The Biden administration is now requiring some cryptocurrency producers to report their energy consumption following growing concerns that the growing industry could pose a threat to the nation's power grids and exacerbate climate change.
Energy Information Administration announced last week that it would begin collecting energy consumption data from more than 130 “identified commercial cryptocurrency miners” operating in the United States. The survey, which began this week, aims to get a sense of how the sector's energy demand is changing and where in the country cryptocurrency operations are growing the fastest.
“As cryptocurrency mining has grown in the United States, concerns have increased about the energy-intensive nature of this activity and its effects on the American electric power sector,” said the EIA in a press release. a new report, following the announcement. “Concerns expressed to the EIA include strains on the electricity grid during periods of peak demand, the possibility of higher electricity prices, as well as the effects on carbon dioxide emissions linked to electricity. 'energy. »
Digital currencies like bitcoin are produced – or “mined” – by huge data centers that essentially solve complex equations to add new tokens to an online network called a blockchain. As currencies grew in popularity, they required more and more computing power, which required more and more electricity from the grid.
The new EIA report reveals that the world's cryptocurrency miners used as much electricity in 2023 as the entire country of Australia, accounting for up to 1% of global electricity demand. In the United States, according to the report, just 137 mining facilities were responsible for 2.3 percent of the nation's total electricity demand last year, about the same demand as the state of West Virginia. .
Since most of the electricity generated around the world, including in the United States, comes from burning fossil fuels, anything that increases energy demand also increases the amount of carbon dioxide released into the world. atmosphere. Clean energy advocacy group RMI believes U.S. cryptocurrency operations release 25 to 50 million tonnes of CO2 every year. That's the same amount as the U.S. rail industry's annual diesel emissions.
This is a particularly alarming problem in the United States, where cryptocurrency operations are growing rapidly. According to the EIA report, which cites calculations from the UK-based Cambridge Judge Business School, nearly 38% of all bitcoins – the most popular type of cryptocurrency – were mined in the United States in 2022, up from just 3.4% in 2020. The EIA has now identified at least 137 commercial-scale cryptocurrency mining facilities across 21 states, largely clustered in Texas, Georgia and New York.
The expansion of crypto operations also appears to increase the cost of energy in some states. In 2018, a small town in upstate New York welcomed a crypto mining company to town, but residents' utility bills skyrocketed, prompting local lawmakers to temporarily ban mining. operations of the company. “I heard a lot of complaints that electric bills were up $100 or $200,” said Colin Read, who was then mayor of Plattsburgh. told Vice. “You can understand why people are upset. »
The situation is similar in Texas, said Ben Hertz-Shargel, who leads research on grid electrification at global energy consulting firm Wood Mackenzie. In addition to energy-intensive cryptocurrency mining, which puts a strain on the state an already fragile energy networkHe said ratepayers are also seeing increased electricity costs.
“Nearly every hour of the year, the demand for energy from Bitcoin mines drives up the real-time cost of electricity in Texas, which is determined every 15 minutes based on supply and demand ” Hertz-Shargel said in an email. “This increases electricity costs by $1.8 billion per year for homeowners and businesses across the state, an increase of 4.7 percent over what they currently pay.”
Crypto companies could alleviate some of these issues, including their impact on climate change, by developing their own renewable energy systems to reduce their reliance on the grid, Hertz-Shargel said, similar to what big tech companies like Google and Amazon. But not only are crypto companies not doing this, he said, they are setting up shop next to existing renewable energy installations, drawing clean energy that would otherwise go to homes and businesses near.
“Every unit of clean energy consumed by the local wind or solar farm is simply diverted from another customer,” he said. “The net effect is that the overall demand for electricity on the grid increases, which must be met by the increased dispatch of expensive, high-emissions fossil generation. »
Some cryptocurrency companies have found ways to significantly reduce their energy footprint. In 2022, crypto company Ethereum announced a software update which has successfully reduced carbon emissions from its mining operations by more than 99 percent.
Hertz-Shargel said other companies should follow Ethereum's lead or they could see even more government regulation in the future.
This story was originally published on Inside climate news.