Bitcoin mining is often sold as a danger to the environment, but what if BTC could be a tool to enhance the transition to renewable energies?
The global popularity of Bitcoin
BTC $43,316 has resulted in its network energy consumption sitting at 147.3 terawatt-hours per year as of Jan. 19, 2024.
This puts the network close to the yearly average energy consumption of countries such as Ukraine, Malaysia and Poland, according to the University of Cambridge.
This nation-state level of electricity consumption, no small part of which is generated by fossil fuels, has created a narrative of Bitcoin mining being harmful to the environment. Its carbon footprint, high energy demand and water consumption may be well-founded metrics but are often used to show only one side of the coin.
Furthermore, the Bitcoin mining industry has been shifting toward alternative energy sources. On Jan. 18, 2024, Bitcoin mining sustainable energy usage hit a new all-time high of 54.5%, according to the Bitcoin ESG Forecast.
The adoption of clean energy by Bitcoin miners benefits the global climate. On top of that, Bitcoin mining has become an ideal candidate to boost the transition to renewable energies and offer promising potential revenue for the green energy industry.
Bitcoin mining can fund early-stage renewable projects
A group of scientists from Cornell University in the United States determined that establishing Bitcoin mining operations in strategic locations could diminish the environmental footprint of cryptocurrencies by serving as revenue that can be directed toward future investments in renewable energy projects.
In the October 2023 study, researchers concluded that monetizing the excess power collected by renewable energy could earn hundreds of millions of dollars thanks to Bitcoin mining.
They stated that, in the U.S. alone, there is substantial revenue potential during the pre-commercial development phase of wind or solar farms. In this phase, the farms are generating electricity but not yet integrated into the broader grid.
Developers could recover millions of dollars, which can then be invested in future renewable projects.
Texas has the highest potential, according to the study, with 32 planned renewable projects that could generate a combined profit of $47 million by mining Bitcoin during pre-commercial operations.
Bitcoin mining can further provide a flexible customer to wind and solar energy installations, the peak production times of which may not always correspond to periods of peak demand.
Additionally, Bitcoin mining could give renewable utilities “the ability to play the arbitrage between electricity prices and Bitcoin prices,” according to investment firm ARK Invest in a 2021 report.
Margot Paez, a fellow at the Bitcoin Policy Institute and a Bitcoin mining sustainability and environmental consultant, told Cointelegraph:
“There’s often a supply-demand mismatch that causes excess production of renewable power. Bitcoin mining acts as an off-taker that pays for the electricity that would otherwise be wasted. In turn, Bitcoin mining benefits from using renewable energy instead of fossil fuels, improving the network’s carbon footprint. It’s a win-win.”
Bitcoin mining is location-agnostic
Bitcoin mining can move to wherever an excess of energy is produced, making it effectively location-agnostic. As researcher Fengqi You at the Cornell Atkinson Center for Sustainability mentioned in the study mentioned above:
“Profitability of a mining system hinges on periods of steady energy availability since renewable energy sources can vary significantly. […] Therefore, it is important to site the mining farm strategically to maximize productivity.”
Jaran Mellerud, co-founder and chief mining strategist at Bitcoin mining company Hashlabs, told Cointelegraph that there are two types of renewable energy sources that Bitcoin miners can use.
The first are variable renewable energy sources, such as wind and solar. Mining using these sources is challenging and often entails low up-time and constant interruption of operations.
The second energy source Bitcoin miners can use, per Mellerud, is baseload renewable sources like hydro and geothermal. Mining using these sources is much simpler, as they are more stable and can offer a higher up-time than wind or solar.
Ben Gagnon, chief mining officer at Bitcoin mining company Bitfarms, told Cointelegraph:
“We believe in the long run hydroelectricity should be one of the most cost-effective sources of power for many years to come, so we don’t need to choose between being sustainable and being cost-effective.”
Mellerud recounted a real case scenario where Hashlabs implemented a Bitcoin mining facility in Ethiopia powered solely by renewable energy sources. Ethiopian electricity generation consists of 94% hydro, 5% wind and 1% solar, with the country’s 25% electricity surplus expected to grow as new hydroelectric power plants open.
“Ethiopia’s utility is monetizing some of this excessively generated electricity by selling it to us while waiting for the country’s electricity consumption to catch up,” Mellerud said.
For the Bitcoin miners, this activity is a win-win scenario, as they are helping the utility finance new electrical infrastructure buildouts for the country’s growing population.
Regulation hinders renewable energy transition through Bitcoin mining
The researchers from Cornell University highlight one significant problem for the Bitcoin mining industry to thrive: regulation. Bitcoin miner Mellerud confirmed this continuous worry within the industry:
“The biggest hurdle of Bitcoin mining is regulations and associated political risk.”
The Cornell study made a policy recommendation to provide economic rewards for environmentally responsible cryptocurrency mining, such as carbon credits for avoided emissions: “These rewards can act as an incentive for miners to adopt clean energy sources, which can lead to combined positive effects on climate change mitigation, improved renewable power capacity and additional profits during pre-commercial operation of wind or solar farms.”
This approach radically differs from the attempt to apply taxes to crypto miners by the administration of U.S. President Joe Biden.
Bitfarms’ Gagnon doesn’t oppose the carbon credits proposal but pointed out that Bitcoin’s economic incentive is already enough for the industry to prosper:
“Bitcoin mining is the only economic incentive on the planet to voluntarily reduce energy waste and emissions not funded by a subsidy. It’s the only one. There is no need for a government policy to incentivize this behavior! Bitcoin mining is the incentive to do just that!”
Energy usage is not bad for humankind
In Gagnon’s opinion, “using energy is not a bad thing.” He thinks that the “ability to harness energy is a cornerstone of society and human progress.”
Gagnon believes that humankind has advanced as the ability to harness more energy evolved. For the Bitcoin miner, energy “is fundamentally what enables the world we live in today.”
Humans have benefited from the ability to find and utilize energy for all recorded time. Gagnon highlighted some critical milestones of human evolution where new energy sources had an important role: from the discovery of fire and burning wood to mills powered by rivers, whale oil for candlelight, coal for the industrialization of society, and the forging of steel to build railroads and skyscrapers to the discovery of the atom and nuclear power.
Mellerud believes that “bigger countries on a state level soon will become more friendly toward mining and understand its potential for energy optimization.”
To reach this goal, Gagnon believes the Bitcoin industry must work on “education and outreach to demonstrate the positive benefits that Bitcoin mining operations,” adding:
“Bitcoin mining is a tremendous force for good and a powerful story to be told. It just hasn’t been heard yet by enough people, but as Bitcoin mining continues to prove itself as a force for good, it should inevitably be embraced.”
As for Cornell University’s conclusion, a shift in perspective is needed: Bitcoin should be viewed not merely as an energy consumer but as a facilitator for more efficient and sustainable energy use.
Both sides of the coin need to be considered, especially when the final objective is to improve global climate conditions.
Source: Cointelegraph
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