Renewable Energy, The (Only) Way Forward for Cryptocurrency Mining

Recently, Tesla’s CEO Elon Musk announced that the company would suspend vehicle purchases using Bitcoin and will only resume once mining operations shift towards more sustainable energy sources. This has raised concerns over the rising energy usage of blockchains and cryptocurrency mining. Bitcoin and Ethereum, the two largest blockchains by market capitalization, rely on the proof of work (PoW) concept whereby miners compete to solve complex mathematical problems using graphics processing units (GPUs) or application-specific integrated circuits (ASICs). This process consumes substantial amounts of electricity. A rig with three GPUs can consume 1,000 watts of power or more when it's running, the equivalent of having a medium-size window AC unit turned on. Crypto mining businesses can have hundreds or even thousands of rigs in one location. Cambridge’s Center for Alternative Finance estimates the currently annualized electricity consumption of the Bitcoin network amounts to 145 TWh, which accounts for about 0.65% of total global electricity consumption. Other estimates put the network’s annualized electricity consumption much lower, closer to 75 TWh according to Digiconomist. With such a disparity, it shows the need for more standardized methods to estimate the energy consumption from cryptocurrency mining. However, the level of energy consumption from cryptocurrency mining undeniably will have a growing impact on the environment if alternative methods are not used, especially with the growing usage and implementation globally.

Currently, according to Cambridge, an average of 39% of PoW mining is powered by renewable energy, mainly hydroelectric energy. However, similar to estimating the energy consumption of cryptocurrency mining, a similar challenge is faced in determining the share of renewables in mining, particularly with the variable nature of renewables. The generation of renewable energy, such as hydroelectric energy, varies based on the season in a particular country — larger power capacity generation during the wet season as compared to the dry season. Another promising avenue for carbon neutral cryptocurrency mining is flared natural gas. Bitcoin miners from North Dakota to Siberia have been able to make use of this otherwise-wasted resource.

There has been some developments and progress in the growing shift to renewable energy for cryptocurrency mining. Trading house Mercuria has started working with Bitcoin producers to supply them with renewable energy in a bid to curb the high CO2 emissions associated with cryptocurrencies. A new Bitcoin Mining Council, including the leading Bitcoin miners in North America, has been set up to improve the sustainability of cryptocurrency by promoting energy usage transparency and to encourage miners to use renewable energy sources. Publicly listed crypto miner Argo also announced that it signed a new agreement called the Crypto Climate Accord (CAA), which aims to reach net-zero emissions from electricity consumption by 2030 and to reach net-zero greenhouse gas emissions by 2040. The agreement has collected 40 signatories, consisting of 20 key cryptocurrency companies.

The journey towards renewable energy still has some ways to go. For one, renewable energy at the current state is often not stable in its energy production. Solar energy, for example, produces a surplus of energy during the daytime but none during nighttime. In addition, battery technology at this point has not advanced to a level where it can hold an abundance of energy produced during daytime until nighttime. Renewable energy stations also tend to be located in rural regions with large land areas to build solar farms, hydroelectric dams, and wind farms. Similarly, battery technology lacks the ability to transport energy from the rural regions to urban city centers, where the bulk of energy demand resides.

As such, it is important for there to be cohesion between the renewable energy system, the battery technology, and cryptocurrency mining. Having a green grid interconnecting these elements can encourage crypto mining to gradually shift towards 100% renewable energy sources. Utility companies will thus be incentivized to scale their renewable energy capacity alongside the technological advancements in battery technology. This way of transitioning to clean energy not only provides enhanced benefits such as lower cost for miners, but also paves the way for other energy intensive applications to shift towards renewable energy as the main source of energy. Coupled with technological advances in GPU technology to make them more power efficient, the impact of crypto mining can potentially be more sustainable.