Is Bitcoin Inherently Bad for the Environment?

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Woman’s hands holding a sheet of paper with Bitcoin symbol in the middle of nature with a river … [+] flowing near the forest. Eco crypto and digital currency concept.

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Bitcoin and other cryptocurrencies have an energy and environmental problem. But if it’s done right, it might be possible to channel all that energy into something that’s good for the planet.

Crypto environmental issues

A fierce debate over the environmental impacts of cryptocurrencies, such as bitcoin, is gaining momentum. Bitcoin consumes a lot of energy. This energy consumption is increasing and consumes as much energy every year as entire countries, such as Finland, Malaysia or Sweden. Although bitcoin is not the only industry that consumes as much energy as entire countries, for example concrete consumes more energy than India, the energy consumed by both sectors comes with pollution. associated, including carbon emissions.

Even transactions with bitcoin consume a lot of energy, with the average transaction consuming over 1,700 kWh of electricity, almost double the monthly amount used by the average American household. However, there were ways to transact in bitcoin using much less energy.

Exacerbating this problem, some bitcoin mining operations have partnered with struggling fossil fuel power plants, keeping some power plants that would otherwise have retired online, increasing overall carbon emissions. Some utilities even went straight into the bitcoin game.

Large bitcoin mining operations are also moving, as China, the country that previously had the largest bitcoin mining industry, recently banned both mining and transactions of cryptocurrency. This change has moved bitcoin mining operations to places like Texas and potentially Alberta, Canada.

All other things being equal, bitcoin operations that co-locate and use fossil fuels that would otherwise have remained in the ground will increase emissions.

Some are considering using stranded natural gas that would otherwise have been flared, which in the absence of methane venting and flaring regulations would make using natural gas for bitcoin carbon neutral at best. However, this is a stretch, and making natural gas more valuable at the wellhead could further deter the development of pipelines that would have brought the gas to market.

However, co-locating bitcoin mining operations with zero-carbon resources, such as nuclear, hydropower, wind and solar, could help reduce carbon emissions associated with mining itself. same. Co-location could also give a financial boost to power plants that might be able to sell their electricity at a higher price to miners rather than to the grid when demand and prices are low. This type of hybrid power plant / mine could even make unprofitable projects economical.

Taking it a step further, it is also possible that the bitcoin mines themselves provide benefits directly to the grid and, if mined intelligently, even lead to an overall reduction in carbon emissions.

A positive impact on the network?

A new report, commissioned by Lancium, and full disclosure, written by the author of this article, shows how large flexible loads, like data centers or bitcoin mines, could be useful to the network, if exploited in a smart way.

The study simulated the evolution of the Electric Reliability Council of Texas (ERCOT), the network that serves most of Texas, until 2030 under several scenarios: 1) a base case without data center / bitcoin expansion mining, 2) a case with 5 GW of inflexible data centers / bitcoin mines (still active) by 2030, 3) a scenario with 5 GW of slightly flexible datacenters deployed by 2030 and 4) a scenario with 5 GW of highly flexible data centers deployed by 2030.

The inflexible scenario added a significant base load to the ERCOT system. This growth has resulted in the deployment of more power plant capacity than the baseline scenario, including more wind, natural gas and solar power. This increase in energy consumption also resulted in an additional 7.9 million metric tonnes of carbon emissions compared to the baseline scenario by 2030.

Figure showing the ERCOT capacity changes for each scenario considered in the report.

Lancium and IdeaSmiths LLC

However, the flexible scenarios were more interesting. The two flexible scenarios actually see more wind and less natural gas deployed than the base scenario and the inflexible scenarios. This change is due to the fact that data centers / mines have been programmed to reduce their power consumption by certain percentages when electricity prices reach certain levels. In total, the third scenario saw data centers / mines reduce their load by about 14% of the year.

Figure illustrating the potential shipment of responsive flexible data centers at prices.

Lancium and IdeaSmiths LLC

The flexibility of the data centers / mines in the last two scenarios allowed the model to deploy different levels of technology than the base or rigid case. The model actually built more renewables as it could use the flexibility of data centers / mines to compensate for fluctuations in renewable energy production. This flexibility has also made it possible to reduce carbon emissions compared to the baseline scenario.

Figure illustrating the evolution of carbon emissions in 2030, compared to the baseline, as a function of … [+] scenario is chosen.

Lancium and IdeaSmiths LLC.

For an additional load to result in a reduction in total carbon emissions, the additional energy consumption must be offset by more zero carbon energy. In the data center / flexible mine cases, the amount of power generated from wind and solar was more than the base case and the amount generated from natural gas was less.

In general, the flexibility of data centers / mines shifts their load towards a more valuable energy than electricity, which corresponds better to renewable energies. This is because renewables are great for delivering large amounts of energy, but have less of the ability to always deliver constant capacity or power.

In concept, flexible data centers / mines are similar to electrification of transportation or heating with the ability to control the times that chargers and heaters operate. However, it is likely that data centers / mines could offer large flexible load levels concentrated in a smaller number of locations which could facilitate their administration.

Grid decarbonization studies often assume high levels of flexible demand, and much of this flexibility often comes from diffuse sources, such as smart thermostats and electric vehicle charging. Although this analysis did not seek to satisfy any carbon policy, it illustrates the potential carbon benefits of high levels of flexible demand coupled with an electricity market capable of integrating it.

Mining and trading cryptocurrencies, such as bitcoin, present challenges when it comes to energy and emissions, but new research shows that there are possible ways to alleviate some of these problems if miners of cryptocurrency are ready to operate in such a way as to complete the deployment of more low carbon emissions. energy.

The author of this article does not currently own or operate any cryptocurrency.

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