Billions of dollars are flowing into digital currencies. In addition, the energy-intensive operation required to create and store Bitcoin has increased electricity demand. This could benefit slow-growing utilities in the region.
Electricity-rich North Dakota aims to become a cryptocurrency hub. Even the utilities of the municipalities of Brainerd, Minnesota and Glencoe utilize Bitcoin production.
The new cryptocurrency operation in Jamestown, North Dakota, provided by Otter Tail Power in Minnesota, easily consumes twice as much power as the entire city. The Crypto Center will soon become OtterTail’s second-largest customer and could eventually double in size.
Tim Rogelstad, president of Fergus Falls-based Otter Tail, said: “The question we are working on is’what can we do?'”
However, there are problems with the rapid expansion of cryptocurrencies.
If utilities do not properly manage the greedy power appetite of crypto, they run the risk of spoiling payers at a higher cost. And the US power grid, like many of the world’s power grids, is still fixed to climate-eroding fossil fuels.
This means that the rapid expansion of cryptography is exacerbating climate change, industry critics say. “What’s the problem?” Said Alex de Vries, a Dutch economist and data scientist.
On his Digiconomist website, de Vries estimates that Bitcoin’s carbon dioxide emissions are equal to those in the Czech Republic. Financially speaking, one Bitcoin transaction emits as much carbon dioxide as 2.7 million Visa credit card payments.
The cryptocurrency industry, which produces Bitcoin and hosts cryptocurrency operations, says it is increasingly demanding wind and solar power.
“It’s very rare if we don’t generate electricity from renewables,” said Dave Perrill, CEO of Compute North, based in Eden Prairie, which hosts cryptocurrency mining centers, including Nebraska and Texas. “Environmental and social factors are very important to our customers and very important to us.”
Still, cryptocurrency miners cannot rely on inherently fluctuating wind and solar power. Their computers cancel day and night in the constant competition to create digital currencies.
27 Trillion Peace Puzzle
Cryptocurrency miners deploy computer weapons to solve math problems — in return for cryptocurrencies.
“It’s like a puzzle with 27 trillion pieces, one missing,” said Vivian Fang, a professor of accounting at the Carlson School of Management at the University of Minnesota.
There are thousands of cryptocurrencies, but the most widely produced is Bitcoin.
Their supporters argue that cryptocurrencies can protect wealth from changes in inflation through a decentralized financial system without the intervention of central and commercial banks.
Cryptocurrency speculators have carved out their destiny. However, its use in everyday commerce is still limited. For skeptics, cryptocurrencies are a financial medium for internet criminals and, at worst, a kind of Ponzi scheme.
Whatever the point of view, the main method of crypto mining, called “Proof of Work”, consumes enormous amounts of power.
“Proof of work is a competition for computing power,” Fang said. The more hardware you have, the more likely it is that the crypto miner will hit your payday.
Electricity is by far the largest operating cost for crypto mining companies. And the power industry, whose sales have been sluggish for a long time due to energy savings, could take advantage of this business.
When Dallas-based Applied Blockchain launched its crypto mining business in Jamestown earlier this year, Otter Tail’s largest customer was Enbridge, which needed electricity to push Canadian oil into the Minnesota pipeline. It became the top.
The cryptocurrency boom is progressing rapidly. OtterTail, a publicly traded company with 133,000 customers in Minnesota and Dakota, first met Applied Blockchain last July, Rogelstad said. They made a deal in August.
“We are used to dealing with it in months and years, and they are used to dealing with it in seconds and minutes,” he said.
The Applied Blockchain Crypto Center uses 100 MW of power almost continuously. This represents about 10% of Otter Tail’s peak power demand. Utilities and Applied are discussing doubling their power consumption.
For smaller utilities, the impact of cryptography can be even greater.
Brainerd plans two crypto mining operations totaling 70 MW. Taken together, the peak electricity demand of the city’s local governments almost doubles. Glencoe’s small crypto project will nearly double the electricity usage of local utilities.
Minnesota Entity Wants to Share Cryptographic Benefits
Minnesota’s electricity market is generally not as attractive as other states, “said Perrill of Compute North, which sets up cryptocurrency electricity trading. “The cost of electricity is too high.”
North Dakota’s economy is better, and the state is courting crypto miners, including tax cuts on data center equipment. In January, the state announced a $ 1.9 billion crypto center near Williston that consumes up to 700 megawatts of electricity.
North Dakota is one of the top wind power companies in the United States. However, its power system is based on five large coal-fired power plants. Otter Tail owns two parts of it, but sells its stake in one and adds a significant amount of renewable electricity.
The Grand Forks-based Minkota Electricity Cooperative, which serves northwestern Minnesota, is rooted in coal. It will generate electricity for a 100 MW crypto mining center opened in Grand Forks at the end of last year.
Minkota and other North Dakota electricity producers are planning to equip their coal plants with technology to “recover” carbon emissions. However, this technique is expensive and is rarely proven in coal factories.
Ben Jones, a professor of economics at the University of New Mexico, each of the United States’ major fuels for power generation, has studied the impact of cryptomining on carbon emissions and other pollution due to the use of natural gas and coal by crypto. bottom.
Jones and two other researchers said that the $ 1 value of Bitcoin created in 2018 was 49 cents of damage to the climate and health of the United States, China, which until recently was the capital of crypto mining in the world. Found to be the cause of 37 cents.
“Bitcoin is slowly decarbonizing, just as we are all moving,” Jones said.
Jones and De Vries said the crypto industry has virtually retreated from renewables after being banned in hydropower-rich China last year. Today, the United States is the world’s leader in Bitcoin mining, followed by Kazakhstan, which consumes large amounts of coal.
After China launched cryptocurrencies, Bitcoin mining’s share of renewable energy fell from about 41% in 2020 to 25% in August last year, a recent article co-authored by deVries in the scientific magazine Joule. Says.
The Bitcoin Mining Council, an industry group, disagrees with such numbers. A member survey concluded that sustainable energy accounted for nearly 60% of Bitcoin production in the fourth quarter of 2021.
There is another method of crypto mining called “Proof of Stake”. It consumes much less power because it does not depend on raw computing power, but it has not yet been widely deployed.
Utilities say they are protecting toll payers
Plattsburgh in northern New York has ample and cheap hydropower from the St. Lawrence River, which makes it attractive to crypto miners.
However, during the cold season of 2018, cryptocurrency-backed electricity demand exceeded the allocated supply, forcing Plattsburgh to buy electricity from the expensive spot markets. Home customers have had a temporary increase in billing.
The Minnesota Utility Manager says he has built a cryptocurrency contract to avoid fooling payers.
Otter Tail has traditionally always needed to continually power its customers. However, it can limit power to the applied blockchain through what is called an “interruptible” power contract.
Larger users, such as crypto mining centers, can get particularly low rates, provided they can cut off power when the grid is stressed, such as high summer power demand or damage associated with storms. increase.
Brenard and Glencoe municipal power companies also have interruptable power contracts with cryptocurrency customers. These cities, like Otter Tail, say they have enough existing capacity to meet the new demand from crypto miners.
In Brainerd and Glencoe, local utilities have connected crypto miners to substations built a few years ago to increase the reliability of the grid and prepare for economic growth. Local power directors in both cities say existing toll payers do not incur additional costs from cryptography.
Dave Meyer, General Manager of Glencoe Light and Power, said: “Otherwise I wouldn’t have pursued it.”