After China banned Bitcoin and other cryptocurrencies in 2021, crypto miners flocked to the United States in search of cheap electricity and relaxed regulations. Within a few years, the US share in the world’s cryptocurrency mining business increased from his 3.5% to 38%, forming the world’s largest cryptocurrency mining industry.
The impact of this change cannot be ignored. From New York to Kentucky to Texas, crypto mining warehouses power 24/7 computing operations, significantly increasing local electricity demand. Their electricity use strains local power grids, increases electricity bills for neighbors, and keeps once-decommissioned fossil fuel plants open. To date, no one knows exactly how much electricity the U.S. cryptocurrency mining industry uses.
That’s about to change, as federal authorities launch the first comprehensive effort to collect data on crypto mining’s energy use. The U.S. Energy Information Administration, the energy statistics arm of the federal Department of Energy, this week asked 82 commercial cryptocurrency miners to report how much energy they consume. This is the first study in a new program aimed at shedding light on an opaque industry by leveraging the agency’s unique power to require large companies to disclose their energy usage.
“This is bipartisan data from the miners themselves that no one else has,” said Mandy DeRoche, deputy chief counsel for clean energy programs at the environmental law nonprofit Earthjustice. Stated. “Understanding this data is the first step to understanding what can be done next.”
Cryptocurrencies like Bitcoin circumvent the need for financial institutions by adding data to a public ledger or “blockchain” to verify every transaction. To earn money, computers using energy-intensive mining software compete to confirm additions to the blockchain. Cryptocurrency mining could account for 0.6% to 2.3% of total annual electricity use in the United States, according to initial estimates released last week by the U.S. Energy Information Administration. To put this into perspective, in 2022, the entire state of Utah consumed about 0.8 percent of the electricity consumed in the United States. Washington state, home to about 8 million people, consumed 2.3 percent of her.
“It’s a huge amount of energy, no transparency, no understanding of the details,” DeRoche told Grist. One reason it’s so difficult to track energy usage in cryptocurrency mining, he says, is the large scale of mining facilities, from individual computers to huge warehouses. Smaller facilities are often exempt from local permitting requirements and often migrate to obtain cheaper power. Desroches said data about large operations’ energy use is often hidden in private contracts with local power companies or tied up in lawsuits over individual facilities.
The Energy Information Administration (EIA) is in a very strong position to demand greater transparency from crypto miners. Under federal law, authorities can require companies involved in “significant energy consumption” to provide information about their electricity usage. In July 2022 and February 2023, Democratic members of Congress, including Sen. Elizabeth Warren and Rep. Rashida Tlaib, sent letters to the Environmental Protection Agency and the Department of Energy, asking the agencies to enforce their policies against crypto miners. He called on the government to exercise its authority and “introduce a compulsory disclosure system.” as soon as possible. ”
In late January, the EIA sent a letter to the White House Office of Management and Budget requesting emergency authorization to investigate cryptocurrency mining facilities, taking the first step toward creating such a structure. The letter says the price of Bitcoin has risen 50% in the past three months, potentially encouraging further mining activity and straining local power grids already under strain from cold snaps and winter storms. raised concerns.
“Given the emerging and rapidly changing nature of this issue and the inability to quantitatively assess the potential for public harm, we believe that reliable “We feel a sense of urgency to generate data,” EIA Director Joseph DeCarolis wrote. letter. The White House approved the investigation on January 26th.
Although little is known about total electricity usage, the impact of crypto mining on utility bills and carbon pollution has been widely documented. A recent analysis by energy consulting firm Wood Mackenzie found that Bitcoin mining in Texas is already raising electricity bills for residents by $1.8 billion annually. In the winter of 2018, utility bills for residents of Plattsburgh, New York, rose by up to $300 as nearby Bitcoin miners gobbled up low-cost hydroelectric power, forcing the city to purchase more expensive power elsewhere. I had no choice but to do it.
The surge in crypto electricity demand has also brought back fossil fuel generators that were previously shut down. The previously shuttered Greenwich Natural Gas Plant near Dresden, New York, was reopened in 2017 exclusively for Bitcoin mining. In Indiana, a coal-fired power plant scheduled to shut down in 2023 is still operating, and a cryptocurrency mining facility has opened next door. Aboutbit, the cryptocurrency mining startup that owns the facility, told IndyStar in Indianapolis that the facility has nothing to do with keeping the coal-fired power plant open. DeRoche pointed to other gas plants in New York and Kentucky where crypto mining operations are creating new demand for fossil fuels.
In Texas, cryptocurrency miners are also paid by the state’s power grid operator to shut down during heat waves and other periods of high demand. Since 2020, five facilities in Texas have earned at least $60 million from the program, according to the New York Times. Desroches said these subsidies don’t bring much in return or jobs for locals, and even large-scale mining operations only employ a few dozen people at most, the Times reported.
However, Bitcoin mining companies claim they are benefiting local residents. Riot Platforms, one of the nation’s largest bitcoin mining companies, said in a September press release that the company “employs hundreds of Texans and helps revitalize communities that have experienced economic hardship.” “There is,” he said. Cryptocurrency mining companies also dispute claims that they are overusing energy resources. In a May 2022 letter to the Environmental Protection Agency, the Bitcoin Mining Council, an organization representing Bitcoin mining companies, made the dubious claim that “Bitcoin miners produce no emissions.” went. “Digital asset miners simply purchase electricity that is available on the open market, just like ordinary industrial buyers,” the group added.
Policymakers are finally beginning to understand the industry’s impact on the climate and neighboring communities. In November 2022, New York state enacted a two-year moratorium on new cryptocurrency mining facilities powered by fossil fuel plants.
EIA’s investigation into crypto mining companies, which begins this week, will identify “power sources used to meet crypto mining demand,” EIA administrator De Carolis said in a press release. The data will be published on the EIA website later this year.