Jeff Campbell, the plant engineer, started researching Bitcoin as soon as he got home from Mr. Spence’s house in 2017. He watched a 40-minute YouTube video and said the idea clicked into place: “This is currency that’s underpinned by power.”
On Amazon, he bought a $50 USB stick that promised to mine Bitcoin. He switched his computer to an isolated network and plugged it in.
At that time, Bitcoin was still “fringe,” Mr. Campbell said, and he worried about getting a computer virus or even ending up on an FBI watchlist because of cryptocurrency’s reputation in moving funds for terrorism.
Jeff Campbell, Scrubgrass power plant’s engineering manager, realized how quickly Bitcoin mining could generate revenue. (Andrew Rush/Post-Gazette)
The USB stick worked as advertised, and after a few weeks, Mr. Campbell invested $1,000 and bought a mining machine, a computer whose sole purpose is to run computations. It ran for a week and generated the equivalent of $6.65 in Bitcoin.
Nervously, Mr. Campbell linked the machine’s digital wallet to Scrubgrass’ PNC account to transfer the spoils, then he went into the office to check if it really showed up there.
“Oh, my God. I can’t believe this is really going to work,” he said
“All we need to do is put 15,000 of these in,” he told Mr. Spence. “$6 a day, seven days a week, 365 days a year. That’s not small money. Now multiply that by 15,000.”
That would be $230 million a year.
The earnings from the first machine funded the purchase of the second, then those two funded the third and so on.
Today, there are about 3,000 cryptocurrency miners packed into retrofitted shipping containers behind the power plant, most of them owned by Stronghold and some that belong to other mining companies that buy power from the plant. Another 5,000 machines are scheduled to arrive next month. According to documents filed with the SEC, Stronghold is planning to operate 57,000 miners by the end of next year.
A bank of Bitcoin mining machines at the Scrubgrass waste coal power plant. (Andrew Rush/Post-Gazette)
In 2020, when the power plant seldom ran, Stronghold made more money from its Bitcoin operations than by selling Scrubgrass’s energy to the grid. During the first three months of this year, the trend reversed. It received almost $2 million from power sales and more than $1 million from its crypto datacenter.
Mr. Spence talks to his kids about blockchain, the cryptography involved in storing and verifying huge swaths of data, the way people in the 1960s talked about plastics, a la the movie “The Graduate.”
“I feel that blockchain is gonna change the world,” he said.
For Mr. Campbell it feels like the beginning of the internet did: He knows it’s going to be revolutionary and ubiquitous, but the vision is still fuzzy. “Facial recognition? Three-dimensional rendering? Autonomous driving? Artificial intelligence?” he spitballs.
Mr. Spence’s business partner, Mr. Beard, who used to manage energy investing at Apollo Global Management Inc., isn’t as exuberant.
“I’m not sure that you need to be a believer,” he said.
He plugged the numbers into an Excel spreadsheet and saw that it makes economic sense to mine. That was enough for him.
Stronghold is buying another waste coal plant, Panther Creek Energy Facility in Carbon County, with plans to replicate its cryptomining data center there, and is eyeing a third.
Stabilizing the grid
A bulldozer is parked at the Russellton waste coal pile in West Deer. (Andrew Rush/Post-Gazette)
While Bitcoin is the shiny veneer of the operation, it’s actually a means to an end — giving Scrubgrass a reason to run more than the electric grid needs so it can continue to burn waste coal.
For the first 20 years, the plant ran nearly constantly. It had a power purchase agreement with the local utility, which meant there was a guaranteed demand and a guaranteed price for its output.
When that ended, in 2013, Scrubgrass struggled to navigate the competitive power market, where the price of power was falling in part because the Marcellus Shale was making natural gas a cheaper fuel for electricity than coal, let alone waste coal.
Plants — especially smaller ones like Scrubgrass that find themselves on the margin — often run only at peak times when the demand on the grid raises prices enough to make it worth their while.
Having a constant demand, like the attached data center, means Scrubgrass doesn’t need to shut down when prices for power fall. It also means that when the grid needs it, Scrubgrass can act like a battery — instantly switching its power to the grid.
(Andrew Rush/Post-Gazette)
“I think 10 years from now, people are going to say, ‘Bitcoin is the thing that power plants do to regulate the grid,” Mr. Campbell said.
He’s already thinking of ways to route the heat produced by the miners back into the power plant. (Last winter, Mr. Campbell heated his home with Bitcoin machines).
Meanwhile, the plant, although no spring chicken, feels like it’s still trying to figure out what it is — a place where people tinker and experiment. Mr. Shaffer, who spent most of his career at the plant, proudly proclaims that his colleagues aren’t “typical power plant people.” A former restaurant manager runs the data center.
Mr. Spence, not a typical anything except an entrepreneur whose ventures over the years ranged from natural gas services to a health magazine, hung the framed photo of Scrubgrass just inside the front door of his home.
“They should be building more plants like this, not less,” he said recently. “It’s not perfect. I acknowledge that to you. But it’s damn good.”
Anya Litvak: alitvak@post-gazette.com