Bitcoin requires an immense amount of energy. Heres why thats sparking a crypto backlash – PBS NewsHour

The first time Jackie Sawicky learned that a Bitcoin mining operation was coming to Corsicana, a rural Texas city 60 miles south of Dallas, was on April 27, when she happened upon a Facebook video of a meeting at the local public library. The featured speaker was Chad Everett Harris, the upbeat executive vice president of Riot Blockchain, a Bitcoin mining company based in Castle Rock, Colorado. Bald and comfortably plump, Harris wore a suit jacket and open-collared shirt over blue jeans and delivered his message with the verve of a motivational speaker.

Were coming to Corsicana to build the largest [Bitcoin mining facility] in the world, Harris announced, describing the four-building, 400,000 square-foot complex that will occupy 265 acres with number-crunching machines. We turn energy into opportunity.

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Riot already operates the largest Bitcoin mine in the country in Rockdale, Texas. When someone in the audience asked Harris what drew him to Corsicana, the seat of Navarro County (pronounced Nah-verr-o in local parlance), he answered without hesitation. The Navarro Switch! he said, referring to part of the 192-mile, 345-kilovolt transmission line that moves power from West Texas to eastern parts of the state, where demand is high. And water, he added. You can pay a lot to bring power somewhere. But you cant get water.

He literally told us, Sawicky says, that he was coming to exploit our resources.

To some people, Bitcoin the most valuable and well-known of the 10,000 or so currently circulating cryptocurrencies is nothing more than a pyramid scheme; to others, it represents the future of money: decentralized, unregulated, and tracked on a virtual ledger in the digital cloud that everyone can inspect, known as a blockchain. But its production consumes dizzying quantities of electricity. In May of 2022, the worlds sum total of Bitcoin mining operations had an annual energy budget nearly equal to the entire country of Argentina, or the Czech Republic, or, according to Cambridge Universitys Bitcoin Electricity Consumption Index, all the tea kettles in England boiling water for 26 years.

In warmer climates, cryptocurrency-mining by the Bitcoin method, known as proof of work, typically needs water to cool those machines running fast and hot as they play the Bitcoin lottery (Riot says it will use a new technology in Corsicana that reduces water use). Proof-of-work mining is essentially a high-stakes guessing game: Computers spend all day throwing out random 64-digit numbers until one matches the right number, as determined by Bitcoins consensus-managed protocol. On the worldwide network of Bitcoin servers, you have 200 quintillion guesses every second of the day nonstop, explains Alex de Vries, a researcher at the School of Business and Economics at the Vrije Universiteit Amsterdam. And even despite that, only one machine gets it right every 10 minutes.

The correct answer gets logged on Bitcoins blockchain, and the winner gets a reward: 6.2 Bitcoins. Thats not as much money as it used to be: In the coins current slump, each coin nets about $20,000, down from a high in November 2021 of just under $68,000.

Due to its high demand for electricity, proof-of-work cryptocurrency mining has not been welcomed in every corner of the world. Miners seek cheap energy to maximize their profits, but their energy-intensive activities typically drive electricity costs up for everyone. Even when mining plants run on renewable energy, critics say, they often exploit existing clean energy resources at the expense of ordinary consumers, who are then forced to buy more expensive, and often dirtier, power.

FILE IMAGE: A bank of cryptocurrency miners operates at the Scrubgrass Plant in Kennerdale, Pennsylvania, U.S., March 8, 2022. Alan Freed/Reuters

In Bonner, Montana, a small city in Missoula County, the Bitcoin company HyperBlock set up in 2016 and almost immediately began cutting into the communitys supply of hydropower from the Salish-Kootenai Dam; County Commissioner Dave Strohmaier called the plants energy use grotesque and equal to as much as one-third of the countys household demand. HyperBlock went bankrupt when Bitcoin plummeted at the start of the COVID pandemic. The county subsequently enacted a first-of-its-kind zoning ordinance requiring, among other things, that cryptominers supply their own, new renewable energy sources.

A similar scenario has played out in upstate New York. The region initially drew cryptominers with its abundant supply of cheap hydropower electricity from the 2.6 gigawatt Niagara Power Project. In 2017, when the Bitcoin company Coinmint set up in the vacant space behind the Family Dollar Store in Plattsburgh, a city of less than 20,000 residents, electricity costs were one-third of the national average. Bitcoin miners had registered as industrial consumers, says Colin Read, a professor of economics and finance at the State University of New York, Plattsburgh, who was also Plattsburghs mayor at the time. And our industrial rate was less than 2 cents per kilowatt hour, which might be the lowest in the world.

But Plattsburgh, which manages its own municipal utility, also has a monthly quota for electricity use. If the city exceeds that quota, it has to go looking elsewhere for electricity, forcing everyones utility bills up. In the winter of 2018, residents who heated their homes with electricity saw costs rise 30 to 40 percent, according to Read.

Plattsburgh quickly imposed a moratorium on new crypto-mining operations while city officials figured out how to make it more efficient. We imposed a regulation that says Bitcoin miners have to recycle a share of their heat, Read says. After that, they simply werent interested in coming here anymore. They always migrate to the places with the least regulation.

Bitcoin mining has faced similar challenges in other countries. China, despite once being the worlds largest supplier of the application-specific integrated chips used in crypto-mining, declared all virtual currency activities illegal in the fall of 2021, in part because the mining produces high carbon emissions. (The countrys central bank also wants to develop its own digital coin.) Icelands national power company, Landsvirkjun, which once attracted cryptocurrency miners with its climate-friendly geothermal energy, began denying power to new miners in late 2021. Even Iran, where the oversight-free nature of peer-to-peer currency had enabled entrepreneurs to dodge international sanctions, found crypto-mining so burdened its grid that the government was forced to ban it first for four months beginning in May 2021, then again the following December, as heating demands strained its electricity supply.

Neither energy consumption nor water nor Bitcoins volatility have deterred the elected leaders of Texas, who have welcomed the industry with effervescent enthusiasm. Blockchain is a booming business Texas needs to be involved in, Governor Greg Abbott tweeted last summer after signing into law a bill recognizing cryptocurrency in the states commercial code. (Texas was the second state to do so, after Wyoming.) And the miners have come, reveling in the states wide-open spaces, where the rattling fans that cool their hard-working rigs can operate without disturbing the neighbors, and abundant cheap energy keeps overhead low. Whereas once China hosted 75 percent of the crypto-mining business, now the United States is home to 40 percent of the activity, and one-quarter of it happens in Texas.

Three days after Harriss announcement at the Corsicana library, Jackie Sawicky founded Concerned Citizens of Navarro County to marshal opposition to Riot Blockhains plans for Corsicana. More than 600 people have signed a petition to stop the mine, and the group has more than 500 members on its Facebook page, where Sawicky and others post news stories about their states grid and water woes.

READ MORE: From the stock market to crypto, a punishing six months for investors

Were going to be paying increased electricity bills to upgrade ERCOTs grid to accommodate these places, she says, referring to Texass independent system operator, the Electric Reliability Council of Texas. The grid notoriously slumped under the strain of winter storm Uri in 2021, cutting power to more than 4 million homes and businesses, many of which relied on electricity to heat their buildings. Hundreds of people died from extreme cold exposure or the failure of medical equipment.

Harris has insisted in news stories that mining only uses excess power when demand is light; when the grid is overloaded, ERCOT issues them credits for shutting down, which miners can do within minutes. In that way, he says, Riots participation in demand response can actually stabilize ERCOTs unsettled and isolated grid.

Thats at least partially true, says de Vries, the Dutch researcher. But the companys participation in demand response isnt exactly altruistic. Riot Blockchains filings with the Securities Exchange Commission, he points out, state plainly that the company will pay a mere 2.5 cents per kilowatt hour for its electricity, a full 10 to 11 cents less than the going residential rate. That figure represents our contractual cost of power, confirms Trystine Payfer, spokesperson for Riot Blockchain, minus the credits the company earns for participating in the utilitys demand-response program. That program is a sweet deal: It means that, when electricity supply is tight and Riot voluntarily shuts down, the company earns credits for power. If electricity prices shoot up to $9 per kilowatt hour, as they did during 2021s winter storm, it might be more profitable to unplug from the grid than to keep mining Bitcoin.

Our utility provider does not actually pay us the credited amount each month, Payfer stresses, rather, we have the right to apply the credits toward future [bills].

Nevertheless, de Vries argues, its hard to see how that wont drive prices up for everyone. The utility still has to buy the power, he notes, and the credits it issues under the demand-response program come from the same pool of money other customers fund when they pay their bills.

We have a saying here in Texas, Sawicky says. Dont piss on my boots and tell me its raining. And thats pretty much whats going on.

Not every community has fought Bitcoin mining the way Sawickys group has. Riot Blockchains Rockdale facility, initially built on 100 formerly forested acres near the former Alcoa aluminum plant, has by most accounts been a boon to the community, which had long been a company town revolving around the now-shuttered factory. We rebuilt the animal shelter, Harris said at the Corsicana launch meeting. When I learned kids didnt have lights in their parks, we put lights in the ball fields. For a year, we rented an entire hotel. Bitdeer, another Bitcoin mining company, set up shop nearby and bought emergency ventilator equipment for Rockdales volunteer firefighters.

But Corsicana, Sawicky argues, is different. People came to Navarro County for farming and ranching and open space. We have wildlife. We have two pair of nesting bald eagles and tons of migrating birds. I worry about all of them.

Mostly she worries about electricity prices. Electricity prices in Texas are already up 70 percent over what they were a year ago. We have a 15 percent poverty rate in Navarro County, Sawicky notes. We cant pay more for electricity than we already do.

FILE IMAGE: A geothermal energy plant in Ahuachapan, El Salvador, where the Salvadoran president has expanded that infrastructure to begin bitcoin mining projects. Image taken June 16, 2021. Photo by Camilo Freedman/SOPA Images/LightRocket via Getty Images

Some ambitious Bitcoin miners have tried to eliminate their pressure on utilities by buying up their own fossil-fuel plants to power their mining activities. The coal-fired Greenidge power plant in New Yorks Finger Lakes region, decommissioned in 2010 and revived seven years later as a gas-fired plant, in 2021 became a gas-powered Bitcoin mine; 120 miles west, in North Tonawanda, Canadian cryptominer Digihost intends to inhabit a still-operational gas-fired power plant using the plants power to mine its coin.

But more such projects in New York State could be in peril if Governor Kathy Hochul signs a pending bill instituting a two-year moratorium on new fossil-fueled proof-of-work crypto-mining in the state. The bill, passed by New York legislators on June 3, is designed to give the state time to evaluate how the technology fits within the states 2019 climate law, which commits New York to 100 percent zero-emissions electricity by 2040. The state law would be the first in the country restricting cryptocurrency mining.

Read doesnt think the bill does enough. Even if Bitcoin miners arent using hydrocarbons, he says, theyre displacing renewable energy that would be used for other purposes. And theres no easy way to measure that. Bitcoin, he says, will continue to increase the use of fossil-gas-fired power in the state, regardless of whether miners use clean energy or not. Nor has Governor Hochul committed to signing the legislation. Both she and New York City Mayor Eric Adams, who has asked her to consider a veto, have received significant donations from the crypto industry.

There are ways to reduce the energy use and, consequently, the climate impact of cryptocurrency mining. Some energy companies have developed plans to capture fugitive methane from oil and gas drilling and divert it to electricity plants dedicated to Bitcoin mining. Crusoe Energy has already begun such operations in North Dakota and Colorado and plans to expand to Texas and New Mexico. Another company, the Casper, Wyoming-based JAI Energy was specifically founded to take advantage of waste gas to mine Bitcoin. The process could theoretically be a net win for the climate, as methane from the oil fields is typically ether flared or vented, releasing fast-acting planet-warming gases into the atmosphere.

An even better alternative, Read says, is to trade proof-of-work mining for another process, known as proof of stake. It doesnt use exorbitant amounts of energy, because it doesnt involve gazillions of computers taking 200 quintillion stabs per second at a random number. Instead of trying to win the lottery in 10 minutes, he explains, you put down a large deposit proving you have a stake in the outcome. You ensure you dont corrupt the system when you verify an entry on the cryptocurrencys blockchain. If you fail to verify properly, you lose your investment.

Proof-of-stake means you can have everything in crypto without having all these environmental problems, Read says. Several currencies, such as Cardano and Peercoin, use proof-of-stake exclusively; Ethereum, the second most-valuable coin next to Bitcoin, is in the process of transitioning to proof-of-stake.

In fact, almost all cryptocurrency currencies are mined with proof-of-stake right now, Read says. We just dont hear about it so much because Bitcoin represents 99 percent of all capitalization in cryptocurrency. There may come a day when you get auto and home loans on a smartphone with decentralized, digital currency. But that currency probably wont be energy-devouring proof-of-work Bitcoin.

Bitcoin, Read says, is cryptocurrencys Model T.

This article is reproduced with permission from Yale Environment 360. It was first published on June 21, 2022. Find the original story here.

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Bitcoin requires an immense amount of energy. Heres why thats sparking a crypto backlash - PBS NewsHour