By Thomas Shewchuck, Evertas Head of Underwriting
Due to its energy consumption, Bitcoin mining has remained a controversial topic. To objectively assess the cryptocurrency’s environmental impact, it’s crucial to understand the basics of how Bitcoin is mined.
Bitcoin’s Energy Consumption
The energy consumption of Bitcoin mining is substantial, with daily power demand estimated at about 20.08 gigawatt hours as of early 2024. This consumption translates to an annual rate of approximately 176.02 terawatt hours– more than Egypt, Malaysia and Poland, according to the Cambridge Centre for Alternative Finance. (The Cambridge Bitcoin Electricity Consumption Index offers more data, updated every 24 hours.)
These statistics, though, are more nuanced than have been reported in the press. A report from the Lawrence Berkeley National Laboratory indicates many of the comparisons and popular statistics on the topic of Bitcoin mining energy consumption and C02 impact are just plain wrong. They ignore rapidly increasing energy efficiency of mining hardware demanded by the industry (the primary operating cost of a cryptocurrency mining facility is expenditure for electricity), and the positive impacts of mining on renewable energy.
The U.S. Energy Information Administration released the report “Tracking electricity consumption from U.S. cryptocurrency mining operations” in February of this year. In it, they say that the “annual electricity use from cryptocurrency mining probably represents from 0.6% to 2.3% of U.S. electricity consumption,” but also that “methods for estimating energy use in cryptocurrency mining” are challenged by a number of factors.
Renewable Energy in Mining
The volume of energy consumed is only part of the story. The Bitcoin mining sector is increasingly using renewable energy sources. According to Daniel Batten, a co-founder of methane mitigation fund CH4 Capital, by January 2024, 54.5% of Bitcoin mining was powered by sustainable energy, showcasing a shift towards greener practices. Batten, who sees “Bitcoin as a world-leading ESG Asset,” has been documenting his Bitcoin ESG Forecast research online, and in the third issue of the Forecast, he asserts that “Bitcoin Mining is currently the only major global industry that is powered mostly by sustainable energy.”
Bitcoin Indirectly Benefits Renewable Energy
In addition to running on sustainable energy, Bitcoin can be financially beneficial to wind and solar farms during their pre-commercial development phase.
Consider a strip mall with a big box store as its anchor tenant. The real estate owner makes their margin on smaller unit tenants, and those tenants enjoy more foot traffic from the big box store’s patrons. Similarly, Bitcoin miners act as “anchor tenants” for wind and solar farm energy operations. Energy production operators can sell their power to the miners at any time, given the miners’ 24/7 power demand. When wind and solar farms have produced excess energy beyond demand from miners, that energy can be sold to the grid (if transmission infrastructure exists) at a higher rate, improving their profit margins.
A recent study led by Cornell researchers looked at planned renewable energy projects across the U.S. and calculated each project’s potential to profit from Bitcoin mining when they have begun generating electricity but haven’t yet been integrated into the grid. The study, titled “From Mining to Mitigation: How Bitcoin Can Support Renewable Energy Development and Climate Action,” says that “states like Texas have the maximum potential, with 32 planned renewable installations that could generate combined profits of $47M using Bitcoin mining during precommercial operation.”
Despite its high energy consumption, Bitcoin mining is making strides towards sustainability. The industry’s shift to renewable energy not only reduces its environmental footprint but also supports the growth of the green energy sector. The conscious efforts of miners to move towards an environmentally sustainable model of electricity consumption could contribute to crypto’s global adoption as a regulated and reliable currency.