Bitcoin is Key toan Abundant, Clean
Energy Future
In this memo, we aim to explain how the Bitcoin network functions as aunique energy buyer that could enable society to deploy substantiallymore solar and wind generation capacity. This deployment, along withenergy storage, aims to facilitate the transition to a cleaner and more
resilient electricity grid. We believe that the energy asset owners oftoday can become the essential bitcoin miners of tomorrow.

ABOUT THIS MEMO

Highlights
Bitcoin mining presents anopportunity to accelerate theglobal energy transition to
renewables by serving as acomplementary technology for clean
energy production and storage.
Solar and wind are now the least
expensive energy sources in theworld, but are hitting deployment
bottlenecks primarily because of
their intermittent power supply andgrid congestion.
Bitcoin miners as a flexible load
option could potentially help solve
much of these intermittency andcongestion problems, allowing
grids to deploy substantially more
renewable energy.
By deploying more solar and wind,these generation technologies will
likely fall even further down theirrespective cost curves, bringing
them closer to zero marginal costenergy production.

The Bitcoin Clean Energy Initiative hasdeveloped this short research paper as a starting
point to share our vision for how bitcoin mining- in conjunction with renewable energy andstorage - is especially well suited to accelerate
the energy transition. To complement this work,
ARK Invest has contributed an open source
model that demonstrates how bitcoin mining
could augment these renewable + storage
systems to supply a larger percentage of a grid’s
baseload energy demand for comparable or
lower cost unit economics. This work is merely
the beginning of what we hope will be a fruitful
exploration of solutions to help usher in anabundant, clean energy future.
A UNIQUE ENERGY BUYER

Bitcoin miners are unique energy buyers
in that they offer highly flexible and easilyinterruptible load, provide payout in a globallyliquid cryptocurrency, and are completely
location agnostic, requiring only an internet
connection. These combined qualities
constitute an extraordinary asset, an energy
buyer of last resort1 that can be turned on or off
at a moment’s notice anywhere in the world.

1. Special Report: Energy Backed Money, Satoshi Energy.

Bitcoin Clean Energy Initiative Memorandum

April 2021

Energy asset
owners are theentities which
own the power
production
plant once it isin commercial
operation.
Bitcoin Clean
Energy Initiative(BCEI) is a
project launchedby Square in
December 2020 topromote the useof clean energy
in Bitcoin mining.
Learn more about
its origin here.
Interruptible load
is an end use ofelectricity, likemining bitcoin,
which can beturned on or off
quickly and easily.

01

RENEWABLE ENERGY IS NOW THE CHEAPEST ENERGYThe Levelized Cost of Energy (LCOE) for solar
and wind has fallen 90% and 71%,1 respectively,
over the last decade. The unsubsidized costsof solar and wind energy are now 3-4 cents /kWh and 2-5 cents / kWh, respectively. Certain
individual projects have had even lower costs.
For context, the average LCOE for fossil
fuels such as coal or natural gas is ~5-7 cents/ kWh. This means that solar and wind are
already at a lower price point than coal andnatural gas. Solar and wind energy also justreached cost parity2 with both geothermal andhydroelectric, which at around 3-5 cents / kWh
are inexpensive, but geographically limited.
There will always be inexpensive individualsites for different power sources like hydro or
geothermal, but on the whole, solar and wind
are now the lowest cost and most scalable.
What’s more, we believe they will only continue
to get more affordable over time. We believe
this is especially true for solar, a semiconductor
technology, which has consistently declined inprice by 20-40%3 per doubling of cumulative
capacity deployed.
LCOE by Energy Source
In Price per kWh
Hydro~.01 – .04

Nat. Gas~.04 – .07

Wind~.02 – .05

Geothermal~.05 – .10

Solar~.03 – .04

Coal~.06 – .07

All but Hydro, Lazard. Hydropower, IRENA –International Renewable Energy Agency.

TEMPORAL SUPPLY & DEMAND MISMATCH AND
GRID CONGESTION

Solar and wind energy, however, both suffer fromone major deficiency versus more expensive
baseload power like natural gas or nuclear:intermittency. In the energy industry, this results
in what is known as the “duck curve.” 4

NREL Duck Curve
Net load in Megawatts, January 11
Years 2012-2020 represented
34k

2020

30k

26k
2012

22k

18k
0

12am

3am

6am

9am

12pm

3pm

6pm

9pm

Ten Years of Analyzing the Duck Chart, NREL.

In essence, the sun shines during the day, but
not at night. Wind is more unpredictable, but
tends to blow more heavily at night. Energy
supply, therefore, is either abundant or nonexistent. Demand, however, peaks around thelate afternoon or early evening when people
arrive home and turn on appliances, at whichtime neither solar nor wind are abundantly
available. The end result is significantly more
power than society typically needs for a few
hours per day and not nearly enough when
demand spikes. This same challenge also plays
out seasonally as the sun shines more during
the summer and the wind blows more during
the winter. These deficiencies are further
exacerbated by grid congestion,5 which issimilar to highway traffic and frequently occurs
because solar and wind projects are often built
in rural areas with lots of sunlight and wind
but little nearby load (i.e. end power users)
and transmission capacity. Because of thesechallenges, there are >200 GW6 of delayed solar
and wind capacity currently in just three U.S.
grid interconnection queues. These are solar
and wind projects which have developers andfinancing readily available, but which grids
physically cannot accommodate.

1. Levelized Cost of Energy and Levelized Cost of
Storage – 2020, Lazard.
2. Levelized Costs of New Generation Resources in
the Annual Energy Outlook 2021, U.S. Energy
Information Administration.
3. Solar's Future is Insanely Cheap (2020), Ramez Naam.
4. Ten Years of Analyzing the Duck Chart, NREL.
5. Transmission congestion & constraints: Market
impediment or opportunity? NRG Editorial Voices.
6. New data tool from Berkeley Lab Tracks Proposed
Projects in Interconnection Queues, Berkeley Lab.

Increased transmission capacity and energy
storage will be critical to solving these
problems, especially as Lithium Ion batteriescontinue to fall down their cost curve. For the
moment, though, utility-scale batteries arestill too expensive to deploy universally. Afterthey’ve fallen another 80% in cost, they will still
face physical limitations around their useful
lifespan and for how long they can store energy
without dissipation. They will, however, be themost critical technology in storing inexpensive
mid-day solar power for evening peak demand.

Bitcoin Clean Energy Initiative Memorandum

April 2021

Levelized Costof Energy (LCOE)
is the total
lifetime cost ofbuilding andoperating a power
plant divided by
the total amountof energy
it produces(measured incents / kWh).
Semiconductor
technology thebasis of modern
electronics andcomputing which
has historicallyfallen in cost as
its production
capacity increases(e.g. see
Moore’s Law).
Intermittency iswhen an energy
source is notconstant. For
example, in thecase of a solar
farm, it only
produces when
the sun shines.
Grid congestionis when a grid’stransmission lines
have reached the
maximum capacity
for how muchelectricity can flow
through them at
any given moment.
Transmission
capacity the rate
at which electricity
can be moved
from a power plant(e.g. a solar farm)to a load center(e.g. a city).

02

LONG TERM IMPLICATIONSBITCOIN MINING IS AN IDEAL COMPLEMENT FOR
GENERATION + STORAGE

Bitcoin miners, on the other hand, are an ideal
complementary technology for renewables
and storage. Combining generation with bothstorage and miners presents a better overallvalue proposition than building generation andstorage alone. As mentioned above, there will
always be physical limitations to how muchenergy can be cost effectively stored without
dissipation. However, the daily intermittency
challenge can be met almost entirely with justa few hours of storage capacity.
By combining miners with renewables + storage
projects, we believe it could:
1 Improve the returns for project investors
and developers, moving more solar and windprojects into profitable territory.
2 Allow for the construction of solar andwind projects even before lengthy gridinterconnection studies are completed (asbitcoin miners can offtake the energy until
selling to the grid becomes possible).
3 Provide the grid with readily available“excess” energy for increasingly common
black swan events like excessively hot orcold days when demand spikes (e.g. the early2021 outages in Texas).
Note that this “excess” energy will also be quite
useful as society’s electricity demands increase
with the proliferation of electric vehicles andthe electrification of all devices. In a sense, theunlimited appetite of miners allows them to
eat whatever remains of the “duck’s belly.” Given
these benefits, we believe it makes logicalsense for utility-scale storage developers toaugment their current battery offerings with
bitcoin miners.

We believe there are two large implications
if bitcoin mining becomes normalized as
an energy buyer of last resort. First, theamount of solar and wind energy on the grid
cold increase dramatically. As noted above,
there’s currently >200 GW of delayed solar
and wind capacity in the interconnection
queues of just three U.S. electricity markets.
For context, that’s approximately double theamount of solar and wind capacity currently
installed there.
As society starts deploying more solar andwind, we believe it should bring their LCOE
even further down their cost curves, making
the next batch of solar and wind even more
affordable. If the LCOE falls, it could potentiallyunlock profitable new use cases for thatelectricity like desalinating water, removing
CO2 from the atmosphere, or producing greenhydrogen. Some experts in the field expectthat the marginal cost of producing newelectricity will actually approach zero.1
The second major potential impact could bea sizable transformation and greening of the
bitcoin mining industry. It’s estimated that
there’s only 10-20 GW2 of mining capacity
worldwide today. Deploying miners at even
20% capacity with the above mentioned
200GW of delayed solar and wind projects
on U.S. grids alone could result in 40 GW of
new mining capacity, effectively dwarfing theentirety of the existing global market. Notethat while many of these projects would likely
be built “behind the meter” to utilize otherwise
curtailed solar and wind power wheneverpossible, they would likely still mine withgrid electricity during other periods when
profitable to do so, so it wouldn’t be entirely
green from day one. But if solar and windbecome even less expensive and constitutean increasingly large portion of baseload
power, the ultimate trend would continue
moving quickly toward renewable dominatedhashrate. We believe deploying such a large
amount of new, geographically diverse hashrate
would also have the second order consequenceof strengthening the security of the Bitcoin
network, potentially further entrenching
bitcoin as a sound currency for all.

1. Zero Marginal Cost Energy, Max Webster. Dec 2020.
2. Cambridge Bitcoin Electricity Consumption Index.

Bitcoin Clean Energy Initiative Memorandum

April 2021

Dissipation is theprocess of losing
some stored
energy as heat,also known as“heat loss”.
Black swan
events are low
probability, highimpact events
like severe
winter storms
or heat waves.
Utility-scalestorage is large
batteries deployedby utilities withstorage capacity
ranging from a
few megawatthours (MWh) to
hundreds of MWh.
Interconnection
queues areprojects awaiting
approval tosupply energy totransmission grids.
Behind the meter
refers to using
energy directly at
the generation site
without travelingthrough the grid.
Hashrateis the total
computational
power securing
the Bitcoin
network.

03

THIS SECTION OF THE MEMO WAS WRITTEN BY THE TEAM AT ARK INVEST

Without bitcoin mining, solar - an intermittent
energy source - could supply only 40% of
grid power before utilities would face theneed to fund significant investments withhigher electricity prices. With bitcoin mining
integrated into a solar system however, energy
providers - whether utilities or independent
entities - would have the ability to play thearbitrage between electricity prices andbitcoin prices, as well as potentially sell the“surplus” solar and supply almost all grid power
demands without lowering profitability.
The graph above illustrates the impact that
bitcoin mining could have on the adoptionof solar systems. Assuming a constant cost ofelectricity, it traces what percentage of power
solar could provide to the grid. The y-axis is thepower generated by solar, the x-axis is battery
capacity. The size of each circle is proportionate
to the size of the bitcoin mining operation. At
each point, the solar system provides a different
percentage of the grid’s needs. As bitcoin
mining scales, the solar system increases insize and provides a higher percentage of thegrid’s needs. Increasing bitcoin mining capacity
could allow the energy provider to “overbuild”
solar without wasting energy. In the bottom leftof the chart, in the absence of bitcoin mining,
renewables can satisfy only 40% of the grid’s
needs. In the top right of the chart, including
solar, batteries, and bitcoin mining can satisfy
99% of the grid’s demand.

Size of bubble is bitcoin mining power

90%

1,5k

80%
70%
60%

1,0k
50%
500
20%
0

10%
200

40%
400

600

800

1,0k

1,2k

1,4k

1,6k

Battery system capacity (MWh)Our model demonstrates that integrated bitcoin
mining could transfigure intermittent power
resources into baseload-capable generation
stations. It suggests that the addition of Bitcoin
mining into power developers’ toolboxes
should increase the overall addressable market
for renewable and intermittent power sources.
All else equal, with bitcoin mining, renewableenergy could provision a large percentage ofany locality’s power economically. As a followon effect, cost declines associated with scaling
renewables should most likely accelerate,leaving them even more economicallycompetitive at equilibrium.
WE PROVIDE AN OPEN-SOURCE VERSION AND MORE
DETAILED BREAKDOWN OF THE MODEL AND ITS
ASSUMPTIONS HERE1.

Baseload-capable
generation refers
to the ability tomeet the minimum
level of demand on
an electrical grid
over a spanof time.

1. Solar Battery Bitcoin, ARK Invest GitHub.

Bitcoin Clean Energy Initiative Memorandum

99% of grid
demand met

2,0k

Solar installation power (MW)With real-world data, we(ARK Invest) demonstrate that
bitcoin mining could encourage
investment in solar systems(solar grids + batteries), enabling
renewables to generate a higher
percentage of grid power withpotentially no change in thecost of electricity.

Bitcoin mining could encourage
investment in solar systems, enabling
renewables to generate a higher
percentage of grid power with nochange in the cost of electricity

April 202104

NEXT STEPS

There are still some important remaining
questions about how the above vision could
play out. We see at least three meaningfulbusiness opportunities:
1 Energy Management Softwareand Services
Energy management companies thatspecialize in both storage and mining could
build software to decide in real-time the bestuse for a newly created electron: whether
to use it, store it, or mine it. They could also
provide key asset management tools andanalytics to monitor project performance.
2 Energy/Miner Marketplaces
Managed marketplaces could emerge
to connect project developers, miners,
and financiers. One key challenge would
be solving the current creditworthinessthreshold requirements for existing miners.
3 ASIC Manufacturing
New chip foundries could be built to meetthe expected surge in demand. Samsung
and TSMC are leading the way with recent
announcements of new North American
plants. We also expect to see continued
hardware and firmware improvements toincrease the durability of mining equipment
optimized for interruptible power usage.

Call to Action

The bitcoin and energy
markets are converging
and we believe the energy
asset owners of today will
likely become the miners of
tomorrow. Utility executives,
sustainable infrastructure
funds, and grid-scale storage
developers are well-positioned
to expedite this future byaligning their strategic
roadmap and deploying large
scale investments into theemerging synergy between
bitcoin mining and clean
energy production.
We plan to follow up with more research
explorations and additional resources focusedon the intersection of bitcoin and clean energy.
CONTACT BITCOIN-ENERGY@SQUAREUP.COM

Application
Specific Integrated
Circuit (ASIC) is
a computer chipthat’s customized
to perform one
function. In thiscase, ASICs are
specialized to mineand secure the
Bitcoin network by
performing a hashfunction called
SHA-256.

This memo includes content and data (“information”) from ARK Invest, which is a holder of Square, Inc. (“Square,” “we,”“our,” “us”) Class A common stock. This information was made available to us for inclusion in this memo at no cost in
furtherance of Square and ARK Invest’s commitment to bitcoin and renewable energy. This information has also recently
been open-sourced and made publicly available as set forth above. Although we believe the information from ARK Invest
included in this memo is reliable, we have not independently verified its accuracy or completeness. Square is presenting
this information for informational purposes only and Square is not intending to approve or adopt the information. Square
undertakes no obligation to update this memo, and the information contained herein may be updated, amended orsuperseded by subsequent documents or disclosures, or may become outdated and inaccurate over time.

Bitcoin Clean Energy Initiative Memorandum

April 2021

TaiwanSemiconductor
Manufacturing
Company (TSMC)
is a Taiwanesemultinational
semiconductor
contract
manufacturing
and design
company.

05