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Unpacking Renewable Digital Currency Mining
Last month I had the pleasure to attend the annual American Renewable Energy Day (AREDAY) conference in Snowmass, Colorado. Like many energy-focused conferences around the world, AREDAY convened a series of panels and keynotes that explored the role of blockchain and related technologies in the energy sector.
The interests of the energy blockchain companies on stage ranged from transactive energy to soil remediation to improving energy and water access for women in the developing world. The audience's enthusiasm for all things blockchain was palpable.
Unique among the conferences I have attended thus far, AREDAY featured a digital currency mining company: Hut 8 Mining. The representative from Hut 8 gave a virtual tour of a bitcoin mining facility and talked about the process in some detail. The presentation gave the audience a rare look into a secretive industry, but it also included two claims worth unpacking.
Are Fossil Fuel-Based Digital Currency Mining Companies Losing Ground?
Claim 1: Proof of Work and energy consumption shouldn't be a concern because mining companies who don't use renewables are priced out.
The idea here is that renewables, particularly hydro and geothermal, can produce electricity at low costs that fossil resources can't match. Spending less on electricity, which is a significant fraction of miners' costs, allows companies to invest more in hardware that helps them outcompete other miners for revenue.
This is true in some areas where renewable generation is widely available. For example, Hut 8 Mining is based in Canada, which gets about 57% of its electricity from hydro. Digital currency mining is increasingly prevalent in the northwestern US for the same reason. However, it's worth noting that regulatory changes could easily force miners into parts of the world where the cheapest electricity is not renewable.
It is also important to note that digital currency mining isn't really green unless it's using surplus renewable energy. The roughly 92 TWh of electricity demand from mining companies displaces power from consumers who would otherwise have used it to run their homes and businesses; these customers then turn to whatever electricity sources are available, renewable or not.
Does the Renewable Economy Stand to Benefit from Digital Currency Mining?
Claim 2: Digital currency mining stimulates the renewable economy by increasing demand for large-scale renewables.
I find this claim doubtful. The renewables that can most reliably produce electricity within the range attractive to miners are large-scale operations. Thankfully, I have yet to hear of a dam built for the express purpose of powering miners. Solar is still most cost-effective in sun-drenched regions that also tend to have hot climates—factors which aren’t ideal for miners.
It isn't a great idea to build new capacity to fuel a business that's essentially programmed to implode over the next 5-10 years. Large mining farms are likely to go out of business or move over that timeframe, and utilities who expanded their generation assets to account for their transient demand run the risk of being left with stranded assets.
Digital Currency Mining: Green, or Greenwashed?
While those two claims aren’t completely false, they are at best misleading. Digital currency mining can be sustainable, in the environmental if not the business sense, but only if the operation is using power that would otherwise go to waste. And if mining is helping to incentivize renewables, it could still lead new capacity to be built where it isn’t needed. In short, as with all technologies, there are benefits and there are costs—we need to acknowledge both.