https://oilprice.com-By Felicity Bradstock
- With Bitcoin having lost more than half its value since November and other cryptocurrencies following suit, the energy consumption of the crypto mining industry is back in the headlines.
- While crypto mining companies around the world have been attempting to go green and reduce emissions, governments are pushing back against the growing energy demand of crypto.
- China has already banned cryptocurrencies altogether, and New York is moving to ban new mining projects, but industry insiders claim they will simply move to friendlier markets.
It has been a difficult start to the year for crypto markets and, as prices have plunged, the industry’s energy consumption has come back into the spotlight. Crypto miners are racing to make digital currencies greener by using renewable energy sources to power operations, while others head to gas sites to use waste carbon for mining. But with uncertainty clouding Bitcoin’s future, gas project operators are starting to reconsider partnering with crypto miners. The poor environmental impact of cryptocurrency mining is gaining increasing attention as governments and energy firms around the world attempt to cut carbon and transition to renewables. Mining digital currencies requires huge amounts of electricity. Bitcoin operations alone required around 91 terawatt-hours of electricity annually, higher than the quantity of electricity used by the whole Finnish population of 5.5 million.
Recently, many crypto companies have partnered with natural gas producers to use carbon sequestered through carbon capture and storage (CCS) technologies to produce electricity. But many question whether it is practical to use such high amounts of energy to produce a currency with no certain future when this energy could be used to power industrial operations.
This is particularly troublesome as many governments have not yet imposed regulations on the crypto industry as it grows at an increasing speed. As digital currency production increases and mines crop up around the world, governments must consider how to manage the increase in energy use as they push to decarbonize.
Crypto firms have been racing to make currency mining greener as they fear a crackdown on their energy use. There are plenty of examples of this clean mining. A facility housing 15,000 mining rigs in the Swedish town of Boden, operated by Hive Blockchain, is being run from local hydropower rather than fossil fuels. Crypto firms are choosing this region as it produces excess wind and hydropower, meaning the energy used for mining is not needed to power homes. But officials in the region are concerned about the huge amount of power required to run operations such as these.
Sweden hopes to use renewables to fuel electric vehicles, batteries, and fossil-free steel to help meet the country’s climate aims. But with crypto draining so much power, it could hinder these objectives. Meanwhile, other crypto firms are still reliant on fossil fuels to power activities, finding sites that still flare gas to incorporate CCS technologies and set up mines there.
There are further worries about the future of crypto as Bitcoin plummets 55 percent from its November high. Bitcoin accounts for around one-third of the cryptocurrency market. Valued at approximately $570 billion, its price decreased by over 10 percent on Monday, and over 20 percent over the last week. The value of Ethereum has also decreased by around 20 percent in the last week.
However, several countries are starting to welcome cryptocurrency as legal tender, suggesting that governments believe it is here to stay. El Salvador and the Central African Republic both legalized the use of digital currencies within the last year. It has also played a key role in Ukraine’s war efforts, with organizations from around the world donating crypto to support Ukrainian groups. Although some countries, such as China, have banned cryptocurrency altogether.
Now crypto mining is at risk of being banned in certain cities looking to cut carbon at an increasing rate. New York is discussing the possibility of passing a new bill to ban new crypto mining operations. If passed, the bill would require digital currency mining companies to provide proof-of-work showing that they use renewable energy sources rather than fossil fuels to power operations. Meanwhile, new crypto miners would not be able to enter the market. New York would be the first state in the U.S. to introduce this kind of legislation, potentially paving the way for others to follow.
However, those working in the crypto sector believe this will simply encourage companies to move operations elsewhere. Amanda Fabiano, Head of Mining at Galaxy Digital, explained “New York will be left behind, losing to other states at best, and at worst, other more progressive nations. New York is setting a bad precedent that other states could follow.”
In fact, some miners have already begun to move operations for fear of new regulations being introduced. This is the case for digital currency company Foundry, which believes its investors are being scared off from investing in New York-based crypto. This will see many people working in crypto moving out of New York state in favor of other regions.
While crypto operations are continuing to increase, with many shifting to green energy sources to fuel mining in order to garner political support, there is no certainty around the future of digital currency. While some want to increase pressure on crypto firms to go green, others want to promote regulations to curb crypto mining entirely. And although digital currency companies have provided a useful way to get rid of waste carbon for gas producers, the lack of certainty around their longevity may deter oil and gas firms from establishing future partnerships.
By Felicity Bradstock for Oilprice.com