As cryptocurrency is plummeting in value, it is catching the eyes of a public that is facing rising consumer bills, while digital currency miners are being scrutinized because of their high energy demand. With media articles highlighting the huge amount of electricity needed to produce Bitcoin and other digital currencies, Americans are concerned that the electricity use could contribute to rising energy costs.
While not everyone is buying into virtual currency, particularly due to the recent plummet in value, the market cap of the 19,000 digital currencies in circulation is approximately $1.75 trillion, making it an extremely lucrative business. Crypto investment has steadily increased in recent years as more information about online money has spread, and the value of Bitcoin greatly increased throughout the pandemic.
Some of the biggest cryptocurrency companies in the U.S. use the same amount of electricity as every home in a big city such as Houston, around 150 terawatt-hours annually. One eye-catching title in 2019 stated that Bitcoin consumes around the same amount of electricity as the whole country of Switzerland. Now, Democratic lawmakers are worried crypto mining may not only be contributing to the rising utility costs being faced by consumers across the country, but could also be harming the environment.
The mining of digital currency requires the use of dedicated computers, which run continually solving complicated maths problems to produce new virtual coins. Since crypto mining was banned in China, the U.S. has become an international production hub and home to around one-third of the global computing power dedicated to mining bitcoin.
The report from a group of Democrats suggests that Bitcoin and other digital currencies account for a large number of carbon emissions due to their high electricity use, which is around 65 megatons of carbon dioxide a year. And their energy demand is continuing to increase as more crypto companies emerge, and more people worldwide invest in virtual currencies. Following the report, the politicians requested that the Environmental Protection Agency and the Department of Energy (DoE) require crypto producers to disclose their energy use and emissions output to improve the understanding of an industry that is widely overlooked by regulators.
The information came from seven of the biggest U.S. crypto companies, Stronghold, Greenidge, Bit Digital, Bitfury, Riot, BitDeer, and Marathon. However, little is known about the energy usage of all the crypto producers in the U.S. due to a lack of regulation on the highly fragmented industry. There is a severe lack of reporting required by crypto firms at present. This means lawmakers do not have a clear understanding of how much energy the industry uses or its environmental impact.
Joshua D. Rhodes from the Center on Global Energy Policy explains the crypto trend, “Bitcoin mining operations are in an arms race between time, the volume of miners, and the efficiency of the machines they use.” He added, “When it comes to Bitcoin’s energy use, it’s currently something of a ‘wildcatter’ market. The Texas grid operator ERCOT estimates that crypto miners may increase energy demand by up to 6 gigawatts by mid-2023, roughly the equivalent of adding another Houston to the grid.”
However, some crypto producers say they’re helping oil and gas firms to fight climate change by using waste gas from fossil fuel operations that would otherwise be flared. Bitcoin miners have been teaming up with oil firms in the last couple of years, offering to set up operations on onshore oilfields using carbon capture and storage (CCS) technologies to use waste gas for mining activities.
In New York, the state legislature has already passed a bill to ban the introduction of new crypto mining operations unless they are powered entirely by renewable energy. Moves such as this could help reduce the negative environmental impact of the industry on the environment. However, it would do little to alleviate its contribution to rising energy costs, which could harm consumers facing energy poverty.
Not to mention, some states simply do not have sufficient infrastructure to support the rapidly developing crypto sector. Earlier this month, Texas asked consumers to cut their energy usage during a heatwave to reduce the burden on the state’s aging grid system. And yet, crypto mining continues. And digital currency producers are expected to add a huge electrical load to the grid between now and 2026, around 27 gigawatts, which is a third of the grid’s current maximum capacity, according to the Electric Reliability Council of Texas (ERCOT).
Despite the fall in crypto prices in recent weeks, digital currency miners are still expanding activities as they expect investors to continue funding the production of Bitcoin and other virtual currencies. But consumers are growing increasingly concerned that crypto miners’ electricity usage could be driving up their energy costs. Not forgetting the burden it’s placing on an overwhelmed grid system and the potential harm it’s doing to the environment from the high carbon emissions. As lawmakers and the public place mounting pressure on the industry, it is only a matter of time before regulators catch up, and require miners to report their energy use and emissions to better control the sector.
Felicity Bradstock is a freelance writer specializing in Energy and Industry. She has a Master’s in International Development from the University of Birmingham, UK, and is now based in Mexico City.
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