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Bitcoin’s Green Potential: Energy Consumption Does Not Equal Carbon Emissions
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Tag: Renewable
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‘Bitcoin incentivizes renewable energy’ agree Elon Musk and Jack Dorsey
Some of Bitcoin’s most prominent backers have sought to make the case for Bitcoin’s environmental efficiency, with a collaborative paper from researchers at financial services firm Square and investment manager Ark Invest asserting that Bitcoin mining can drive increased efficiency in renewable energy production.
The paper, authored by “The Bitcoin Clean Energy Initiative,” or BCEI, seeks to counter the claim that “the computation required to secure Bitcoin […] is environmentally damaging and ruining the planet,” arguing that Bitcoin mining incentivizes the generation of electricity “from renewable carbon-free sources.”
The paper has received support from top crypto luminaries including Square’s Jack Dorsey, Tesla’s Elon Musk, and Ark Invest’s Cathie Wood.
True
— Elon Musk (@elonmusk) April 22, 2021
In an April 22 Twitter thread, Square argues that while solar and wind can produce energy cheaper than fossil fuels, these renewable sources typically produce excessive supply when demand is low and conversely struggle to meet needs of consumers and industry when demand is high.
According to the researchers, the issue of divergent renewable production and demand for electricity could be mitigated by building an ecosystem “where solar/wind, batteries, and Bitcoin mining co-exist to form a green grid that runs almost exclusively on renewable energy.”
“Not only is this doable, it is doable without jeopardizing the sector’s profitability.”
The paper describes the Bitcoin mining sector as “an energy buyer of last resort” that can be situated anywhere in the world.
Despite solar and wind energy costing between roughly half and one-third of fossil fuels per kilowatt-hour, the paper asserts the geographical limitations of renewable power plans typically results in energy supply being “either abundant or non-existent.”
“The end result is significantly more power than society typically needs for a few hours per day and not nearly enough when demand spikes. This challenge also plays out seasonally.”
By combining Bitcoin mining with renewable energy storage, the paper argues the limitations of batteries and energy dissipation can be offset by diverting excessive electricity to mining farms. If miners were able to capture just 20% of wind and solar energy that is delayed on U.S. power grids, BCEI estimates that global mining capacity could triple.
The mobilization of miners as an electricity buyer of last resort would also bolster the profitability of the renewable energy sector, offering producers the opportunity for “arbitrage between electricity prices and Bitcoin prices.”
“In a sense, the unlimited appetite of miners allows them to eat whatever remains of the ‘duck’s belly.’ Given these benefits, we believe it makes logical sense for utility-scale storage developers to augment their current battery offerings with Bitcoin miners.”
The paper also asserts that the costs associated with expanding renewable energy will see accelerated decline.
“The Bitcoin and energy markets are converging and we believe the energy asset owners of today will likely become the miners of tomorrow,” it said.
Alright, I’m just gonna come out and say it. Bitcoin mining is bad for the environment. #bitcoin #EarthDay2021
— Mati Greenspan (tweets ≠ financial advice) (@MatiGreenspan) April 22, 2021
However, not everyone is convinced by BCEI’s assertions, with popular analyst Mati Greenspan describing the report as “justify[ing] Bitcoin’s massive energy consumption.”
Rather than offer a solution to Bitcoin’s ever-increasing energy consumption, Greenspan describes BCEI’s paper as offering the blueprint for “an energy-intensive feedback loop.”
“The main focus of the paper doesn’t seem to seek out solutions so much as justify Bitcoin’s massive energy consumption and paint a rosy picture of how it might positively impact the clean energy sector,” Greenspan argued.
Earlier this year, researchers at the University of Cambridge estimated that Bitcoin consumes 121.36 terawatt-hours annually — ranking the network among the 30-largest energy users worldwide and above the country of Argentina.
Square Makes The Case For Clean Energy Bitcoin
In a white paper released today, financial services company Square outlines the opportunity that Bitcoin presents to facilitate a transition to a cleaner and more resilient electricity grid.
The research report, titled “Bitcoin Is Key To An Abundant, Clean Energy Future,” was released as part of Square’s Bitcoin Clean Energy Initiative, an ongoing effort to support companies working to integrate green energy technologies within bitcoin mining. Square also supports Bitcoin projects financially through its Square Crypto arm and offers BTC for sale through its payments app Cash App.
The research paper highlighted the opportunity that Bitcoin presents to accelerate a global transition to renewable energy sources, as Bitcoin miners are uniquely positioned to capitalize and make the most of these sources.
“Bitcoin miners are unique energy buyers in that they offer highly flexible and easily interruptible load, provide payout in a globally liquid cryptocurrency, and are completely location agnostic, requiring only an internet connection,” per the report.
It also noted that, by certain measures, solar and wind energy are the least expensive sources of power on the planet, though they have been difficult for operations to leverage due to their intermittent availability. Square sees an opportunity in combining renewables, steadily improving energy storage technologies and bitcoin mining.
“By combining miners with renewables and storage projects, we believe it could improve the returns for project investors and developers, moving more solar and wind projects into profitable territory,” according to the white paper. “[And] allow for the construction of solar and wind projects even before lengthy grid interconnection studies are completed… [and] provide the grid with readily available ‘excess’ energy for increasingly common black swan events like excessively hot or cold days when demand spikes.”
The white paper also included a brief section contributed by Bitcoin-focused investment management firm Ark Invest. It outlined its belief that bitcoin mining could spur investment into solar power systems that raise the overall proportion of grid power that’s driven by renewables. It included the illustration of a model indicating that without bitcoin mining, renewables can satisfy only 40% of the grid’s needs, but that with bitcoin mining, solar energy and batteries, it can satisfy 99% of its needs.
“Our model demonstrates that integrated bitcoin mining could transfigure intermittent power resources into baseload-capable generation stations,” the section reads. “All else equal, with bitcoin mining, renewable energy could provision a large percentage of any locality’s power economically.”
The white paper concludes with suggested next steps to catalyze significant transition to clean energy through bitcoin mining. Square would like to see energy management companies develop software capable of determining the best use of newly captured energy — whether it should be used, stored or mined. It would like to see managed marketplaces emerge that connect project developers with bitcoin miners and financiers. And it would like more chip foundries established to meet the growing demand for ASICs capable of effectively mining bitcoin.
“The bitcoin and energy markets are converging and we believe the energy asset owners of today will likely become the miners of tomorrow,” the paper concludes. “Utility executives, sustainable infrastructure funds, and grid-scale storage developers are well-positioned to expedite this future by aligning their strategic roadmap and deploying large scale investments into the emerging synergy between bitcoin mining and clean energy production.”
Gryphon Raises $14 Million For Zero-Carbon Bitcoin Mining Operation
According to a release, Gryphon Digital Mining has raised $14 million in a Series A fundraise for the launch of a zero-carbon footprint Bitcoin mining operation.
“At Gryphon, our long-term strategy is to be the first vertically integrated crypto miner with a wholly-owned, 100 percent renewable energy supply,” said Rob Chang, CEO of Gryphon Digital Mining, per the release. “Our vision is to further develop and use economically viable, renewable, off-grid energy.”
The announcement noted that institutional investors made up more than 30 percent of the Series A and it closed in a little over two weeks. It also noted that Gryphon has partnered with a data center that grants it access to electricity costs as low as $0.013 per kilowatt hour (kWH). At launch, it expects its mining operation to have 730 petahashes per second (PH/s) of processing power which it thinks can grow to more than 2,000 pH/s by the end of the year.
The release did not detail the specific energy sources that Gryphon expects to leverage, but it did position the firm as one that sees opportunity in fueling the practice through green energy.
“Gryphon has the opportunity to become a market leader by providing reliable, low-cost mining while relying on renewable energy to minimize Bitcoin mining’s carbon footprint,” according to the release.
While there is a popular belief that bitcoin mining is a waste of energy that unduly contributes to issues like climate change, projects like this are demonstrating that Bitcoin mining can actually incentivize and drive use of renewable energy sources.