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In 2021, when China banned bitcoin and other cryptocurrencies, crypto miners flocked to the United States in search of cheap electricity and looser regulations. In a few short years, the U.S.’s share of global crypto mining operations grew from 3.5 percent to 38 percent, forming the world’s largest crypto mining industry.
The impacts of this shift have not gone unnoticed. From New York to Kentucky to Texas, crypto mining warehouses have vastly increased local electricity demand to power their 24/7 computing operations. Their power use has stressed local grids, raised electricity bills for nearby residents, and kept once-defunct fossil fuel plants running. Yet to date, no one knows exactly how much electricity the U.S. crypto mining industry uses.
That’s about to change as federal officials launch the first comprehensive effort to collect data on cryptocurrency mining’s energy use. This week, the U.S. Energy Information Administration, an energy statistics arm of the federal Department of Energy, is requiring 82 commercial crypto miners to report how much energy they’re consuming. It’s the first survey in a new program aiming to shed light on an opaque industry by leveraging the agency’s unique authority to mandate energy use disclosure from large companies.
“This is nonpartisan data that’s collected from the miners themselves that no one else has,” said Mandy DeRoche, deputy managing attorney in the clean energy program at the environmental law nonprofit Earthjustice. “Understanding this data is the first step to understanding what we can do next.”
Cryptocurrencies like bitcoin bypass the need for financial institutions by adding data to a public ledger, or “blockchain,” to verify all transactions. To win money, computers using energy-intensive mining software race to confirm additions to the blockchain. According to initial estimates published by the U.S. Energy Information Administration last week, cryptocurrency mining could account for between 0.6 percent and 2.3 percent of total annual U.S. electricity use. To put that into perspective, in 2022, the entire state of Utah consumed about 0.8 percent of electricity consumed in the U.S. The state of Washington, home to nearly 8 million people, consumed 2.3 percent.
“It’s a tremendous amount of energy that we don’t have transparency into and that we don’t understand the details about,” DeRoche told Grist. One reason why it’s so difficult to track crypto mining’s energy use is the size of mining facilities, which can range from individual computers to giant warehouses. Smaller facilities are often exempt from local permitting requirements and frequently move to source cheaper electricity. Data on larger operations’ energy use is often hidden in private contracts with local utilities or tied up in litigation over individual facilities, said DeRoche.
The Energy Information Administration, or EIA, is in an unusually powerful position to require greater transparency from crypto miners. Under federal law, the agency can require any company engaged in “major energy consumption” to provide information on its power use. In July 2022 and February 2023, Democratic members of Congress including Senator Elizabeth Warren and Representative Rashida Tlaib sent letters to the Environmental Protection Agency and the Department of Energy, calling for the agencies to exercise that authority over crypto miners and “implement a mandatory disclosure regime as rapidly as possible.”
In late January, the EIA sent a letter to the White House Office of Management and Budget requesting emergency approval to survey crypto mining facilities, taking the first step in creating such a regime. The letter raised concerns that the price of bitcoin had increased 50 percent in the last three months, incentivizing more mining activity that could stress local power grids already under strain from cold weather and winter storms.
“Given the emerging and rapidly changing nature of this issue and because we cannot quantitatively assess the likelihood of public harm, we feel a sense of urgency to generate credible data that would provide insight into this unfolding issue,” EIA Administrator Joseph DeCarolis wrote in the letter. The White House approved the survey on January 26.
While its total electricity use is poorly understood, cryptocurrency mining’s impacts on utility bills and carbon pollution have been widely documented. A recent analysis by the energy consulting firm Wood Mackenzie found that bitcoin mining in Texas has already raised electricity costs for residents by $1.8 billion per year. In the winter of 2018, utility bills for residents in Plattsburgh, New York, rose by up to $300 as nearby bitcoin miners gobbled up low-cost hydropower, forcing the city to buy more expensive electricity elsewhere.
Crypto’s skyrocketing electricity demand has also revived previously shuttered fossil fuel power generators. Near Dresden, New York, the formerly shut-down Greenidge natural gas plant reopened in 2017 exclusively to power bitcoin mining. In Indiana, a coal-fired plant slated to power down in 2023 will now keep operating, and a crypto mining facility is setting up shop next door. AboutBit, the crypto mining startup that owns the facility, told the Indianapolis outlet IndyStar that the facility had nothing to do with the coal plant remaining open. DeRoche pointed to other gas plants in New York and Kentucky where crypto mining operations have created renewed demand for fossil fuels.
In Texas, crypto miners are also paid by the state’s power grid operator to shut down during heat waves and other periods of high demand. Since 2020, five facilities in Texas have made at least $60 million from the program, according to The New York Times. Those subsidies come without much payoff or jobs for local residents, DeRoche said: Even large mining operations employ at most only a few dozen people, the Times reported.
Bitcoin mining companies, however, maintain that they benefit local residents. Riot Platforms, one of the country’s biggest bitcoin mining firms, stated in a press release in September that the company “employs hundreds of Texans and is helping to revitalize communities that had experienced economic hardship.” Crypto mining businesses also dispute claims that they overuse energy resources. In a May 2022 letter to the Environmental Protection Agency, the Bitcoin Mining Council, a group representing bitcoin mining companies, made the dubious claim that “Bitcoin miners have no emissions whatsoever.” The group added, “Digital asset miners simply buy electricity that is made available to them on the open market, just the same as any industrial buyer.”
Policymakers are finally starting to catch up to the industry’s impacts on the climate and neighboring communities. In November 2022, the state of New York enacted a two-year moratorium on new crypto mining facilities that source power from fossil fuel plants.
The EIA’s surveys of crypto mining companies beginning this week will identify “the sources of electricity used to meet cryptocurrency mining demand,” DeCarolis, the EIA administrator, said in a press release. The data will be published on the EIA’s website later this year.
This article originally appeared in Grist at https://grist.org/technology/bitcoin-mining-uses-a-lot-of-energy-the-us-government-is-about-to-find-out-how-much/.
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