If I'm going to set up a mining operation, wouldn't it make financial sense to set it up near a hydroelectric plant where my electric cost is 1/10th of what it is in my home in PA? Any cost reduction is an increase in profit, so there's still motivation to reduce costs, a pretty large one.
The 2 are pretty much linked for each "generation" of miner.
So in order to continue spending $27 million per day at the cheaper electricity rate, they would need to buy more miners, which would produce more bitcoin, which means more profit.
So their whole incentive is based around the price of electricity, and the cheaper they can get it for, the more money they are going to make.
No, Bitcoin is produced at a fixed rate. If more power goes into mining, difficulty increases to compensate.
If I have 2x as much hashpower as I did yesterday, i'll get roughly 2x as much bitcoin as a reward (which over time will go down as the global hashrate goes up).
In other words I'll get a larger percentage of global bitcoin production, which is fixed.
One of the largest US mining operations are said to be located in Seattle where there is dirt cheap hydroelectric. So are many of the Chinese operations.
It's not as mich of a zero sum game as it might seem, it's more of a race to the bottom.
If your competitors are running on cheaper electric, you'd better find some cheaper electric or they are going to increase the difficulty to the point that it's not profitable for you.