As the world transitions towards a future powered by zero-carbon energy sources, investments in energy infrastructure are critical. However, there are several challenges today that stand in the way of progress, including grid instability, energy transmission and storage, and harmful byproducts from current energy sources.
First, grid instability represents one of these challenges. Renewable resources like wind and solar have a variable supply. That is, there are “intermittency” issues that result from the fact that these resources are sensitive to factors like time of day and weather. Second, There is a geographic mismatch between renewable energy resources and energy demand. Power generation often takes place in remote areas because these are optimal in terms of space and resources. However, energy is difficult to transfer, so it often does not reach the consumer.
Third, There has been an increasing awareness that byproducts of energy production, such as gas flaring, have significant negative environmental impacts. However, this has been a persistent challenge given that oil production frequently takes place in remote and inaccessible locations. Unmitigated gas flaring emits more than 400 million tons of CO2 equivalent emissions annually.
To date, the answer to mismatches in energy supply and demand has been curtailment, which is costly and results in wasted energy. For example, in the month of April 2023, California couldn’t use over 700,000 megawatt-hours of wind and solar power. That is enough energy to power more than 60,000 homes for a year.
Bitcoin mining as a bridge to much-needed investments and market support
The need for action on the energy transition is urgent – and Bitcoin mining can be an important bridge to much-needed investments and market support. These mining operations, which are – in essence simply data centers that power the Bitcoin network – are uniquely suited to address some of these challenges due to their unique combination of flexibility, consistency, and transparency. Specifically:
Flexibility: Numerous studies have found that a flexible load on renewable-powered grids can be a key solution minimizing the mismatch of supply and demand. Bitcoin mining operations are flexible on two critical axes: (1) location and (2) demand. This means that they can access stranded sources of energy and power up and down, depending on grid conditions.
Consistency: Similarly, sustained demand at-scale is important. Typical demand for energy varies based on several factors such as time of day, population, etc. Consequently, markets for renewable energy sources can face periods of low demand, which affects their market prices and business models. Mining can serve as a consistent source of demand, reducing the need for costly curtailment.
Transparency: Bitcoin, and crypto more broadly, provide a new model for engagement with energy more broadly. The transparency of the industry means that data that can be used to inform decision-making – and, it can provide a model for greater accountability.
The latest Crypto Council paper aims to surface examples of sustainability-focused operations and provide new insights into and data behind their approaches. The case studies featured include Crusoe Energy, CleanSpark, Lancium, TeraWulf, and USBTC. They represent nearly two dozen sites across the US, taking various approaches to sustainable operations.
Utilizing flared gas as a power source to mitigate the effects of methane emissions – which has more than 80x the warming power of CO2 over a 20 year timeframe.
Experimenting with new technology for cooling, which makes up an estimated 40% of energy consumed by mining operations.
Balancing grid instability by powering mining operations up or down within a 5-15 second timeframe.
Building brand-new renewable energy sources, which represent more than 3 GW of added renewable energy to the grid in the long-run.
Going Beyond the Energy Transition to the Digital Economy
It is worth highlighting why this conversation matters beyond the energy transition. Crypto and blockchain technology are opening new possibilities for the digital economy. Creating options for individuals to interact and transact in a disintermediated manner has enormous implications for digital money, data ownership, identity, and beyond. Proof of Work, the consensus mechanism that underpins the Bitcoin blockchain was the starting point for these conversations. Its system of economic rewards design uniquely makes “cheating” expensive and incentivizes honest behavior.