From upstate New York hydroelectric plants to volcanoes in El Salvador, some Bitcoin miners are looking for cheap energy—just as long as it’s renewable.
Bitcoin has earned a notorious reputation for its carbon emissions due to the network's energy use, which resulted in a series of tweets in May by Tesla CEO Elon Musk, who said his electric car company would no longer accept Bitcoin for payments because of environmental concerns surrounding the use of fossil fuels to mine the asset. U.S. lawmakers, like Sen. Elizabeth Warren, have also criticized the energy expenditure of the cryptocurrency.
They have a point. To process transactions on the Bitcoin blockchain, miners—which can be individuals or companies—need to solve complex puzzles using powerful computers. This uses electricity. A lot of it.
The latest figures from Cambridge University’s Bitcoin Electricity Consumption Index (BECI) estimate that the Bitcoin network currently uses more energy annually than the whole of the Philippines, at 97.7 TWh (terawatt hours—a unit of energy equal to outputting one trillion watts for one hour).
Most Bitcoin mining happened in China until recently, much of it using coal-fired power. The Chinese government has since cracked down on miners, leading to an exodus out of the country and into places like Texas.
Amid these global shifts and the fiery debate over the environmental impact of cryptocurrencies, “green” Bitcoin mining is in. A group of major Bitcoin miners have even formed a Bitcoin Mining Council to promote the industry’s use of renewables, a move that was initially spurred by Elon Musk although he currently has no involvement.
Nishant Sharma, the head of BlocksBridge Consulting, a PR consultancy for Bitcoin mining operations, said in an interview that every Bitcoin mining operation in the U.S. and Canada that he is aware of is now either offsetting carbon emissions or actively trying to use more renewable energy.
“It has now become a trend for every company to have a green mining hook in their press releases,” he said.
Bitcoin is actually energy agnostic: many miners seek out the most profitable arrangements they can, and often find inefficiencies in the energy system to exploit. This might mean setting up shop on an oil patch to turn waste gas that would otherwise be flared off into profit, or, in some cases, it may mean making a deal with a wind farm to get excess energy on the cheap.
But how green is “green” Bitcoin mining? Here are some of the ways that Bitcoin miners are trying to shake the perception that helping Bitcoin kills the planet.
Bitcoin miners have long embraced renewable energy where it’s profitable to do so. For example, hydropower resources in Quebec and British Columbia have attracted miners, some of whom have even built out their own electricity infrastructure in order to tap in. Texas has also seen a boom in wind power in the last decade, and the state’s deregulated power grid makes it a top destination for miners seeking low rates from providers who need a customer for energy when more wind power is generated than the grid can send.
Last week, Bitcoin mining company Argo Blockchain secured a $25 million loan to fund its “green” Texas Bitcoin mine. The 320-acre site will use only renewable energy, the majority being hydroelectric. In a small town in Upstate New York, an aging hydro electric plant was revived when its owners hooked up some Bitcoin mining rigs. The owners claim they make more money using it to mine Bitcoin than by selling the electricity to National Grid.
CleanSpark, a Utah-based Bitcoin mining operation, previously designed microgrids for industry and residential applications. The company already had a renewable energy background when it decided to acquire a Bitcoin mining firm in December 2020, for which it plans to integrate renewables. El Salvador, a relatively low-income country in Central America, is hoping to generate some cash with its state-owned geothermal energy plants. It hasn’t yet started the project.
The list goes on. Miners like Marathon, which is a member of the Bitcoin Mining Council and aims to go 70 percent carbon neutral using wind and solar, are in the middle of the fray of this emerging industry.
“What we’re going to see is a huge expansion, I think, in the number of people coming into the industry—especially in North America,” said Fred Thiel, CEO of Marathon. “And I think you’re going to see countries who have access to hydro, geothermal, whatever it might be, bring some Bitcoin miners in, and now they will have a cash machine.”
Some companies are looking to Latin America for renewables. One of the biggest publicly-traded Bitcoin mining operations, Canada-based Bitfarms, already uses renewables and is actively looking to use more: the company last week announced it would expand to Paraguay on a five-year lease with an annually-renewable power purchase agreement to secure 10 MW of green hydropower.
But the U.S. also provides a friendly environment for Bitcoin miners. Texas, for example, is already attracting Chinese miners looking to escape their government’s harsh crackdowns. Wind energy—which is abundant in the state due to an abundance of land—is cheap. Miners can get energy for 2 cents per kWh.
Of course, this currently goes both ways: for every wind farm that presents a tantalizing opportunity for profit for a Bitcoin miner, there's a fracking operation that can use its waste gas to turn a profit.
Sharma attributed much of the hype surrounding a green rush in Bitcoin mining to public attention stoked by Elon Musk. The tech entrepreneur and world’s second richest man in May tweeted that his electric car company would no longer accept Bitcoin due to its environmental impact. He then said he would set up a Bitcoin Mining Council to promote energy usage transparency and accelerate sustainability initiatives.
Since then, American mining operations have tried to rebrand themselves as eco-friendly businesses. And even if renewable power isn’t in play, Bicoin miners are purchasing carbon credits.
“Even if a [Bitcoin mining] company isn’t mining with renewables, they’re at least offsetting their carbon emissions,” Sharma said.
For example, New York-based miner Greenidge is now using carbon credits to offset the impact of its natural gas-powered operation after coming under pressure from environmentalists. While Anthony Scaramucci's Skybridge Capital, a significant holder of Bitcoin, is using Brazilian company MOSS Earth's carbon credit offsets to “green-up” their crypto investment. MOSS tokenizes carbon credits generated by Amazon conservation projects, and then sells the credit in the form of their own token—which was last week listed on top crypto exchange Gemini.
It’s worth noting here that while many see carbon offsetting schemes like this as being helpful, some environmental activists see it as merely greenwashing. While a Bitcoin mine that uses fossil fuels may help fund some green initiatives elsewhere in the world, it may still be directly producing tons of e-waste in the form of spent equipment, for example. One estimate pegged the Bitcoin network’s annual e-waste production as being equivalent to that of the Netherlands.
The exact mix of renewable energy and fossil fuels powering Bitcoin has been debated for years, and crypto boosters found support in a 2019 report from investment firm CoinShares that pegged Bitcoin as being two-thirds powered by renewables.
That report, which relied on the average energy mix of geographic regions where miners are concentrated to infer how much Bitcoin mining is renewable-powered, drew skepticism for being out of step with other analyses but nonetheless has gained traction among Bitcoiners who see the hype over the green mining rush as being overblown.
“Bitcoin mining has always been mostly hydro anyway. Although the mining council can be a thing for the good, it is important to remember that mining is a selfish activity, meaning that most miners are in it for the profits only,” says Ray Nasser, CEO of U.S.-based Arthur Mining.
“Considering that Bitcoin mining has always been mainly using hydro energy anyway, the Mining Council can help the industry organize as an important sector of the economy and change this misleading narrative that mining is essentially bad for the environment.”
Given that there is money to be made, it is highly unlikely that Bitcoin mining will meaningfully wind down any time soon. And there is no doubt that citizens, lawmakers, and the odd CEO will continue to call on miners to decarbonize their Bitcoin. If they fail, the world’s top crypto currency risks being dirty forever.