Green Energy: How Will the Bitcoin Mining Industry Evolve?
Climate change resulting from carbon emissions is a significant problem of the modern era. Therefore, it is essential to ensure that green energy practices and sustainability are implemented. Renewable energy sources offer the best way to combat carbon emissions. This article will cover the adoption of green energy in Bitcoin mining so far and how it will likely evolve.
Index
A better approach to Bitcoin mining?
Green Energy and Bitcoin Mining
The Myth and Reality of Bitcoin Mining with Renewable Energy
Why is green Bitcoin mining important?
Renewable Energy Sources Making An Impact on Bitcoin Mining
Hydroelectric Energy
Solar Energy
Wind Energy
Waste Fuel
Geothermal Energy
Challenges of Green Energy Adoption
The Future of Bitcoin Mining with Green Energy
How Bitcoin Mining can Solve Green Energy Adoption Problems
Limitations of Bitcoin Mining with Green Energy
Government Policies affecting Bitcoin Mining with Green Energy
United States
El Salvador
Case Studies of Miners Using Green Energy to Mine Bitcoin
HODL Ranch
RIOT Blockchain
Crusoe Energy System
Greenidge Generation Plant
Scrubgrass Generating Power Plant
RSK Contributions to Bitcoin Mining with Green Energy
Merged Mining
A Better Approach to Bitcoin Mining?
Bitcoin mining requires energy – lots of it. However, there is no direct way to calculate exactly how much energy Bitcoin consumes every year. It can only be estimated from the consumption of commercially-available mining rigs and the network hash rate.
The Cambridge Bitcoin Electricity Consumption Index estimates that Bitcoin mining consumes over 136.38 TWh of electricity annually. That is more than the total energy consumption of the UAE (United Arab Emirates). Digiconomist currently places the estimation at 204.50 TWh per year.
The major challenge of Bitcoin mining with non-renewable energy sources is the carbon footprint that originates from the power plants for mining.
Green Energy and Bitcoin Mining
The Myth and Reality of Bitcoin Mining with Renewable Energy
The common myth that comes to mind when we talk about renewable energy is that is quite expensive. However, that´s not quite accurate. In fact, according to an industry paper by the Bitcoin Clean Energy Initiative (BCEI), green sources like wind and solar energy are already cheaper than fossil fuel sources like coal and natural gas.
In the past decade, the levelized cost of energy (LCOE) for wind and solar energy has fallen 71% and 90% respectively. Currently, the unsubsidized costs for solar energy are between 3 – 4 cents per kWh and wind energy costs are 2 – 5 cents per kWh. While geothermal and hydroelectric energy is around 3 – 5 cents per kWh, the average LCOE for fossil fuels like natural gas and coal is 5 – 7 cents.
Additionally, the cost of renewable energy sources is expected to get cheaper with new technology and innovations.
Why is Green Bitcoin Mining Important?
Green Energy will reduce the Carbon Footprint of Bitcoin Mining
Green energy bitcoin mining is expected to help clean up the carbon footprint of mining bitcoins. Currently, the carbon footprint of Bitcoin is estimated at 114.06 Million Tons of Carbon dioxide – comparable to that of the Czech Republic.
Green Energy is Cheap and Sustainable
Another significant advantage of green energy is that it is always available, reusable & sustainable which translates into lower costs. Fossil fuels, as we know them, will not always be around due to scarcity. According to Stanford MAHB, at current reserve estimates, oil might likely end in 2052, gas in 2060 and coal in 2090.
Renewable Energy Sources Making An Impact On Bitcoin Mining
Hydroelectric Energy Sources
According to the 2nd Global Benchmarking Study, hydroelectric energy is the most used renewable energy source for Bitcoin mining. This is mainly because regions with substantial green power sources usually overlap with areas with an abundance of unused low-cost hydroelectric power.
China used to be the dominant mining region because of the abundance of hydroelectric energy but since the ban, Bitcoin miners had to switch to other regions like the United States that support Bitcoin mining.
Hydroelectric energy varies due to season: the supply is subjected to seasonal changes. Typically, supply reduces during the dry season. Therefore, hydroelectric power might need to be supplemented during these times.
Solar Energy
The landscape of solar energy has changed over the past few decades as its levelized cost of energy (LCOE) has fallen rapidly following Moore’s law-type trajectory. Solar energy has experienced an average annual growth rate of 42% in the past decade and costs have dropped by a factor of 10. Regions like UAE and Portugal have extremely low energy prices for example.
Texas is positioning itself in the United States as a major Green Bitcoin Mining hub with the largest crypto mining operation in America. Bitcoin miners act as shock absorbers for the over-supply of green energy in the State. Like hydroelectric power, solar energy production varies daily and it is also affected by seasonal changes.
Wind Energy
Like solar energy, the wind energy landscape has also changed as over the past 10 years wind energy has seen a 15% growth rate annually in the United States. Currently, wind energy is the largest source of renewable energy in the United States and the second-largest in the world. The Roscoe Wind Farm near Roscoe, Texas, is one of the largest capacity wind farms in the world.
California is also another state positioning itself to compete in the wind energy scene. The Alta Wind Energy Center is currently the largest windfarm in the world. The wind energy source is twice as efficient as solar energy and is one of the cheapest sources.
Waste Fuel
Generation of electricity with waste fuel involves using coal waste (gob or garbage of bituminous) and natural gas flare to generate power. The problem with waste fuel like gob is that it might not make profitable fuel on a large scale. However, it is useful for for Bitcoin mining as the output is good enough for POW.
An example is the Scrubgrass Generating Power plant in Pennsylvania, United States. The generating plant turns the gob piles in Pennsylvania into electricity to power computers for Bitcoin mining. The power plant produces around 85,000 kW of energy per day, 80% of which is used for mining bitcoins.
Geothermal Energy
Geothermal energy involves using heat from the earth’s subsurface to produce energy to run mining operations. The renewable energy source is only feasible in areas with active volcanoes or geothermal regions like Iceland.
El Salvador is positioning itself to be a leader on this regard. The country plans to take advantage of its several active volcanoes to generate energy for Bitcoin mining.
Challenges of the Adoption of Green Energy
The biggest challenge for widespread adoption of green energy sources is intermittency. Intermittency is when an energy source is not constant. Most green energy sources – sun, wind, and hydroelectric – can only generate energy during specific periods.
For example, a solar plant will only generate power during the day when there is sun. These energy sources are also affected by seasonal changes; the peak generation period of solar energy is during the summer, while hydroelectric energy peaks during wet seasons.
Intermittency implies an oversupply during peak production periods and little to no supply at other times. This challenge is often worsened by grid congestion. Grid congestion occurs when a grid’s transmission lines reach their maximum capacity. Similar to highway traffic congestion – oversupply of power causes grid congestion.
Grid congestion often occurs because solar and wind energy farms are mostly built in rural areas with lots of sun and wind. The problem is that these areas have little nearby load and transmission capacity.
Also, the outdated electricity grids are often unable to handle surges during peak production periods. This turns into delayed solar and wind capacity. For example, there are over 200 GW of delayed solar and wind capacity in just three grid interconnection queues in the United States.
Interconnection queues are wind and solar projects with financing and developers ready but waiting for approval to supply energy to transmission grids. This often increases energy prices even though there is an excess energy supply.
The Future of Bitcoin Mining with Green Energy
How Bitcoin mining can help the widespread adoption of Green Energy
Incorporating Bitcoin mining into existing renewable projects can help green energy developers easily solve the oversupply/excess energy production problem. For Bitcoin miners, that means cheap energy to run their computers. Bitcoin mining can also encourage more investments in the renewable energy industry helping to solve the problem of intermittency.
For miners, this may lead to the sizable transformation and complete adoption of green energy in Bitcoin mining. Currently, it is estimated that there is only around 15.81 GW of mining capacity globally. Cheaper clean energy will lead to an increase in the mining capacity. For example, deploying miners at even 20% with the 200GW of the delayed solar and wind projects mentioned in the last section will result in 40GW of new mining capacity. That is a 100% increase in mining capacity.
Limitations of Mining Bitcoin with Green Energy
The major limitation of mining Bitcoin with green energy is the intermittency problem. Miners will have to find alternative sources of electricity during periods of low production. Another problem is that miners have to be close to energy generation plants for now due to insufficient storage capacity. Utility-scale batteries are too expensive to use for importing energy and there´s also the issue of how long they can store energy without dissipation.
To solve all these problems, there is a need to develop increased transmission capacity and energy storage methods. Lithium-ion batteries may be the next breakthrough as they continue to fall down their cost curve and may become the most critical technology for solving the energy storage problem and overcoming current limitations.
Government Policies affecting Bitcoin Mining with Green Energy
Several countries are actively promoting the adoption of green energy to reduce their carbon footprint:
United States
After China’s ban on Bitcoin mining, the United States quickly filled China’s position to become the leading Bitcoin mining country as 35.4% of the world’s hash rate is currently from the United States. Most states in the United States offer renewable-energy tax credits.
As for Bitcoin mining with green energy, several states are also actively partnering with Bitcoin mining companies to help tackle the energy oversupply problem. Texas is active in this scene. The State plans to expand its power generation capacity with 16 GW of new solar and wind energy projects in the works. Under normal conditions, this is way more than what the State needs.
So, to avoid grid overload, it is essential to find ways to release energy. This is where Bitcoin mining companies become helpful. Miners buy up the excess energy when it is not needed and then shut down their rigs during peak demands to release power back into the grid.
Miners enter into a demand-response contract with the Texas power grid whereby they agree to shut down their rigs at a moment’s notice when there is excess demand in return for rebates. The miners get energy at a subsidized rate (below 2 cents per kWh) which significantly reduces production rates.
El Salvador
El Salvador is also actively exploring powering Bitcoin mining with geothermal energy from volcanoes. The pilot project is located near El Salvador’s Tecapa volcano and powers around 300 computers for Bitcoin mining.
President Bukele believes the country’s geothermal resources can help reduce the massive carbon footprint. He plans to build a Bitcoin city in the south-eastern region of La Union to take advantage of the Conchagua volcano’s geothermal energy for mining.
Case Studies of Miners Using Green Energy to Mine Bitcoin
HODL Ranch
The HODL Ranch is a 150 MW capacity crypto-mining data center near Midland, West Texas. The Ranch is the first large-scale crypto mining operation that taps into the grid’s massive energy generated by the wind and solar farms (generates close to 16 GW).
Riot Blockchain
The publicly-traded company, Riot Blockchain, operates the largest Bitcoin mining operation in the United States, located in Rockdale, Northeast of Austin. The mining operation is close to the giant interconnection that moves 5000 MW of grid power. The mining rig taps directly into this interconnection to draw 300MW, which it uses to power 120,000 high-speed mining computers.
Crusoe Energy System
The Crusoe Energy System has raised over $250 million to start Bitcoin mining operations in the middle of remote oil-and-gas fields across six states including Texas, North Dakota and New Mexico. The mining operation will be powered by natural gas (waste fuel) from oil operations that would have otherwise burned off or flared.
Greenidge Generation Plant
The Greenidge Generation plant is located on the banks of Lake Seneca in New York. The plant produces about 80MW of power with hydroelectric energy, 50% of which is used for Bitcoin mining.
Scrubgrass Generating Power Plant
Scrubgrass Generating Power Plant is located in Venango County, north of Pittsburgh, Pennsylvania. The power plant runs on gob (bituminous garbage) waste fuel from coal pits. The plant produces around 85,000 KW and 80% is used for mining Bitcoin.
RSK Contributions to Bitcoin Mining with Green Energy
Merged Mining
The RSK network offers miners the opportunity to use the Bitcoin blockchain to mine RBTC using the Auxiliary Proof-of-Work (AuxPoW) consensus mechanism without further hardware requirements. This helps miner save energy because they can mine more than one crypto asset with the same resources thanks to merged mining.