Crypto boom a boon for electricity providers, but questionable for climate

One billion dollars are flowing in digital currency. And the energy-intensive operations needed to create and store bitcoins have illuminated energy demand, a potential blessing for the region’s slow-growing utility companies.

North Dakota, rich in electricity, aims to become a cryptographic center. Even municipal service companies in Brainerd and Glencoe, Minnesota, are taking advantage of bitcoin production.

A new cryptocurrency operation in Jamestown, ND, served by Minnesota’s Otter Tail Power, will easily take out twice as much electricity as the entire city. The encryption center immediately became Otter Tail’s second largest customer and may eventually double in size.

“We’ve been in constant contact to add new ones,” said Tim Rogelstad, president of Fergus Falls-based Otter Tail. “The question we’re struggling with is, ‘What can we accommodate?'”

However, the rapid expansion of cryptocurrency has a problem.

If utilities do not properly manage the cryptic voracious electric appetite, they run the risk of charging taxpayers higher costs. And the U.S. grid, like much of the rest of the world, is still anchored in climate-eroding fossil fuels.

This means that the rapid expansion of cryptography is exacerbating climate change, say industry critics. “The question is, to what extent?” said Alex de Vries, an economist and data scientist from the Netherlands.

On its Digiconomist website, de Vries estimates that bitcoin’s carbon footprint is the same as in the Czech Republic. In financial terms, a bitcoin transaction emits both carbon dioxide and 2.7 million Visa credit card settlements.

The crypto mining industry – companies that produce bitcoins and host cryptocurrency operations – says it is increasingly looking for wind and solar energy.

“It’s very rare when there is no renewable energy generation,” said Dave Perrill, CEO of Eden Prairie-based Compute North, which houses cryptographic mining centers, including Nebraska and Texas. “Environmental and social factors are very important to our customers, and they are very important to us.”

Still, cryptocurrencies can’t bet on inherently variable wind or solar power: their computers work day and night in relentless competition to coin digital currency.

27 trillion-piece puzzles

Cryptocurrency mining companies deploy an arsenal of computers to solve a mathematical problem, with a cryptocurrency reward as a reward.

“It’s like a jigsaw puzzle with 27 trillion pieces and a flaw,” said Vivian Fang, a professor of accounting at the Carlson School of Management at the University of Minnesota.

There are thousands of cryptocurrencies, but the most widely produced is bitcoin.

Proponents of her case have been working to make the actual transcript of this statement available online.

Cryptocurrency speculators have coined fortunes. But its use in everyday trade is still limited. For skeptics, cryptocurrency is a financial means for Internet criminals and, at worst, a kind of Ponzi scheme.

Whatever the opinion, the main method of cryptographic mining, called “working test”, consumes huge amounts of electricity.

“The job test is a race for computing power,” Fang said. The more hardware, the greater the chance that a cryptographic miner will reach a payday.

Electricity is by far the largest operating cost for cryptographic mining companies. And the slow power industry, whose sales have long been limited by energy conservation, could use the business.

When Dallas-based Applied Blockchain opened its cryptographic mining operation in Jamestown earlier this year, it was only led by Enbridge, which needs energy to propel Canadian oil through Minnesota pipelines, as Otter Tail’s largest customer. .

The cryptographic electricity boom is advancing rapidly. Otter Tail, a listed company with 133,000 customers in Minnesota and Dakotas, first met with Applied Blockchain last July, Rogelstad said. They made a deal in August.

“We’re used to trading in months and years, and they’re used to trading in seconds and minutes,” he said.

The Applied Blockchain will use 100 megawatts of power almost continuously, or about 10% of Otter Tail’s maximum electricity demand. Utility and Applied talk about doubling that power consumption.

For smaller utilities, the impact of cryptography may be even greater.

Two cryptographic mining operations, totaling 70 megawatts, are planned for Brainerd; together they would almost double the maximum electricity demand for the city’s municipal service. A smaller cryptographic project in Glencoe would roughly double the electricity usage of your municipal business.

Minnesota entities want to share the cryptographic benefit

Minnesota’s electricity markets are generally not as attractive as other states, “said Perrill of Compute North, which sets cryptographic power offerings.” Energy costs are too high. “

North Dakota’s economy is better and the state is courting cryptographic miners, even through tax exemptions on data center equipment. In January, the state announced a $ 1.9 billion cryptocurrency center near Williston that would consume up to 700 megawatts of electricity.

North Dakota is one of the leading producers of wind energy in the country. But its electrical system is grounded in five large coal-fired power plants. Otter Tail owns parts of two of them, although it is ceding its stake in one and adding significant amounts of renewable energy.

The Grand Forks-based Minnkota Power Cooperative, which serves northwestern Minnesota, has its roots in coal. It generates electricity for a 100-megawatt cryptographic mining center that opened in Grand Forks late last year.

Minnakota and other North Dakota power producers have plans to equip their coal-fired power plants with technology to “capture” carbon emissions. But the technology is expensive and largely untested in coal-fired power plants.

The use of natural gas and coal by Crypto, the main U.S. fuels for electricity generation, respectively, led Ben Jones, a professor of economics at the University of New Mexico, to study the effects of cryptographic mining on emissions. carbon and other pollutants.

Jones and two other researchers found that $ 1 of the value of bitcoin created in 2018 was responsible for 49 cents in climate and health damage in the US.

“Bitcoin is advancing to decarbonization the same way we all move, slowly,” Jones said.

Jones and de Vries said the crypto industry has effectively withdrawn from renewables after it was banned last year in hydropower-rich China. The United States is now the world leader in bitcoin mining, followed by Kazakhstan, which weighs coal.

After China launched cryptography, the share of renewable energy in bitcoin mining fell from about 41% in 2020 to 25% last August, according to a recent article co-written by de Vries in the scientific journal Joule.

The Bitcoin Mining Council, a trading group, disputes such numbers. In a survey of its members, it concluded that sustainable energy accounted for almost 60% of bitcoin production in the fourth quarter of 2021.

There is another method of cryptographic mining called “participation testing” that does not depend on gross computing power, so it consumes much less electricity, but has not yet been widely implemented.

Utilities say they are protecting taxpayers

Plattsburgh, upstate New York, has ample, cheap hydroelectric power from the St. Lawrence River, making it a magnet for cryptographic miners.

But during a cold period of 2018, the demand for energy, driven by cryptography, exceeded the allotted supply, forcing Plattsburgh to buy expensive electricity in the spot market. Residential customers have seen temporary increases in their bills.

Minnesota utilities say they have structured their cryptographic power contracts to prevent taxpayers from being deceived.

Otter Tail traditionally needs a continuous supply of power to customers at all times. But it can limit electricity to Applied Blockchain through what is called an “interruptible” power contract.

A large user such as a cryptographic mining center can get a particularly low rate provided that their power can be turned off if the network is stressed, such as due to high demand for electricity in the summer or storm damage.

Brainerd and Glencoe municipal service companies also have discontinued power contracts with cryptographic customers. Those cities, as well as Otter Tail, also say they have enough existing capacity to accommodate the new demand from cryptocurrencies.

In Brainerd and Glencoe, municipal service companies engaged cryptographic miners in substations that had been built years ago to improve network reliability and prepare for economic growth. Municipal energy directors in both cities say existing taxpayers will not pay any additional costs for cryptography.

“There is absolutely no negative impact on our other customers,” said Dave Meyer, CEO of Glencoe Light & Power. “Otherwise, I wouldn’t have chased him.”

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