China ranks first in power generation worldwide. Why can't it be used to mine Bitcoin?

Source: Lawyer Liu Honglin

I actually don’t understand electricity at all.

During the "May Day" holiday, I drove through the Hexi Corridor, from Wuwei to Zhangye, Jiayuan, and then to Dunhuang. Driving on the Gobi Desert highway, I often saw clusters of wind turbines standing silently on the Gobi, which was quite spectacular, resembling a sci-fi version of the Great Wall.

*Image source from the internet

The Great Wall from a thousand years ago guarded the border and territory, while today, these wind turbines and photovoltaic arrays guard a nation's energy security, the lifeline of the next generation industrial system. Sunlight and wind have never been organized so systematically, embedded in national strategy, and become a 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 round of bull and bear market transitions and every on-chain prosperity, the sound of mining machines running continuously is indispensable. When we talk about mining, the most discussed topics are the performance of mining machines and electricity prices—whether mining can be profitable, whether the electricity price is high, and where to find low-cost electricity.

However, when I saw this long stretch of power lines, I suddenly realized that I do not understand electricity at all: where does it come from? Who generates the electricity? How does it get transported from the desert to a thousand miles away, who uses it, and how should it be priced?

This is my cognitive gap, and perhaps there are partners who are equally curious about these issues. Therefore, I plan to use this article to do some systematic remedial work, from China's power generation mechanism, grid structure, electricity trading, to the terminal access mechanism, to re-understand one kilowatt-hour.

Of course, this is the first time Lawyer Honglin is encountering this completely unfamiliar topic and industry, and there will inevitably be shortcomings and omissions. I also ask partners to provide valuable feedback.

How much electricity does China actually have?

Let's start with a macro fact: according to data released by the National Energy Administration in the first quarter of 2025, China's electricity generation in 2024 will reach 9.4181 trillion kWh, a year-on-year increase of 4.6%, accounting for about one-third of global power generation. What is this concept? Combined, the EU generates less than 70% of China's electricity annually. This means that not only do we have electricity, but we are in a dual state of "power surplus" and "structural restructuring".

China not only generates a lot of electricity, but the way it generates electricity has also changed.

By the end of 2024, the country's total installed capacity will reach 3.53 billion kilowatts, a year-on-year increase of 14.6%, of which the proportion of clean energy will further increase. The new installed capacity of photovoltaic power is about 140 million kilowatts, and the new wind power capacity is 77 million kilowatts. In terms of proportion, in 2024, China's new installed capacity of photovoltaic will account for 52% of the world's new installed capacity, and the new installed capacity of wind power will account for 41% of the world's new installed capacity.

This growth is no longer concentrated solely in provinces rich in traditional energy, but is gradually shifting towards the northwest. Provinces such as Gansu, Xinjiang, Ningxia, and Qinghai have become "major provinces for new energy" and are gradually transforming from "resource-exporting areas" to "main energy production forces." To support this transformation, China has deployed a national-level new energy base plan in the "Shage Desert" region: concentrating more than 400 million kilowatts of wind and solar power installation in desert, Gobi, and arid areas, with the first batch of about 120 million kilowatts included in the "14th Five-Year Plan" special planning.

*The first in Asia, Dunhuang's 100-megawatt molten salt tower solar thermal power station (image source from the internet)

At the same time, traditional coal power has not been completely withdrawn, but gradually transformed into a peak-shaving and flexible power supply. According to the National Energy Administration, the country's installed coal power capacity will increase by less than 2% year-on-year in 2024, while the growth rate of photovoltaic and wind power will reach 37% and 21%, respectively. This means that a "coal-based, green-based" pattern is taking shape.

From the perspective of spatial structure, the supply and demand of energy and electricity in the country will be generally balanced in 2024, but the regional structural surplus still exists, especially in the northwest region, where there is a situation of "too much electricity to use", which also provides a realistic background for us to discuss "whether bitcoin mining is an export method of power redundancy" later.

In summary, China is not lacking electricity; what it lacks are "dispatchable electricity," "absorptive electricity," and "profitable electricity."

Who can send electricity?

In China, electricity generation is not something you can just do if you want; it does not belong to a purely market-oriented industry, but rather resembles 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 power generation business must obtain the "Electricity Business License (Power Generation Category)". The approval authority is usually the National Energy Administration or its dispatched agencies, depending on the project scale, region, and technical type. Its application process often involves multiple cross-assessments:

• Is it in line with national and local energy development plans?
• Have the land use, environmental assessment, and water conservation approvals been obtained?
• Does it meet the conditions for grid connection and consumption space?
• Is the technology compliant, is the funding in place, and is it safe and reliable?

This means that in the matter of "power generation," administrative power, energy structure, and market efficiency are all participating in the game simultaneously.

Currently, the main power generation entities in China can be roughly divided into three categories:

The first category is the five major power generation groups: National Energy Group, Huaneng Group, Datang Group, Huadian Group, and State Power Investment Corporation. These enterprises control more than 60% of the country's centralized thermal power resources, and are also actively deploying in the field of new energy. For example, China Energy Group will add more than 11 million kilowatts of wind power capacity in 2024, maintaining a leading position in the industry.

The second type is local state-owned enterprises: such as China Three Gorges New Energy, Beijing Energy Power, and Shaanxi Investment Group. These enterprises are often tied to local governments, playing an important role in local electricity layout, while also undertaking certain "policy-related tasks."

The third category is private and mixed-ownership enterprises: typical representatives such as LONGi Green Energy, Sungrow, Tongwei, Trina Solar, etc. These companies have shown strong competitiveness in photovoltaic manufacturing, energy storage integration, distributed generation and other sectors, and have also obtained "index priority" in some provinces.

But even if you are a leading new energy company, it doesn't mean that you can "build a power plant whenever you want." The bottlenecks usually appear in three aspects:

1. Project metrics

Power generation projects need to be included in the local energy development annual plan and must obtain indicators for wind and solar projects. 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, it is impossible to legally initiate the project. Some regions also adopt a "competitive allocation" method, scoring on factors such as land conservation level, equipment efficiency, energy storage configuration, and source of funds, to select the best options.

2. Grid access

After the project is approved, it has to apply to the State Grid or China Southern Power Grid for an access system assessment. If the local substation capacity is full, or there is no transmission channel, then the project you build is useless. Especially in areas where new energy is concentrated in the northwest, it is the norm that it is difficult to access and dispatch.

3. Acceptance capacity

Even if the project is approved and the route exists, if the local load is insufficient and the inter-regional channels are not opened, your electricity may also be "unused." This has led to the issue of "abandoned wind and solar energy." The National Energy Administration pointed out in its 2024 report that some cities and regions have even had their new energy project connections suspended due to an excessive concentration of projects far exceeding the load.

Therefore, whether "power generation is possible" is not only a matter of the capability of enterprises but also the result of the joint determination of policy indicators, the physical structure of the power grid, and market expectations. Against this backdrop, some enterprises have begun to shift towards new models such as "distributed photovoltaics", "self-supply in parks", and "coupling of industrial and commercial energy storage" to circumvent centralized approval and absorption bottlenecks.

From the perspective of industry practice, this three-layer structure of "policy access + engineering threshold + scheduling negotiation" determines that China's power generation industry still belongs to a "structural access market", which does not inherently exclude private capital, but it is also difficult to allow pure market-driven dynamics.

How is electricity transported?

In the energy sector, there is a widely circulated "power paradox": resources are in the west, while electricity is in the east; electricity is generated, but cannot be transmitted.

This is a typical issue in China's energy structure: the northwest has abundant sunlight and wind, but low population density and small industrial load; the eastern region is economically developed and has high electricity consumption, but the locally exploitable renewable energy resources are very limited.

So what should we do? The answer is: build ultra-high voltage transmission (UHV), using "power highways" to transmit wind and solar power from the west to the east.

By the end of 2024, China will have put into operation 38 ultra-high voltage lines, including 18 AC lines and 20 DC lines. Among these, the DC transmission projects are particularly critical as they enable long-distance, low-loss, and large-capacity directional transmission. For example:

• "Qinghai-Henan" ±800kV DC line: 1587 kilometers long, delivering electricity from the photovoltaic base in the Qaidam Basin of Qinghai to the Central Plains urban agglomeration;
• "Changji - Guquan" ±1100kV DC line: with a length of 3293 kilometers, it sets a double record for global transmission distance and voltage level;
• "Shanbei-Wuhan" ±800kV DC line: Serves the Shanbei energy base and the industrial hinterland of Central China, with an annual transmission capacity exceeding 66 billion kilowatt-hours.

Each ultra-high voltage line is a "national-level project," uniformly approved by the National Development and Reform Commission and the Energy Administration, with investment and construction managed by the State Grid or the Southern Power Grid. These projects often involve investments of hundreds of billions, with construction periods of 2 to 4 years, and typically require inter-provincial coordination, environmental assessments, and cooperation for land acquisition and relocation.

So why do we need to develop ultra-high voltage? In fact, it's a matter of resource redistribution behind it:

1. Space resource redistribution

China's scenic resources and its population and industry are seriously misaligned. If the spatial differences cannot be bridged through efficient power transmission, all the slogans about "West-to-East Power Transmission" are mere empty talk. Ultra-high voltage is about replacing "resource endowments" with "transmission capacity."

2. Electricity Price Balancing Mechanism

Due to the significant differences in electricity pricing structures between the resource end and the consumption end, ultra-high voltage 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 western regions can achieve energy monetization benefits.

3. Promote the consumption of new energy

Without transmission channels, the northwest region is prone to situations where "excess electricity cannot be used" due to wasted wind and solar energy. Around 2020, the electricity abandonment rate in Gansu, Qinghai, and Xinjiang once exceeded 20%. After the completion of ultra-high voltage transmission lines, these figures have dropped to below 3%, which is a structural alleviation brought about by the enhancement of transmission capacity.

At the national level, it has been made clear that UHV (Ultra High Voltage) is not only a technical issue but also an important pillar of the 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 dispatch goal of a "national grid."

However, it is important to note that while ultra-high voltage is good, there are also two long-term points of contention:

• High investment and slow recovery: An ±800kV DC line often requires an investment of over 20 billion yuan, with a payback period exceeding 10 years;
• Difficulty in inter-provincial coordination: Ultra-high voltage requires traversing multiple administrative regions, which places high demands on the coordination mechanism among local governments.

These two issues determine that UHV is still a "national project", rather than a market infrastructure under the free decision-making of enterprises. However, it is undeniable that in the context of the rapid expansion of new energy and the intensification of regional structural mismatch, UHV is no longer an "option", but a must for "China's version of the energy Internet".

How to sell electricity?

After generating and sending electricity, the next most critical question is: how to sell it? Who will buy it? How much per kilowatt?

This is also a core aspect that determines whether a power generation project is profitable. In a traditional planned economy system, this issue is very simple: power plant generation → sold to the state grid → state grid unified scheduling → users pay electricity bills, everything is priced by the state.

However, after the large-scale integration of new energy into the grid, this model has completely failed. The marginal cost of photovoltaic and wind power is close to zero, but their output is fluctuating and intermittent, which is not suitable for power planning systems with fixed electricity prices and rigid supply and demand. As a result, from "whether it can be sold" has become the life and death line of the new energy industry.

According to the new regulations that will be implemented starting in 2025, all new renewable energy generation projects nationwide will completely eliminate fixed electricity price subsidies and must participate in market trading, including:

• Medium to long-term contract trading: similar to "pre-sale electricity", power generation companies directly sign contracts with electricity consumption companies, locking in a specific time period, price, and electricity volume;
• Spot market trading: Based on real-time fluctuations in electricity supply and demand, electricity prices may change every 15 minutes;
• Ancillary services market: Provides frequency regulation, voltage regulation, and reserves for grid stability services;
• Green Power Trading: Users voluntarily purchase green power, accompanied by Green Power Certificates (GEC);
• Carbon market trading: Power generation companies can earn additional income by reducing carbon emissions.

Currently, multiple electricity trading centers have been established across the country, such as the Electricity Trading Center Co., Ltd. in Beijing, Guangzhou, Hangzhou, and Xi'an, which are responsible for market matching, power confirmation, electricity price settlement, and more.

Let's take a look at a typical spot market example:

During the high temperature period in the summer of 2024, the Guangdong electricity spot market experienced extreme fluctuations, with valley period electricity prices dropping to 0.12 yuan/kWh and peak period prices reaching as high as 1.21 yuan/kWh. Under this mechanism, if new energy projects can be flexibly scheduled (such as being 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 to long-term contracts but lack peak shaving capabilities can only sell electricity at a price of around 0.3-0.4 yuan per kilowatt-hour, and may even be forced to go online at zero price during certain periods of curtailed electricity.

As a result, more and more new energy companies are beginning to invest in supporting energy storage, on one hand for grid dispatch response, and on the other hand for price arbitrage.

In addition to electricity price revenue, new energy companies have several other possible sources of income:

1. 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 GEC for purposes such as carbon disclosure and green procurement. According to data from the Energy Research Association, the transaction price range for GEC in 2024 is 80-130 yuan per MWh, equivalent to about 0.08-0.13 yuan/kWh, which is a significant supplement to traditional electricity prices.

2. Carbon market trading. If new energy projects are used to replace coal power and are included in the national carbon emission trading system, they can obtain "carbon asset" benefits. As of the end of 2024, the national carbon market price is about 70 yuan/ton CO₂, and each degree of green electricity can reduce emissions by about 0.8-1.2 kilograms, with theoretical benefits around 0.05 yuan/kWh.

3. Peak and valley electricity price adjustment and demand response incentives. Power generation companies sign electricity adjustment agreements with high energy-consuming users, allowing them to reduce load during peak periods or feed electricity back to the grid for additional subsidies. This mechanism has been advancing quickly in pilot programs in Shandong, Zhejiang, and Guangdong.

Under this mechanism, the profitability of new energy projects no longer depends on "how much electricity I can generate", but rather:

• Can I sell it for a good price?
• Do I have long-term buyers?
• Can I flatten the peaks and fill the valleys?
• Do I have energy storage or other regulation capabilities?
• Do I have any tradable green assets?

The past model of "seizing indicators and relying on subsidies" for projects has come to an end. In the future, new energy companies must possess financial thinking and market operation capabilities, and even manage power assets with the same precision 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 uses electricity as a medium and involves a collaborative game with policies, markets, carbon rights, and finance.

Why is there stranded 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 completion. And "abandoned electricity" is the most silent yet deadly enemy in this process.

The so-called "abandoned power" does not mean that you do not generate electricity, but rather that the electricity you generate has no users, no channels, and no scheduling flexibility, so it can only be wasted helplessly. For a wind power or photovoltaic company, abandoned power not only directly means a loss of revenue, but may also affect subsidy applications, electricity accounting, green certificate generation, and even impact subsequent bank ratings and asset revaluation.

According to the statistics of the Northwest Supervision Bureau of the National Energy Administration, the curtailment rate of wind power in Xinjiang was as high as 16.2% in 2020, and photovoltaic projects in Gansu, Qinghai and other places also saw a curtailment rate of more than 20%. Although by the end of 2024, this data has dropped to 2.9% and 2.6% respectively, in some areas and periods, curtailment is still a reality that project parties cannot avoid - especially in the typical scenario of high light and low load at noon, a large number of photovoltaic power is "pressed" by the dispatching system, which is equivalent to gray hair.

Many people might think that power abandonment is due to "insufficient electricity usage," but essentially it is a result of an imbalance in system scheduling.

The first is the physical bottleneck: in some resource concentration areas, the capacity of substations has long been saturated, and grid access has become the biggest limitation, and projects can be approved but cannot be connected to the network. The second is the rigidity of the scheduling mechanism. At present, China still takes the stability of thermal power units as the core of dispatching, and the uncertainty of new energy output makes dispatching units habitually "restrict access" to avoid system fluctuations. In addition, the delay in consumption coordination between provinces has led to the fact that although a lot of electricity is theoretically "wanted", it "cannot be delivered" in the administrative process and inter-provincial channels, and can only be discarded in the end. At the market level, there is another lagging rule system: the spot electricity market is still in its infancy, the auxiliary service mechanism and price signal system are far from perfect, and the energy storage regulation and demand response mechanism have not yet formed a scale in most provinces.

In fact, there has been a response at the policy level.

Since 2021, the National Energy Administration (NEA) has included the "New Energy Consumption Capacity Assessment" in the pre-approval of projects, requiring local governments to clarify the local "bearable indicators", and proposing in a number of policies in the "14th Five-Year Plan" to promote the integration of source, grid, load and storage, build local load centers, improve the spot market trading mechanism, and force the configuration of energy storage systems to peak shaving and valley filling. At the same time, many local governments have introduced a "minimum consumption ratio" responsibility system, clarifying that the average annual utilization hours of new energy grid-connected projects shall not be lower than the national benchmark, forcing project parties to consider adjustment measures in advance. Although these measures are in the right direction, there is still a significant lag in the implementation progress - in many cities where the installed capacity of new energy is soaring, problems such as lagging power grid transformation, slow energy storage construction, and unclear ownership of regional dispatching rights are still common, and the rhythm of institutional promotion and market cooperation still does not match.

More importantly, the issue behind the abandonment of electricity is not simply "economic inefficiency", but a conflict of resource space and institutional structure. The electric power resources in the northwest are abundant, but their development value depends on the inter-provincial and inter-regional grid transmission and scheduling system, while China's current administrative divisions and market boundaries are highly fragmented. This leads to a large amount of "technically usable" electricity being institutionally stranded, becoming a form of passive redundancy.

Why Can't China's Electricity Be Used for Cryptocurrency Mining?

While a large amount of "technically available, institutionally unplaceable" electricity is being wasted, a previously marginalized electricity usage scenario—cryptocurrency mining—has appeared in recent years in an underground, guerrilla-style manner, and has regained a "structurally needed" reality in certain regions.

This is not accidental, but a natural product of some kind of structural crevice. As an instant computing power behavior with high power consumption and low continuous interference, cryptocurrency mining is naturally compatible with power generation projects that are curtailed from wind and solar power. The mine does not need a stable dispatching guarantee, does not require the grid to be connected to the grid, and can even actively cooperate with the dispatch of peak shaving and valley filling. More importantly, it can convert electricity that no one wants into on-chain assets outside the market, thus forming a channel for "redundant realization".

From a purely technical perspective, this is 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 concerns the opacity of the cryptocurrency asset path, which can easily lead to regulatory issues such as illegal fundraising and cross-border arbitrage; the latter involves the evaluation of industries with "high energy consumption and low output," which does not align with the current strategic theme of energy conservation and carbon reduction.

In other words, whether mining is considered a "reasonable load" does not depend on whether it consumes surplus electricity, but rather on whether it is included in the "acceptable structure" of the policy context. If it still exists 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 areas, specific power sources, specific electricity prices, and specific on-chain purposes, and designed as a special energy export mechanism within a compliant framework, it may still become part of the policy.

This kind of redesign is not without precedent. Internationally, Kazakhstan, Iran, Georgia and other countries have long incorporated "computing loads" into the power balance system, and even guided mining farms to bring digital assets such as USDT or USDC to the country as a source of alternative foreign exchange reserves in the form of "electricity for stable coins". In the energy structure of these countries, mining is redefined as a "strategic-level adjustable load", serving both grid regulation and monetary system reconstruction.

In China, although it is impossible to emulate such a radical approach, could it be possible to partially, limitedly, and conditionally restore the existence rights of mining sites? Especially during a period when pressure from abandoned electricity continues and green power cannot be fully commercialized in the short term, using mining sites as a transitional mechanism for energy consumption and viewing Bitcoin as an on-chain asset reserve for closed-loop allocation may be more realistic than a blanket ban, and could better serve the country's long-term digital asset strategy.

This is not only a reassessment of mining but also a redefinition of the "value boundary 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 period of computing power, an asset, and a path to participate in the global market. While the country is gradually building AI computing infrastructure, promoting the Eastern Data and Western Computing Project, and building a digital RMB system, should it also leave a technically neutral, compliant and controllable channel for a "on-chain energy monetization mechanism" on the policy drawings?

Bitcoin mining may be the first practice scenario in China where energy is converted into digital assets "without intermediaries"—this issue is sensitive, complex, and yet unavoidable.

Conclusion: The Ownership of Electricity is a Real-World Multiple Choice Question

China's power system is not lagging behind. Wind energy blankets the Gobi Desert, sunlight bathes the sand dunes, and ultra-high voltage lines traverse vast wildernesses, delivering electricity from the frontier to the skyscrapers and data centers of eastern cities.

In the digital age, electricity is no longer just a 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" is, to some extent, understanding how the system sets qualification boundaries. The destination of one kilowatt-hour has never been determined naturally by the market; it is hidden behind countless decisions. Electricity is not distributed evenly; it always flows towards those who are permitted, the recognized scenarios, and the accepted narratives.

The core of the controversy over Bitcoin mining has never been about whether it consumes electricity, but rather whether we are willing to acknowledge it as a "legitimate existence"—a use case that can be incorporated into 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 recognized, it must be institutionally positioned—having boundaries, conditions, the right to explanation, and regulatory standards.

This is not about the deregulation or lockdown of an industry, but a matter of the system's attitude towards "unconventional loads."

And we are standing at this fork in the road, watching this choice quietly unfold.

Reference

[1] China Government Website, "2024 National Power Industry Statistical Data", January 2025.

[2] IEA, "Renewables 2024 Global Report", January 2025.

[3] National Energy Administration, "2024 Annual Energy Operation Report" Appendix.

[4] National Development and Reform Commission Energy Research Institute, "Progress on the Construction of the 'Shagehuang' Wind and Solar Base", December 2024.

[5] National Development and Reform Commission, "Interim Measures for the Management of Renewable Energy Power Generation Projects", 2023.

[6] Reuters, "Evaluation Report on China's UHV Transmission System", May 2025.

[7] Infolink Group, "Analysis of the Cancellation of Fixed Price Subsidies for China's New Energy", March 2025.

[8] National Electric Dispatch Center, "North China Power Spot Market Operation Bulletin (2024)."

[9] REDex Insight, "China Unified Electricity Market Roadmap", December 2024.

[10] China Electricity Council, "2024 Power Industry Report" Appendix.

[11] National Energy Administration Northwest Supervision Bureau, "Northwest Wind and Solar Power Abandonment Report", December 2024.

[12] Energy Research Association, "Observational Report on the Pilot Trading of Green Power Certificates", January 2025.

[13] CoinDesk, "Analysis of Kazakhstan's Mining Policy Adjustments", December 2023.