Crypto is here to save the grid. Or crash it.

By Jason Plautz | 02/16/2023 07:02 AM EST

Many cryptocurrency companies are eyeing new ways to minimize their electricity demand and become players in renewable energy.

Bitcoin clean energy stock photo


Like energy, cryptocurrency is subject to booms and busts — and last year was definitely a bust.

But with the value of bitcoin and other digital currencies beginning to rebound after plummeting in 2022, there are renewed concerns that cryptominers could wreak havoc on the electric grid and U.S. carbon-cutting plans.

That has prompted crypto companies to reframe their role on the grid, eyeing ways to both minimize power demand and boost ties to renewable energy. The industry is aware that a possible regulatory crackdown could halt the days of unfettered electricity use.


“This is an industry with a lot of ethical holes in it, and one of the biggest is the impact on the environment,” Erran Carmel, a technology professor at American University, said of cryptocurrency.

Cryptocurrency has long been branded a climate villain. Companies acquire virtual coins by solving a series of computational puzzles in a “mining” process that essentially requires a fleet of computers to be running for long hours. Depending on where those computers are located, the load may be met by natural gas or coal plants, delaying a transition to renewable energy and generating more climate-warming emissions.

According to a report from the White House Office of Science and Technology Policy, as of August 2022, total global electricity use for crypto was as high as 240 billion kilowatt-hours per year, more than the total electricity used in a year by Argentina.

In the United States — which hosts about a third of the world’s crypto operations — the industry accounted for between 0.9 percent to 1.7 percent of the country’s total electricity usage, higher than all residential lighting, the White House office found.

That sort of energy pull prompted New York Gov. Kathy Hochul (D) to sign legislation imposing a moratorium on new crypto mining in the state last year. Other state and local governments have placed their own restrictions on new crypto mining or imposed requirements that it run on renewable energy.

Restrictions that go too far could hurt the industry at a time when it is looking to reshape its energy story, said John Olsen, New York state lead for the Blockchain Association.

“Other areas of the country have embraced this technology and enabled the kind of out-of-the-box thinking where we don’t just rely on hydro or wind or solar, but have ways of curtailing emissions, capturing waste and even contributing to the overall health of the economy,” Olsen said. “A moratorium puts us a few steps back.”

For example, he said, some crypto mines have taken root in areas where renewable energy might go to waste, offering a load that can support large-scale projects. In Texas, bitcoin companies have shown that toggling their demand up and down can help stabilize prices on the grid.

The strategy isn’t just a regulatory dodge or good spin, said Joe Burnett, a mining analyst for bitcoin company Blockware Solutions. It’s also good business.

“If bitcoin miners are inefficient and nonprofitable, governments should let them fail,” Burnett said. “This industry has the potential to balance energy grids and help supply. And I think that’s a viable future for mining companies.”

The power dilemma

Crypto mining dipped throughout 2022, with the website estimating the industry’s energy use dropped more than 60 percent between January and December.

That reflects 2022’s so-called “crypto winter,” when prices crashed as a number of companies failed and investors pulled out of the volatile and still risky market.

The collapse of cryptocurrency exchange FTX Trading Ltd. in November 2022 after a liquidity crisis and allegations of fraud against CEO Sam Bankman-Fried marked a thud near the end of the year that further drove prices down and increased regulatory scrutiny.

With little reward, mining naturally went down. But activity was also dented by rising electricity and natural gas prices, said Joshua Rhodes, a research scientist at the University of Texas, Austin, who has consulted for crypto companies.

“The main cost of these systems is electricity. It’s basically a bunch of computers guessing at a particular number for trillions of guesses, which takes a lot of energy,” Rhodes said. “So as bitcoin prices fell, electricity prices went up. You’re getting squeezed from both sides.”

According to a study by analytics firm Hashrate Index — backed by mining company Luxor Technologies — 10 of the most popular states for cryptocurrency mines saw electricity prices rise between 2021 and 2022, led by a 43 percent increase in Georgia. That trend, the report says, likely contributed to the bankruptcy of Core Scientific and other cryptomining companies.

The report found that crypto companies in states with abundant hydropower and less natural gas saw the smallest price increases and had more market stability.

“Many miners learned a painful but important lesson in 2022: securing a low, long-term electricity price is vital to the mining business,” Hashrate Index said.

As bitcoin prices have ticked up from a low point in 2022, Hashrate Index found that the computing power behind bitcoin has also risen, hitting a record peak on Jan. 20.

That has coincided with increased regulatory attention from some states and countries.

Oregon lawmakers have proposed a bill that would require crypto miners and data centers to meet the state’s greenhouse gas reduction goals, including a 100 percent reduction by 2040. In Washington state, a new bill would require large loads served by municipal and public utilities to meet clean energy standards that currently apply to customers of investor-owned utilities.

Both states have seen an influx of crypto companies seeking low-cost, reliable hydropower. British Columbia and Manitoba in Canada have also implemented moratoria on new crypto connections.

Whether renewable requirements make a difference remains to be seen.

Take Missoula County in Montana, which in 2021 adopted new zoning rules mandating that crypto miners be powered with new renewable energy, either generated on site or purchased elsewhere. The rules came after the county saw a power drain and residential complaints from expanding operations by miner HyperBlock Inc., which set up shop there seeking out Montana’s relatively cheap power prices.

HyperBlock filed for bankruptcy in 2020 during a dip in bitcoin prices.

Since the rules went into effect, no new crypto companies have applied to come to Missoula County, said Jennie Dixon of the county’s Department of Planning, Development and Sustainability.

In a September report, the Office of Science and Technology Policy recommended that any policy on cryptocurrency consider its environmental and electricity impact and called for federal agencies to conduct reliability assessments for crypto mining and explore environmental standards.

The report also said that regulators could work with Congress on possible energy conservation standards for the industry.

The Office of Science and Technology Policy and the Department of Energy did not respond to requests for comment from E&E News about future regulations.

Environmental regulations have chased crypto miners around the globe. A large share of the industry was housed in China until 2021, when the country’s government cracked down on mining and cryptocurrency transactions in part because of environmental concerns.

Many companies relocated to coal-heavy Kazakhstan and the United States. A study published in the journal Joule found that, on the whole, the global industry used less renewable energy after that shift because of the power mix in the new locations.

American University’s Carmel said that as governments come to grips with the environmental impact of the industry, bitcoin miners are “drifting from country to country to find an unregulated environment.” Right now, he said, the United States offers a balance of unregulated sites and the potential for cheap power.

A path forward

On the other hand, some states are instead encouraging cryptocurrency miners to move in, eager to have an emerging technology take root there. And the miners say that despite the concerns elsewhere, they can be responsible — and beneficial — grid participants.

Wyoming lawmakers have considered legislation that would create deregulated power zones for large industrial customers, allowing them to operate off the regulated grid and get massive quantities of power at low prices. Supporters say that could further enable renewables to be built to support those operations, while detractors have warned it could weaken the business model for existing utilities.

Texas has actively recruited cryptocurrency miners, with at least 30 companies building operations there.

According to data from the Electric Reliability Council of Texas (ERCOT) — the grid operator covering about 90 percent of the state’s power load — cryptocurrency miners consumed about 477 megawatts of continuous consumption per day over a 291-day period in 2022. ERCOT estimates that 1 MW can power 200 homes during times of peak demand.

For a grid that saw widespread blackouts in 2021, adding a load of that size has raised reliability questions.

In December, ERCOT announced a voluntary program that would allow bitcoin miners to reduce power during high demand periods, building on a pilot launched last summer. That can reduce the grid’s demand during winter storms and heat waves, while also offering crypto mines a potential source of income by selling back power when prices are higher.

Rhodes, the Texas researcher, said his research shows that under certain conditions a flexible cryptocurrency industry could result in more renewables being added to the grid because they offer a low-cost source of power that would not need to run continuously.

But, he added, matching “controllable load with uncontrollable generation” would require companies to “be economically flexible.”

Blockware’s Burnett said that similar demand response programs could offer a responsible path forward for the mining industry, soaking up excess power from renewables and selling it during peak times.

“When you’re in demand response mode, you enable consumers to have power without paying these ridiculous prices,” Burnett said. “We’re talking about energy that would already be wasted during normal times that can be used to mine.”

On the flip side, University of Houston energy fellow Ed Hirs wrote in a Barron’s editorial that allowing large users to sell back to the grid amounted to “cronyism” that would drive up prices for other consumers.

Even with demand response, critics say that adding significant load to a national grid in the midst of an energy transition is likely to keep fossil fuel plants online longer.

Sustainable Bitcoin Protocol, a new company backed by major bitcoin miners, is seeking to put heft behind the environmental promise by offering transferrable assets representing coins mined with 100 percent clean power.

“We want to make sure there’s no greenwashing in bitcoin,” said Elliot David, Sustainable Bitcoin Protocol’s head of climate strategy and partnerships, alluding to the practice of making something appear more environmentally friendly than it is.

The company will use third-party platforms to track the energy sources going into a mining company, then offer a separate certificate similar to a renewable energy certificate to that company, which can be sold on the market. 

David said the company doesn’t just want to push existing miners to use renewables, but will eventually make the full industry climate positive as it expands.

“Bitcoin basically converts and monetizes electricity into a globally liquid currency,” he said. “So a place with high energy costs could use it to enable and unleash clean energy development. That’s why we want to maximize green sources.”

But those efforts can only be considered successful if you think that cryptocurrency mining is a necessity, said Carmel, the technology professor.

“On a micro level, crypto mining companies may use alternative energy sources … and may work on a dynamic basis on the grid, which is good. But on a macro level, we have a responsibility to reduce the environmental impact of any industry and of course any pollution,” Carmel said. “That forces you to consider the main question: Is there a higher purpose to crypto, or is this just a Las Vegas casino?”