Can Bitcoin Mining Really Support Renewable Energy?

A new study finds that Bitcoin mining combined with green hydrogen could help accelerate the transition to clean energy – an eyebrow-raising claim given the strong evidence that the cryptocurrency is a major polluter.

To avoid any misconceptions, The edge spoke to researchers to understand the very limited scenarios in which this concept could work, and potential pitfalls given the complicated reality of Bitcoin mining.

The study, published in the journal PNAS, calls Bitcoin and green hydrogen fuel a ‘dynamic duo’ no less than seven times. It envisions an ideal scenario where profits from Bitcoin mining are used to invest in clean hydrogen production and renewable energy.

“It all depends on who uses it [Bitcoin] – exactly the same as a knife.”

The devil is in the details. Bitcoin should be mined using clean energy. And a big caveat in the study is that it suggests that energy companies or climate groups do the mining, not your average Bitcoin miner who has no financial incentive to deploy more renewable energy on the grid. For this to happen, there would actually have to be policies in place to ensure that the funds made from Bitcoin mining are actually spent on clean energy.

“It all depends on who uses it [Bitcoin] – exactly the same as a knife. We can use it as a meal, but we can also use it as a weapon, right?” says Fengqi You, one of the paper’s authors and professor of energy systems engineering at Cornell University. “In this context, we are not going to mine Bitcoin as a trading currency on the open market at all.”

It is estimated that Bitcoin mining activities produce almost as much greenhouse gas emissions annually as the country of Morocco. Bitcoin mines are data farms filled with specialized hardware that solve computer puzzles 24 hours a day for a chance to validate new transactions on the blockchain. They earn Bitcoin as a reward, the price of which recently rose above $70,000.

The new study offers a potential scenario: Why not spend those profits on fueling the growth of solar and wind energy? She proposes to do this in a roundabout way, using an intermediate product: green hydrogen, which is made with renewable energy (as opposed to the majority of hydrogen now on the market, which is made with fossil fuels).

The challenge with solar and wind energy is that they are intermittent energy sources that fluctuate throughout the day and year. You could solve this problem with rechargeable lithium-ion batteries, but they are not yet developed enough to be very efficient for long-term energy storage. That’s where green hydrogen and Bitcoin mining could come into play, the study states.

The authors call hydrogen and Bitcoin ‘energy carriers’. When solar and wind energy are used to make green hydrogen, that hydrogen stores or ‘carries’ the energy as fuel that can be used later – even when the wind dies and the sun doesn’t shine. According to this article, Bitcoin could be considered a virtual energy carrier if it is used to purchase green hydrogen and/or support the deployment of more solar and wind farms.

You say it would be like using Bitcoin as a gift card to spend on clean energy. The policy should set up guardrails so that the money isn’t spent on something else, similar to a gift card that is only valid at a specific store. According to the newspaper, the system could increase solar capacity by up to 25.5 percent and wind capacity by up to 73.2 percent in the US.

But that depends on many hypothetical scenarios. In the real world it would be difficult to replicate. Opening and operating a Bitcoin mine isn’t cheap; Traditional Bitcoin mines operate around the clock to recoup their costs and make a profit.

“They are now running things as fast and as crazy as they can.”

“They’re not thinking very far into the future,” Joshua Rhodes, a research scientist at the University of Texas at Austin and a nonresident fellow at Columbia University, said of Bitcoin mining companies. “They are now running things as fast and as crazy as they can to get the money in now and are not really interested in the long-term, decade-long investment cycles that something like this requires.”

Utilities would face high start-up costs to mine Bitcoin, and would be saddled with more restrictions if they want to support clean energy.

Rhodes, who is also the founder of the consultancy IdeaSmiths, worked on an analysis for the crypto mining company Lancium in 2021. It found that Bitcoin mines that want to fuel the growth of renewable energy would have to be turned off for about 15 percent of the year. , when wind and solar energy generation is low, to effectively reduce greenhouse gas emissions from electricity consumption.

Bitcoin companies in Texas, a mining hotspot where Rhodes’ analysis was conducted, have halted mining in the past, but only because they were paid. The state’s grid operator has paid crypto miners tens of millions of dollars in energy credits to avoid power outages during peaks in electricity demand and shortages in supply. The program has perpetuated the idea that Bitcoin can provide the same energy storage benefits as a battery, even though there is little reason to curtail mining without financial incentives.

Ultimately, Bitcoin can only be compared to half a battery, Rhodes says. Energy goes in, but nothing comes out. “I don’t think it’s appropriate to call Bitcoin an energy carrier,” says Rhodes The edge. “You might be able to make an argument for calling it an enabler, which I think is what they’re trying to do here, but the idea of ​​calling it an energy carrier perpetuates the idea that you can somehow get energy out of this thing to fetch. , which is not possible.”

You and his co-author published a similar article last year finding that Bitcoin mining could potentially generate profits for renewable energy projects. Once again, the findings apply to a very specific scenario: mining using excess renewable energy from new solar and wind farms still waiting to be connected to the grid.

There is a backlog of infrastructure waiting to be connected to the electricity grid. On paper – at least in this latest study – a Bitcoin mine, hydrogen facility, solar and wind farms could all work together. In reality, they may compete with each other for a limited supply of transformers, inverters and all the other equipment needed to connect them to the grid.

Even in a scenario where it is a utility company calling the shots and mining Bitcoin to finance clean energy ambitions, success still depends on Bitcoin prices fluctuating wildly. The price may be around $70,000 today, but it is only now climbing out of the Crypto Winter that pushed prices below $20,000.

“I won’t say impossible, but [the price of Bitcoin] It’s unlikely this will be zero, right? … Once there is a value, there is a way to use these mines as a tool,” You says. “But no one knows what the future market will look like.”

The authors received funding from the National Science Foundation, but no support from industry. You also say he personally doesn’t own any crypto.

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