technical issue but an important pillar of national energy security strategy. In the next five years, China will continue to lay out dozens of UHV lines in the "14th Five-Year Plan for Power Development," including key projects from Inner Mongolia to Beijing-Tianjin-Hebei and from Ningxia to the Yangtze River Delta, further achieving the unified scheduling goal of "a national grid."
However, it is important to note that while UHV is beneficial, there are two long-term points of contention:
High investment, slow recovery: An ±800kV DC line often requires an investment of over 20 billion yuan, with a payback period exceeding 10 years;
Difficult cross-provincial coordination: UHV needs to traverse multiple administrative regions, posing high demands on the collaborative mechanisms between local governments.
These two issues determine that UHV remains a "national project" rather than a market infrastructure decided freely by enterprises. However, it is undeniable that in the context of rapid expansion of new energy and increasing regional structural mismatches, UHV is no longer an "optional choice," but a necessary component of the "Chinese version of the energy internet."
How is electricity sold?
After generating and transmitting electricity, the next core question is: how to sell electricity? Who will buy it? How much per kilowatt-hour?
This is also the core link that determines whether a power generation project is profitable. In the traditional planned economy system, this question is very simple: power plants generate electricity → sell to the State Grid → the State Grid schedules uniformly → users pay electricity bills, all priced by the state.
However, this model has completely broken down after the large-scale integration of new energy. The marginal cost of photovoltaic and wind power is close to zero, but their output is volatile and intermittent, making it unsuitable for inclusion in a fixed-price, rigid supply-demand electricity planning system. Thus, the question of "whether it can be sold" has become a matter of life and death for the new energy industry.
According to new regulations that will take effect in 2025, all newly added renewable energy generation projects nationwide will completely eliminate fixed-price subsidies and must participate in market transactions, including:
Medium- and long-term contract trading: similar to "pre-sold electricity," where power generation companies directly sign contracts with electricity consumers to lock in a certain time period, price, and quantity;
Spot market trading: electricity prices may change every 15 minutes based on real-time supply and demand fluctuations;
Ancillary services market: providing services for grid stability such as frequency regulation, voltage regulation, and backup;
Green power trading: users voluntarily purchase green electricity, accompanied by Green Electricity Certificates (GEC);
Carbon market trading: power generation companies can earn additional income by reducing carbon emissions.
Currently, multiple electricity trading centers have been established nationwide, such as the electricity trading centers in Beijing, Guangzhou, Hangzhou, and Xi'an, which are responsible for market matchmaking, electricity quantity confirmation, and price settlement.
Let's look at a typical example of the spot market:
During the summer heat of 2024, the Guangdong electricity spot market experienced extreme fluctuations, with off-peak electricity prices dropping to 0.12 yuan/kWh, while peak prices reached as high as 1.21 yuan/kWh. Under this mechanism, if new energy projects can be flexibly scheduled (e.g., equipped with energy storage), they can "store electricity at low prices and sell electricity at high prices," obtaining huge price difference profits.
In contrast, projects that still rely on medium- and long-term contracts but lack peak-shaving capabilities can only sell electricity at around 0.3-0.4 yuan per kilowatt-hour, and may even be forced to sell at zero price during certain curtailment periods.
As a result, more and more new energy companies are beginning to invest in supporting energy storage, on one hand for grid scheduling response, and on the other for price arbitrage.
In addition to electricity price income, new energy companies have several potential sources of revenue:
Green Electricity Certificate (GEC) trading. In 2024, provinces and cities such as Jiangsu, Guangdong, and Beijing have launched GEC trading platforms, where users (especially large industrial enterprises) purchase GECs for purposes such as carbon disclosure and green procurement. According to data from the Energy Research Association, the transaction price range for GECs in 2024 was 80-130 yuan per MWh, equivalent to about 0.08-0.13 yuan/kWh, which is a significant supplement to traditional electricity prices.
Carbon market trading. If renewable energy projects are used to replace coal power and are included in the national carbon emission trading system, they can earn "carbon asset" income. By the end of 2024, the national carbon market price was about 70 yuan per ton of CO₂, with each kilowatt-hour of green electricity reducing emissions by about 0.8-1.2 kilograms, theoretically yielding around 0.05 yuan/kWh.
Peak and valley price adjustment and demand response incentives. Power generation companies sign electricity adjustment agreements with high-energy-consuming users, reducing load during peak periods or sending electricity back to the grid, which can earn additional subsidies. This mechanism has been advancing rapidly in pilot programs in Shandong, Zhejiang, Guangdong, and other regions.
Under this mechanism, the profitability of new energy projects no longer depends on "how much electricity I can generate," but rather on:
Can I sell it at a good price?
Do I have long-term buyers?
Can I shave peaks and fill valleys?
Do I have energy storage or other adjustment capabilities?
Do I have tradable green assets?
The past model of "competing for indicators and relying on subsidies" has come to an end. In the future, new energy companies must possess financial thinking and market operation capabilities, and even manage electricity assets as meticulously as derivatives.
In summary: the "selling electricity" aspect of new energy is no longer a simple buying and selling relationship, but a systematic project that involves electricity as a medium, in coordination with policies, markets, carbon rights, and financial interactions.
Why is there curtailment of electricity?
For power generation projects, the biggest risk has never been whether the power station can be built, but rather "whether it can be sold after being built." And "curtailment" is the most silent yet deadly enemy in this process.
The so-called "curtailment" does not mean that you are not generating electricity, but rather that the electricity you generate has no users, no channels, and no scheduling flexibility, so it can only be wasted. For a wind or solar company, curtailment not only means a direct loss of revenue but can also affect subsidy applications, electricity quantity calculations, green certificate generation, and even impact subsequent bank ratings and asset revaluations.
According to statistics from the Northwest Regulatory Bureau of the National Energy Administration, in 2020, the curtailment rate of wind power in Xinjiang reached as high as 16.2%, and photovoltaic projects in Gansu and Qinghai also experienced curtailment rates exceeding 20%. Although by the end of 2024, these figures had dropped to 2.9% and 2.6%, respectively, in certain regions and periods, curtailment remains an unavoidable reality for project parties—especially in typical scenarios of high solar radiation and low load at noon, where a large amount of solar power is "compressed" by the scheduling system, meaning that generating it is essentially pointless.
Many people might think that curtailment is due to "insufficient electricity consumption," but fundamentally, it is a result of imbalances in system scheduling.
First, there are physical bottlenecks: in some resource-rich areas, substation capacity has long been saturated, and grid access has become the biggest limitation, meaning that projects can be approved but cannot connect to the grid. Secondly, the scheduling mechanism is rigid. China still relies on the stability of thermal power units as the core of scheduling, and the uncertainty of new energy output leads scheduling units to habitually "limit access" to avoid system fluctuations. Additionally, delays in cross-provincial coordination for absorption mean that although there may theoretically be "demand," the electricity cannot be "delivered" due to administrative processes and inter-provincial channels, ultimately leading to curtailment. On the market side, there is another set of outdated rule systems: the spot electricity market is still in its infancy, and the ancillary service mechanisms and price signal systems are far from perfect, with energy storage adjustments and demand response mechanisms not yet scaled in most provinces.
At the policy level, there has not been a lack of response.
Since 2021, the National Energy Administration has included "new energy absorption capacity assessment" as a prerequisite for project approval, requiring local governments to clarify local "carrying capacity indicators," and has proposed in multiple policies during the "14th Five-Year Plan" to promote the integration of source, grid, load, and storage, build local load centers, improve spot market trading mechanisms, and mandate the configuration of energy storage systems to shave peaks and fill valleys. At the same time, many local governments have implemented a "minimum absorption ratio" responsibility system, clearly stating that the average utilization hours of new energy grid-connected projects must not be lower than the national baseline, forcing project parties to consider adjustment measures in advance. Although these measures are correct in direction, there is still a significant lag in execution—many cities with rapidly increasing new energy installations still face issues such as lagging grid upgrades, slow energy storage construction, and unclear regional scheduling authority, leading to a mismatch between institutional promotion and market cooperation.
More importantly, curtailment is not simply about "economic inefficiency," but rather a conflict between resource space and institutional structure. The northwest has abundant electricity resources, but their development value relies on inter-provincial and inter-regional grid transmission and scheduling systems, while China's current administrative divisions and market boundaries are highly fragmented. This leads to a large amount of "technically available" electricity being institutionally unplaceable, becoming a form of passive redundancy.
Why can't China's electricity be used for cryptocurrency mining?
While a large amount of "technically available but institutionally unplaceable" electricity is being wasted, a previously marginalized electricity consumption scenario—cryptocurrency mining—has re-emerged in recent years in an underground, guerrilla-style manner, regaining a "structurally needed" position in certain regions.
This is not a coincidence, but rather a natural product of certain structural gaps. Cryptocurrency mining, as a high-energy-consuming, low-continuous-interference instant computing power activity, has an operational logic that is inherently compatible with curtailment of wind and solar power generation projects. Mining sites do not require stable scheduling guarantees, do not demand grid connection, and can even actively cooperate with scheduling to shave peaks and fill valleys. More importantly, it can convert unwanted electricity into on-chain assets outside the market, thus forming a pathway for "redundancy monetization."
From a purely technical perspective, this represents an improvement in energy efficiency; however, from a policy perspective, it remains in an awkward position.
The mainland Chinese government halted mining in 2021, with the core consideration not being the electricity itself, but rather the financial risks and industrial orientation behind it. The former relates to the opacity of cryptocurrency asset pathways, which can easily lead to regulatory challenges such as illegal fundraising and cross-border arbitrage; the latter involves the evaluation of "high energy consumption and low output" industries, which does not align with the current strategic focus on energy conservation and carbon reduction.
In other words, whether mining is a "reasonable load" does not depend on whether it absorbs electricity redundancy, but rather on whether it is included in the "acceptable structure" of the policy context. If it continues to exist in an opaque, non-compliant, and uncontrollable manner, it can only be classified as a "gray load"; however, if it can be limited to specific regions, specific power sources, specific prices, and specific on-chain uses, and designed as a special energy export mechanism within a compliant framework, it may not be excluded from policy considerations.
This redesign is not without precedent. Internationally, countries such as Kazakhstan, Iran, and Georgia have already incorporated "computing power loads" into their electricity balance systems, even using "electricity for stablecoins" to guide mining sites to bring digital assets such as USDT or USDC to the country as a source of alternative foreign exchange reserves. In the energy structures of these countries, mining has been redefined as a "strategic adjustable load," serving both grid regulation and the reconstruction of the monetary system.
While China may not be able to adopt such a radical approach, could it partially, conditionally, and limitedly restore the existence rights of mining sites? Especially in the phase where curtailment pressure persists and green electricity cannot be fully marketized in the short term, treating mining sites as a transitional mechanism for energy absorption and viewing Bitcoin as an on-chain asset reserve for closed-loop allocation may be more realistic and better serve the country's long-term digital asset strategy than a blanket ban.
This is not only a re-evaluation of mining but also a redefinition of the "value boundaries of electricity."
In the traditional system, the value of electricity depends on who buys it and how it is bought; in the on-chain world, the value of electricity may directly correspond to a segment of computing power, an asset, or a path to participate in the global market. As the country gradually builds AI computing power infrastructure, promotes the East Data West Computing project, and constructs the digital renminbi system, should it also leave a technically neutral and compliant channel for a "chain-based energy monetization mechanism" in the policy blueprint?
Bitcoin mining may be China's first practical scenario for converting energy into digital assets in a "no middleman" state—this issue is sensitive, complex, but unavoidable.
Conclusion: The Ownership of Electricity is a Real Choice
China's electricity system is not backward. Wind energy covers the Gobi, sunlight shines on the dunes, and UHV lines traverse vast wilderness, delivering a kilowatt-hour of electricity from the frontier to the high-rise buildings and data centers of eastern cities.
In the digital age, electricity is no longer just fuel for lighting and industry; it is becoming the infrastructure for value calculation, the root of data sovereignty, and an indispensable variable in the reorganization of the new financial order. Understanding the flow of "electricity," to some extent, is understanding how the system sets qualification boundaries. The destination of a kilowatt-hour is never determined by the market alone; it hides countless decisions behind it. Electricity is not distributed evenly; it always flows toward those who are permitted, to recognized scenarios, and to accepted narratives.
The core of the Bitcoin mining controversy has never been about whether it consumes electricity, but rather whether we are willing to acknowledge it as a "legitimate existence"—a usage scenario that can be included in national energy scheduling. As long as it is not recognized, it can only wander in the gray area and operate in the cracks; but once it is acknowledged, it must be institutionally placed—there are boundaries, conditions, rights to explanation, and regulatory standards.
This is not about loosening or blocking an industry, but rather a question of a system's attitude toward "non-conventional loads."
And we stand at this fork in the road, watching this choice quietly unfold.
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