China is the world's largest producer of electricity. 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, then to Jiuquan, and finally to Dunhuang. Driving on the Gobi highway, wind turbines often appeared on both sides of the road, silently standing 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 borders and territory, but today, what these wind turbines and solar arrays protect is the energy security of a nation, the lifeblood of the next generation industrial system. Sunlight and wind have never been so systematically organized, embedded into national strategy, and become part of sovereign capabilities as they are today.

In the Web3 industry, everyone knows that mining is one of the most fundamental aspects and the most solid infrastructure of this ecosystem. Behind every cycle of bull and bear markets, and every on-chain prosperity, the sound of mining machines running continuously is indispensable. Whenever we talk about mining, the most discussed topics are the performance of mining machines and electricity prices—whether mining can be profitable, whether electricity prices are high, and where to find low-cost electricity.

However, when I saw this vast power line stretching for thousands of miles, I suddenly realized that I didn't 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 knowledge gap, and perhaps there are others who are equally curious about these questions. Therefore, I intend to use this article to do some systematic catching up, re-understanding the concept of a kilowatt-hour from China's power generation mechanism, grid structure, electricity trading, to terminal access mechanisms.

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

How much electricity does China actually have?

Let's first take a look at a macro fact: According to data released by the National Energy Administration in the first quarter of 2025, China's total power generation in 2024 will reach 9.4181 trillion kilowatt-hours, a year-on-year increase of 4.6%, accounting for about one-third of the global power generation. What does this mean? The annual power 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 “power surplus” and “structural reconstruction.”

China not only generates a lot of electricity, but the methods of generation have also changed.

By the end of 2024, the total installed capacity in the country is expected to reach 3.53 billion kilowatts, an increase of 14.6% year-on-year, with a further increase in the proportion of clean energy. The newly installed photovoltaic capacity is approximately 140 million kilowatts, and the newly installed wind power capacity is 77 million kilowatts. In terms of proportion, in 2024, China's newly installed photovoltaic capacity accounts for 52% of the global total, while newly installed wind power capacity accounts for 41%, making China almost a “dominant role” in the global clean energy landscape.

This growth is no longer concentrated solely in traditional energy powerhouse provinces but is gradually shifting towards the northwest. Provinces such as Gansu, Xinjiang, Ningxia, and Qinghai have become “new energy provinces” and are 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” region: concentrating over 400 million kilowatts of wind power and photovoltaic installed capacity in desert, gobi, and barren 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 MW molten salt tower solar thermal 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 the national coal power installed capacity is expected to grow by less than 2% year-on-year in 2024, while the growth rates for photovoltaic and wind power are expected to reach 37% and 21%, respectively. This indicates that a pattern of “coal-based and green-dominant” is beginning to take shape.

From a spatial structure perspective, the overall balance of energy and electricity supply and demand in the country in 2024 is expected, but structural surpluses still exist in certain regions, especially in the northwest where there are periods of “excess electricity that cannot be used.” This also provides a real-world context for our later discussion on whether “Bitcoin mining is a way to export power redundancy.”

In summary, what China lacks is not electricity, but “dispatchable electricity,” “absorptive electricity,” and “profitable electricity.”

Who can send electricity?

In China, power generation is not something you can just do if you want; it is not a purely market-driven industry, but rather resembles a “franchise” with policy entry points and regulatory ceilings.

According to the “Regulations on the Administration of Electric Power Business Licenses”, all units wishing to engage in power generation business must obtain the “Electric Power Business License (Generation)”. The approval authority is usually the National Energy Administration or its dispatched agencies, depending on the project's scale, region, and technical 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?
• Are there conditions for grid access and absorption capacity?
• 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 consists of 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 also actively laying out in the new energy sector. For example, China Energy Group is set to add over 11 million kilowatts of wind power capacity in 2024, maintaining a leading position in the industry.

The second category is local state-owned enterprises: such as Three Gorges New Energy, Jingneng Power, and Shaanxi Investment Group. These enterprises are often tied to local governments, play an important role in the local power layout, and also undertake certain “policy-related tasks.”

The third category is private and mixed-ownership enterprises: typical representatives include Longi Green Energy, Sungrow Power Supply, Tongwei Co., Ltd., and Trina Solar. These companies have demonstrated strong competitiveness in sectors such as photovoltaic manufacturing, energy storage integration, and distributed generation, and have also obtained “priority rights for indicators” in some provinces.

However, even if you are a leading new energy company, it does not mean that you can “build a power plant whenever you want.” The bottlenecks here usually occur in three aspects:

1. Project Indicators

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 the Energy Bureau, it is impossible to legally initiate the project. Some regions also adopt a “competitive allocation” method, scoring based on land conservation, equipment efficiency, energy storage configuration, funding sources, and other criteria.

2. Grid Connection

After the project is approved, you still need to apply to the State Grid or the Southern Power Grid for a system access evaluation. If the local substation is at full capacity or there are no transmission channels, then the project you build will be useless. This is especially true in regions with concentrated new energy, such as the Northwest, where access difficulties and scheduling challenges are the norm.

3. Absorption capacity

Even if the project is approved and the lines are in place, if the local load is insufficient and the inter-regional channels are not opened, your electricity may still be “unusable.” This has led to the issue of “abandoned wind and solar energy.” In the 2024 report, the National Energy Administration pointed out that certain cities have even been suspended from connecting new renewable energy projects due to a concentration of projects that far exceed the load.

Therefore, whether “can generate electricity” is not only a matter of the capabilities of enterprises but also the result determined by 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 “industrial and commercial energy storage coupling” to avoid centralized approval and consumption bottlenecks.

From the perspective of industry practice, this three-tier structure of “policy access + engineering thresholds + scheduling negotiations” determines that China's power generation industry still belongs to a “structural access market.” It does not inherently exclude private capital, but it also finds it difficult to allow purely market-driven approaches.

How is electricity transported?

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

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

So what to do? The answer is: to build ultra-high voltage transmission (UHV) to transport wind and solar power from the west to the east using “power highways.”

By the end of 2024, China will have put into operation 38 ultra-high voltage lines, including 18 alternating current lines and 20 direct current lines. Among these, the direct current transmission projects are particularly crucial, as they can achieve low loss and large capacity directional delivery over extremely long distances. For example:

• “Qinghai-Henan” ±800kV DC line: stretches 1587 kilometers, delivering electricity from the photovoltaic base in the Qaidam Basin of Qinghai to the Central Plains urban agglomeration;
• “Changji–Guquan” ±1100kV DC line: 3293 kilometers long, setting dual records 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” that is 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 a construction period of 2 to 4 years, and often require inter-provincial coordination, environmental assessments, and land acquisition cooperation.

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 spatial differences cannot be bridged through efficient power transmission, all the slogans of “West to East Power Transmission” are mere empty talk. Ultra-high voltage is about replacing “resource endowment” with “transmission capacity.”

2. Electricity Price Balancing Mechanism

Due to the significant differences in electricity price structures between the resource side and the consumption side, ultra-high voltage transmission has also become a tool for adjusting regional electricity price differences. The central and eastern regions can obtain relatively low-cost green electricity, while the western region can achieve energy monetization benefits.

3. Promote the consumption of new energy

Without transmission channels, the northwest region can easily experience a situation where “excess electricity cannot be utilized” 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, these numbers have dropped to below 3%, which is a structural alleviation brought about by the improvement of transmission capacity.

At the national level, it has been made clear that ultra-high voltage is not just a technical issue, but an important pillar of the national energy security strategy. In the next five years, China will continue to lay out dozens of ultra-high voltage lines in the “14th Five-Year Plan for Power Development,” including key projects such as Inner Mongolia to Beijing-Tianjin-Hebei and Ningxia to the Yangtze River Delta, further achieving the unified dispatching 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, slow recovery: An ±800kV DC line often requires an investment of over 20 billion yuan, with a payback period exceeding 10 years;
• Cross-province coordination is difficult: ultra-high voltage requires crossing multiple administrative regions, which places high demands on the coordination mechanism between local governments.

These two issues determine that UHV is still a “national project” rather than a market infrastructure based on corporate free decision-making. However, it is undeniable that, against the backdrop of rapid expansion of new energy and increasing regional structural mismatch, ultra-high voltage is no longer an “optional choice”, but a necessary choice for the “Chinese version of the energy internet.”

How is electricity sold?

After sending out electricity, the next core question is: how to sell electricity? Who will buy it? How much per kilowatt?

This is also the core link that determines whether a power generation project is profitable. In a traditional planned economy system, this issue is very simple: power plant generates electricity → sold to the national grid → national grid uniformly schedules → users pay electricity bills, everything is priced according to the state.

However, this model has completely failed after the large-scale integration of new energy into the grid. The marginal costs of photovoltaics and wind power are close to zero, but their output is characterized by volatility and intermittency, making them unsuitable for inclusion in fixed electricity price and rigid supply-demand power planning systems. Thus, the question has shifted from “whether it can be sold” to becoming a lifeline for the new energy industry.

According to the new regulations that will come into effect in 2025, all newly added renewable energy generation projects across the country will completely cancel fixed electricity price subsidies and must participate in market trading, including:

• Medium to long-term contract trading: similar to “pre-sale electricity”, where power generation companies directly sign contracts with electricity consumption companies, locking in a certain period, price, and electricity volume;
• Spot market trading: According to real-time fluctuations in electricity supply and demand, electricity prices may change every 15 minutes;
• Auxiliary service market: Provides frequency modulation, voltage adjustment, backup and other 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 nationwide, such as the electricity trading center companies in Beijing, Guangzhou, Hangzhou, Xi'an, etc., which are responsible for market matching, power quantity confirmation, electricity price settlement, and more.

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

During the extreme heat period in the summer of 2024, the Guangdong electricity spot market experienced extreme fluctuations, with off-peak electricity prices dropping to 0.12 yuan/kWh and peak prices reaching as high as 1.21 yuan/kWh. Under this mechanism, if renewable energy projects can be flexibly scheduled (such as being equipped with energy storage), they can “store electricity at low prices and sell it at high prices,” gaining significant 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 sell at zero price during certain periods of curtailment.

As a result, more and more new energy companies are starting 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 income, 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 approximately 0.08-0.13 yuan/kWh, which serves as 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 generate “carbon asset” benefits. As of the end of 2024, the national carbon market price is about 70 yuan/ton CO₂, and each kilowatt-hour of green electricity reduces emissions by approximately 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, where they can reduce load during peak periods or feed electricity back to the grid to receive 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:

• Can I sell it for a good price?
• Do I have long-term buyers?
• Can I smooth out 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 “competing for quotas and relying on subsidies” has come to an end. In the future, new energy companies must possess financial thinking, market operation capabilities, and even manage electricity 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 is a co-game involving electricity as a medium, along with policies, markets, carbon rights, and finance.

Why is there abandoned electricity?

For power generation projects, the biggest risk has never been whether the power plant can be built or not, but rather whether it can be sold after it is built. And “abandoned electricity” is the most silent yet deadliest enemy in this process.

“Abandoned electricity” does not mean that you do not generate electricity, but rather that the electricity you produce has no users, no channels, and no scheduling flexibility, so it can only be wasted in vain. For a wind power or solar energy company, abandoned electricity not only means a direct 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 statistics from the National Energy Administration's Northwest Regulatory Bureau, the wind power curtailment rate in Xinjiang reached as high as 16.2% in 2020, while photovoltaic projects in Gansu and Qinghai also experienced curtailment rates exceeding 20%. Although by the end of 2024, this data had dropped to 2.9% and 2.6% respectively, curtailment remains an unavoidable reality for project developers in certain regions and time periods—especially during typical scenarios of high solar radiation and low load at noon, where a large amount of photovoltaic electricity is “pressed” by the scheduling system, meaning that it is produced but effectively wasted.

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

First, there is a physical bottleneck: in some resource concentration areas, the capacity of substations has already reached saturation, and the grid access has become the biggest limitation. Projects can be approved but cannot be connected 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 “restrict access” to avoid system fluctuations. Additionally, the delay in coordination for consumption between provinces results in many electricity resources, although theoretically “there is demand”, being unable to be “delivered” due to administrative processes and inter-provincial channels, ultimately leading to abandonment. On the market level, there is another set of lagging regulatory systems: the spot electricity market is still in its early stages, and the auxiliary service mechanism and price signal system are far from being perfected, while energy storage regulation and demand response mechanisms have not yet formed scale in most provinces.

There has actually been a response at the policy level.

Since 2021, the National Energy Administration has incorporated “new energy consumption capacity assessment” into the project approval prerequisites, requiring local governments to clarify local “carrying capacity indicators”. Moreover, several policies in the “14th Five-Year Plan” propose to promote the integration of source, grid, load, and storage, establish local load centers, improve spot market trading mechanisms, and enforce the configuration of energy storage systems to peak shaving and valley filling. At the same time, various local governments have implemented a “minimum consumption ratio” responsibility system, clarifying that the average annual utilization hours of new energy grid connection projects must not be lower than the national benchmark, thereby forcing project parties to consider adjustment measures in advance. Although these measures are heading in the right direction, there is still a significant lag in execution progress—many cities experiencing rapid increases in new energy installations still face widespread issues such as lagging grid transformation, slow energy storage construction, and unclear regional dispatch authority. The pace of institutional promotion and market cooperation remains mismatched.

More importantly, the abandonment of electricity is not simply an issue of “economic inefficiency,” but a conflict between resource space and institutional structure. The northwest is rich in electric power resources, but its development value depends on the inter-provincial and inter-regional power grid transmission and scheduling system, while China's current administrative divisions and market boundaries are highly fragmented. This results in a large amount of “technically available” 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 usable, institutionally unplaceable” electricity remains idle, a previously marginalized electricity consumption scenario—cryptocurrency mining—has emerged in recent years in a more underground and guerrilla-like form, and has regained a “structurally needed” real position in certain areas.

This is not a coincidence, but a natural product of certain structural gaps. Cryptocurrency mining, as a high-energy-consuming and low-interference immediate computing power activity, operates in a way that is naturally compatible with abandoned wind and solar power generation projects. Mining farms do not require stable scheduling guarantees, do not demand grid connectivity, and can even actively cooperate with scheduling to flatten peaks and fill valleys. More importantly, it can convert unwanted electricity into on-chain assets outside the market, thus forming a pathway for “redundant monetization.”

From a purely technical perspective, this is an improvement in energy efficiency; however, from a policy perspective, it is always 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 lack of transparency in the path of crypto assets, which can easily lead to regulatory issues such as illegal fundraising and cross-border arbitrage; the latter involves the industrial evaluation of “high energy consumption and low output,” which does not align with the current strategic focus on 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 uses, and designed as a special energy export mechanism within a compliant framework, it may still be able to become part of the policy.

This redesign is not without precedent. Internationally, countries such as Kazakhstan, Iran, and Georgia have already incorporated “computing power load” into their electricity balance systems, even using the method of “exchanging electricity for stablecoins” to guide mining farms to bring USDT or USDC and other digital assets to the country as a source of alternative foreign exchange reserves. In the energy structure of these countries, mining has been redefined as a “strategic adjustable load,” serving both the regulation of the power grid and the restructuring of the monetary system.

In China, while it may not be possible to imitate such a radical approach, could it be possible to partially, limitatively, and conditionally restore the existence rights of mining farms? Especially in a phase where the pressure of abandoned electricity continues and green power cannot be fully marketized in the short term, treating mining farms as a transitional mechanism for energy absorption and viewing Bitcoin as an on-chain asset reserve for closed-loop allocation might be more realistic than a one-size-fits-all exit and could better serve the country's long-term digital asset strategy.

This is not only a re-evaluation 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 purchased; however, in the on-chain world, the value of electricity may directly correspond to a segment of computing power, an asset, or a pathway to participate in the global market. As countries gradually build AI computing power infrastructure, promote the East Data West Computing project, and establish a digital yuan system, should there also be a technically neutral and compliant channel reserved in policy blueprints for a “on-chain energy monetization mechanism”?

Bitcoin mining may be China's first practical scenario of converting energy into digital assets “without intermediaries”—this issue is sensitive, complex, yet unavoidable.

Conclusion: The ownership of electricity is a real-world multiple-choice question.

China's power system is not lagging behind. Wind energy covers the Gobi Desert, sunlight shines on the sand dunes, and ultra-high voltage transmits electricity across thousands of miles, delivering power from the frontier to the high-rise buildings and data centers in 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 the most significant variable in the reorganization of the new financial order. Understanding the flow of “electricity” is, to some extent, understanding how systems set qualification boundaries. The endpoint of one kilowatt-hour is never determined naturally by the market; it hides countless decisions behind it. Electricity is not distributed evenly; it always flows to those who are permitted, to recognized scenarios, and to accepted narratives.

The core of the controversy surrounding Bitcoin mining has never been whether it consumes electricity, but 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 placed—there must be boundaries, conditions, interpretative rights, and regulatory standards.

This is not about the deregulation or lockdown of an industry, but rather an attitude issue of a system towards “unconventional loads.”

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

Reference materials

[1] China Government Network, “2024 National Electric 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, “Assessment 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 Power Dispatching Center, “North China Electric Power Spot Market Operation Bulletin (2024).”

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

[10] China Electricity Council, “2024 Annual Electricity Industry Report” Annex.

[11] National Energy Administration Northwest Supervision Bureau, “Northwest Wind and Solar Curtailed Situation Report”, December 2024.

[12] Energy Research Association, “Green Power Certificate Trading Pilot Observation Report”, January 2025.

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