Crypto’s Effects on Green Energy
In a previous post, we looked at the debate surrounding Bitcoin’s environmental impact. Among the knocks on the energy-intensive mining process was this positive take: Crypto might actually cause more renewable energy to be produced. Since Bitcoin miners need lots of energy (and wish to maximize profits), they are always looking for the cheapest ways to power their servers. Many are already using renewable energy sources, but if green-energy providers can improve their networks enough to be cheaper than traditional energy sources, even more Bitcoin miners could follow. The resulting steady demand and increased cash flow would drive innovation in the renewable market. In this post, we look at how much renewable energy crypto currently consumes, how much more it might consume as miners relocate, and whether or not it might inspire even more to be produced.
Between 29% and 56% of Bitcoin Mining Is Powered by Renewables
We know that as much as 80% of BTC’s energy consumption comes from mining. How much of that energy is renewable, however, is a little harder to quantify. Often, organizations rely on surveys of a small percentage of miners and extrapolate from there. After one such survey, the Bitcoin Mining Council, a voluntary forum of Bitcoin miners, recently reported that about 56% of the industry’s energy came from sustainable sources. There’s obviously some bias there, however, which explains why statistics from other sources are slightly less rosy. The University of Cambridge’s Centre for Alternative Finance, for example, has reported the number at 29% over the last few years. That’s a wide gap, to be sure, but even the smaller figure is not insignificant—especially when you consider the current mass exodus from China as the government cracks down on mining. Those miners could find themselves in locations with a lot more renewable energy.
According to Cambridge’s most recent report, published in September 2020, the median percentage of renewable energy used by crypto is 66% in North America and 70% in Europe. That’s compared to only 25% in the Asia-Pacific. As more and more miners flee China for the West, they will presumably have more renewable energy options—especially as state and local governments in places like Texas and Florida, which get an increasing amount of their energy from renewables, offer incentives to set up shop there. If those options are less expensive than traditional sources (already, the costs of solar and wind can compete with those of coal and natural gas, though there still needs to be major changes in infrastructure and investment), the percentage of Bitcoin mining powered by green energy is bound to increase.
Bitcoin Mining Can Help Green Energy Providers Maximize Production
There are two big ways that Bitcoin production can encourage renewable energy sources to produce even more renewable energy:
A lot of renewable energy’s potential currently goes to waste. A significant portion of renewables are produced in rural locations that can’t reach enough consumers, and batteries are not yet capable of storing all the excess. Because of this, a hydropower plant in rural Washington state, for instance, doesn’t always create as much energy as it could. But when BTC miners, who are nimble enough to operate from nearly anywhere, move near renewable plants, those plants can increase output and know they have consistent buyers.
Another issue hydro, solar, and wind power currently struggle with is variable production that doesn’t often align with how people use energy. For instance, solar produces the most power during the daytime (when the sun is out, no surprise) and wind typically produces the most power later at night, albeit intermittently. But people use the most power in the evenings, when neither of those sources is peaking, so there is little incentive for providers to expand capacity or improve the network. A recent white paper laid out a vision for how BTC mining could fix this. Since renewables producers would have a potentially limitless buyer of excess power, they wouldn’t have to wait for better transmission and storage technology to arrive before being able to sell more energy to consumers. And the more energy they sell, the more money they have to invest in improving. This could also lead to cheaper renewable energy available to Bitcoin miners—making the industry more green while also leading to more mining, which would lead to more money for energy companies to invest in renewable technology. It wouldn’t be only the miners who would benefit, either: This could also lead to an enormous increase in the energy available to the grid whenever it’s needed, like during the outages in Texas in February. The public could be safer with such a system.
There are skeptics, of course. Some people point out that, beyond the members of decarbonization efforts like the Crypto Climate Accord, miners really don’t care where their energy comes from, as long as it’s cheap. This means that the very same forces that could drive the faster creation of renewables could instead revive fossil-fuel plants—which has already happened in places like Montana and New York. Instead of driving innovation in renewable energy, they say, crypto could actually end up undermining it. The authors of that white paper acknowledged that the mutually beneficial relationship between miners and renewable energy producers that they’ve envisioned “wouldn’t be entirely green from day one.” But, they argue, “if solar and wind become even less expensive and constitute an increasingly large portion” of the overall power supply, the percentage of renewable power used by miners would continue to increase.
Bitcoin’s Influence on Renewable Energy Is Still Mostly Potential
Right now, renewables are on track to make up a larger portion of America’s energy mix than natural gas by 2050. And that is, as even one skeptic has noted, without BTC’s help. But we can’t help but wonder: If renewable energy is doing so well without crypto’s help, how much better could it do with it?