How Do Miners Pay for Electricity? Guide to Settlement Methods Across Mining Models

Have you ever wondered how much profit a mining machine actually brings in each day—and how much of it miners can really keep? Many beginners only calculate “how many coins they can mine per day,” but overlook the fact that electricity is the biggest expense. This blog walks you through how electricity costs are settled under different mining models and uses real-world examples to show how power bills shape miners’ bottom lines.

Electricity Is One of the Largest Costs in Mining

Globally, electricity has become one of the most discussed topics in Bitcoin mining. According to the Cambridge Bitcoin Electricity Consumption Index, annual Bitcoin mining consumes around 120 TWh, roughly equivalent to the entire power usage of Greece or Australia, respectively. Behind this massive consumption lies a simple truth: how miners pay for electricity directly determines whether they can stay profitable.

In mining operations, electricity often makes up 50% or more of total expenses. Buying the hardware is a one-time investment, but electricity is a daily recurring cost. If the electricity rate rises from $0.05/kWh to $0.08/kWh, the payback period of a miner may stretch out by months. Countries with high electricity costs, such as Germany or Japan, rarely see large-scale mining farms. On the other hand, regions with cheap electricity—like Texas in the U.S., Kazakhstan, and parts of Central Asia—have become hotspots for mining data centers. Electricity prices not only affect short-term profits but also determine whether miners can survive a bear market.

Common Electricity Payment Models for Miners

Self-Built Mining Data Center

Building a mining data center is the main option for large-scale miners. They lease or purchase land, sign contracts directly with utilities, and settle bills based on actual meter readings. The key advantage is low electricity rates; in regions with abundant resources, costs can drop to as low as $0.03/kWh. The downside is complexity—construction, cooling, compliance, and ongoing maintenance are all on the miner’s shoulders. For example, some farms in Texas lower costs by using cheap local wind power.

Hosting Services

Hosting is a fit for mid-sized or smaller miners without their own facilities. Miners place machines in a third-party data center, pay a hosting fee, and the provider handles daily operations. Fees are usually fixed, sometimes including electricity and maintenance, and some providers even accept stablecoin payments. The advantage is convenience; the trade-off is less transparency, and costs are usually higher than self-built farms. In 2023, many miners in Kazakhstan turned to hosting, but when government power regulations tightened, sudden rate hikes squeezed their profits.

Cloud Mining

Cloud mining targets investors who don’t own hardware. Platforms sell packaged hashrate, with electricity sometimes included in contracts and sometimes charged separately—often at a per-terahash(TH) daily rate. The advantage is low entry barriers, making it ideal for beginners to experience mining. The downside is less flexibility, since users cannot directly control machines. During the 2021 bull market, cloud mining contracts sold out quickly; in the bear market, however, electricity fees became a pressure point for many users.

Home Mining

Home mining works for hobbyists with just a few machines. Many manufacturers now sell smaller-scale rigs designed for home use. Users plug them into household circuits and pay local residential electricity bills monthly in fiat currency. The benefit is full control—miners can start or stop anytime. The downside is cost: U.S. residential electricity averages $0.16–0.20/kWh, much higher than industrial rates. Home mining is more about experimentation than large-scale profitability.

Electricity Pricing Models and Payment Cycles

Pricing Models

• Per kWh ($0.0x/kWh): The most common and transparent approach, used by most farms. The benefit is fairness—miners pay only for what they use. The drawback is mismatch if machines sit idle or run at partial load. For example, a 2MW farm not running at full capacity will still pay according to actual meter readings.
• Per TH/day ($/TH/day): Common in hosting or cloud mining contracts. The platform charges based on machine hashrate, shielding miners from usage fluctuations. It’s simple, but sometimes miners pay more than actual consumption.
• Flat monthly fee: Some platforms charge a fixed amount per machine (e.g., $200/month), regardless of usage. This is simple but risky—if machines go offline, miners still owe the full amount. This model is now less common, as many miners struggle to stay profitable under such terms.

Payment Cycles

• Monthly or quarterly billing: Common for traditional contracts or large farms.
• Prepaid balance: Used widely by hosting providers; miners top up and fees are deducted daily.
• Revenue deduction: Some cloud mining platforms deduct electricity directly from mining rewards.
• Crypto collateral: Certain newer platforms allow USDT or BTC deposits to cover electricity, offering flexibility but exposing miners to price volatility.

How Settlement Models Shape Mining Decisions

Different billing methods influence how miners operate. With per-kWh billing, miners are incentivized to run during off-peak hours, like at night, and scale down during expensive daytime rates. Hosting and cloud mining often don’t allow direct on/off control, leaving miners to accept fixed terms. Flat monthly fees push miners to run machines 24/7 to maximize value. Some platforms also offer smart optimization—automatically shutting down machines during price spikes—which helps reduce risks.

How to Estimate Electricity Costs

Single machine example
Take a Sealminer A2 Pro with 255 TH/s hashrate and 3,800W power draw. Running 24 hours consumes 91.2 kWh.

• At $0.05/kWh, daily electricity cost is $4.56.
• At $0.08/kWh, daily electricity cost is $7.30.

Scaling up to 20 machines
For 20 A2 Pro units (total 5,100 TH/s):

• Self-built farm ($0.03/kWh): approximately $54.7/day.
• Hosting service ($0.06/kWh + 2% operation fee): approximately $ 111.70/day.
• Cloud mining ($0.05/TH/day): about $255/day. While the per-unit rate looks higher, users don’t need to cover upfront hardware purchases, shipping, or deployment costs—and they avoid worrying about hardware payback cycles—making the overall entry much lower.
• Home mining ($0.16/kWh, U.S. residential average): about $291.8/day.

This comparison shows how electricity costs vary widely by model. Self-built farms deliver the lowest rates but require heavy investment and operational effort. Cloud mining, though billed by hashrate, offers simplicity and convenience, making it attractive for investors who want to start quickly. Home mining tends to be the most expensive, better suited for small-scale trials or hobbyists.

Choosing the Right Model to Optimize Returns

Electricity is the single most decisive factor in mining profitability. Self-built farms suit large-scale miners seeking the lowest costs. Hosting services appeal to miners without their own facilities. Cloud mining is a good starting point for beginners, thanks to its simplicity and lower entry barriers. Home self-mining, while less profitable, is an option for enthusiasts. Each model has trade-offs, but the ultimate goal is the same: transparent billing, stable cash flow, and maximized returns.

For more insights on mining farms, payback calculations, and crypto basics, visit the Bitdeer Learning Hub. We also provide one-stop mining farm construction services—click here to get started.