News
Cryptocurrency companies must now report their energy consumption to the government
The Biden administration is now requiring some cryptocurrency producers to report their energy use following growing concerns that the growing industry could pose a threat to national power grids and exacerbate climate change.
The Energy Information Administration announced last week which will begin collecting energy usage data from more than 130 “identified commercial cryptocurrency miners” operating in the United States. The survey, which began this week, aims to get a sense of how the industry’s energy demand is evolving and in which areas of the country cryptocurrencies are growing the fastest.
“As cryptocurrency mining has increased in the United States, concerns have grown about the energy-intensive nature of the business and its effects on the U.S. electric power sector,” the EIA said in a new relationship, following the announcement. “Concerns expressed to the EIA include strains on the electricity grid during periods of peak demand, potential increases in electricity prices, as well as effects on energy-related carbon dioxide emissions.”
Digital currencies like bitcoin are produced – or “mined” – by massive data centers that essentially solve complex equations to add new tokens to an online network known as a blockchain. As currencies have grown in popularity, they have required ever-increasing amounts of computing power to draw more and more electricity from the grid.
The new EIA report found that the world’s cryptocurrency miners used as much electricity as the entire country of Australia in 2023, accounting for up to 1% of global electricity demand. In the United States, the report said, just 137 mining facilities were responsible for up to 2.3% of the nation’s total electricity demand last year, about the same as demand in the state of West Virginia.
Since most of the electricity generated in the world, including in the United States, comes from burning fossil fuels, anything that increases energy demand also increases the amount of carbon dioxide released into the atmosphere. Clean energy advocacy group RMI estimates that U.S. cryptocurrency operations they release 25 to 50 million tons of CO2 every year. This is the same amount as the annual diesel emissions of the US rail industry.
It’s a particularly alarming problem in the United States, where cryptocurrency operations are growing rapidly. According to the EIA report, which cites calculations from the UK-based Cambridge Judge Business School, nearly 38% of all bitcoin, the most popular type of cryptocurrency, was mined in the US in 2022, up from just 3, 4% in 2020. The EIA has now identified at least 137 commercial-scale cryptocurrency mining facilities in 21 states, largely clustered in Texas, Georgia, and New York.
It also appears that the expansion of crypto operations is increasing the cost of energy in some states. In 2018, a small town in upstate New York welcomed a cryptocurrency mining company only to see residents’ bills skyrocket, prompting local lawmakers to temporarily ban the company’s operations. “I’ve heard a lot of complaints about electric bills going up $100 or $200,” Colin Read, who was mayor of Plattsburgh at the time, he told Vice. “You can understand why people are angry.”
It’s a similar situation in Texas, said Ben Hertz-Shargel, who leads grid electrification research at global energy consultancy Wood Mackenzie. As well as energy-intensive cryptocurrency mining that puts a strain on the state already fragile energy networkhe said, ratepayers are also seeing rising electricity costs.
“Nearly every hour of the year, energy demand from bitcoin mines drives up the real-time cost of electricity in Texas, which is determined every 15 minutes based on supply and demand,” Hertz said. Shargel in an email. “This increases electricity costs by $1.8 billion per year for homeowners and businesses in the state, a 4.7% increase over what they currently pay.”
Crypto companies could mitigate some of these problems, including their impact on climate change, by developing their own renewable energy systems to reduce their dependence on the grid, Hertz-Shargel said, similar to what large corporations are doing technologies like Google and Amazon. But not only are crypto companies not doing that, she said, but they are also setting up shop next to existing renewable energy plants, tapping into clean energy that would otherwise go to nearby homes and businesses.
“Every unit of clean energy consumed by the local wind or solar farm is simply diverted to another customer,” he said. “The net effect is that overall energy demand on the grid increases, which must be met through increased deployment of expensive, high-emitting fossil generation.”
There are some cryptocurrency companies that have found ways to dramatically reduce their energy footprint. In 2022, the cryptocurrency company Ethereum announced a software update which has managed to reduce carbon emissions from its operations by more than 99%.
Hertz-Shargel said other companies should follow Ethereum’s lead or they could see even more government regulation in the future.
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Today’s indicator
9
This is the number of consecutive months since May that have recorded all-time highs for average temperature, scientists said this week after preliminary data showed that January’s record had also been broken. The news comes after 2023 was declared the warmest year on record.
Kristoffer Tigue
Journalist, New York
Kristoffer Tigue is a staff writer at Inside Climate News, covering climate issues in the Midwest. He previously wrote the twice-weekly newsletter, Today’s Climate, and helped lead ICN’s national coverage of environmental justice. His work has been published in Reuters, Scientific American, Mother Jones, HuffPost and many others. Tigue holds a master’s degree in journalism from the Missouri School of Journalism.