The Biden administration has announced that large-scale mining operations will be required to report the energy consumption of cryptocurrency mining. The Energy Information Administration (EIA) issued a press release considering the potential threat that increased energy consumption from crypto mining poses to the nation’s power grid and environment.
Miners consume as much energy as Washington state
According to EIA data, there are 137 known commercial miners in the country, and their cryptocurrency mining energy consumption amounts to 90 terawatt hours per year, or about 2.3% of the national energy consumption. Officials warn that this is the same percentage consumed in the entire state of Washington. In 2022, Utah used only her 0.8% of US electricity.
The energy consumption of crypto mining around the world is equivalent to that of Australia in 2023. EIA will conduct research to collect data with a particular focus on how crypto mining energy consumption is evolving, identify high-growth regions and quantify energy sources. consumption.
The findings will be used to investigate the energy impact of the country’s thriving crypto mining industry.
The US hosts the largest cryptocurrency mining industry
After China banned cryptocurrencies in 2021, crypto miners flocked to the United States in search of cheaper crypto mining energy consumption and looser regulations. Over the years, the country’s share of world mining operations has increased from 3.5% to 38%. This has made it the world’s largest cryptocurrency mining industry.
In mining hubs such as Texas, Florida, New York, and Kentucky, the demand for 24-hour operation has significantly increased the energy consumption of crypto mining.
The EIA is allowed to require companies involved in “significant energy consumption” to publish data on their use. In late January, the EIA sent a letter to the White House requesting emergency approval to inspect crypto mining facilities, taking the first step in creating such a regime. Officials wrote in the letter that the price of Bitcoin rose 50 percent in the last quarter, which could further increase the energy consumption of cryptocurrency mining. This could put additional pressure on power grids already strained by winter storms and cold weather.
This lawsuit doesn’t look good. To put things into perspective, some jurisdictions are even moving to ban crypto mining. Cryptocurrency mining companies, on the other hand, claim to benefit local residents. Leading Bitcoin miner Riot Platforms said in a press release that it is creating jobs for hundreds of Texans and helping to revive the struggling local economy.
The industry disputes claims that crypto mining is excessively energy-intensive. In a letter to the Environmental Protection Agency, the Bitcoin Mining Council claimed that mining does not produce any emissions. They said crypto miners are similar to other consumers who purchase electricity available on the open market.
Analyzing the pitfalls of crypto mining energy consumption reports
The first pitfall concerns reporting CO2e instead of CO2This is often the result of legacy issues with CRC reporting. CO2e stands for “carbon dioxide equivalent” and measures total greenhouse gas emissions. CO2 only provides information about carbon emissions and does not measure other greenhouse gases.
There is no clear methodology
EIA does not provide a methodology for determining energy consumption for cryptocurrency mining.. Examples of recognized methodologies include ISO 14064-1:2018, the corporate standard for GHG reporting protocols, and the Climate Disclosure Standards Committee Framework. These methodologies are based on important principles. For the GHGP, these are accuracy, consistency, relevance, transparency, and completeness. When making disclosures, you should demonstrate your application of these principles by making public statements about estimates, omissions and assumptions.
This begs the question of whether the government knows what it is asking miners to report. This reflects a recent dilemma in which the SEC has filed numerous lawsuits against virtual currency exchanges for illegally selling securities, but has not defined “security.”
There is no way to show efficiency
For transportation data, there is no conversion from fuel to energy consumption (kWh). moreover, No data on strength metrics to show efficiency over time (e.g. production units, CO2e per employee, footprint, etc.).
Crypto mining energy consumption reporting should be as complete and transparent as possible. The focus should move away from mandatory reporting and consider additional voluntary disclosures.
Downside of energy efficiency measures
Although it cannot be argued that the report has advantages, it also has some undisputed disadvantages. If deemed excessive, requirements will be imposed to reduce the energy consumption of cryptocurrency mining by increasing the energy efficiency of mining. Upgrading to more efficient appliances and systems is costlyadditional costs will be incurred for maintenance, installation and subsequent repairs.
After the Ethereum merger in 2022, the Ethereum mainnet reduced its carbon emissions by more than 99 percent. However, there are signs that the Ethereum merge is “priced in” and Ethereum is currently overvalued.
If energy efficiency is the most important goal regarding energy consumption in crypto mining, Mining performance may decrease. Thankfully, there may be unexpected ways to generate clean energy.
Finally, there may be Energy saving effect is lower than expected It depends on usage patterns, weather, and other factors that are difficult to account for in advance.