BTC Mining and Renewables-Brief Note

July 12, 2021

Recently Elon Musk voiced his ecological concerns about mining bitcoin; in particular using coal as a feed stock. Interestingly enough Tesla won’t sell its $2.5 billion worth of the digital coin. Musk said Tesla will resume transactions with bitcoin once mining “transitions to more sustainable energy.” ESG {environmental,social,governance} as a stock selection criteria has heavy weighting now. It may dictate how many investors deal with this BTC issue even if evidence tends to prove that renewables are used extensively in BTC mining. Is Musk’s motive his stock’s price?

Several miners have adopted the CAA or Crypto Climate Accord promoting decarbonization of the industry. Objectives of the CAA include reaching net-zero emissions from electricity consumption by 2030 and to reach net-zero greenhouse gas emissions by 2040. Thus far, there has been 40 to sign, amongst them 20 prominent cryptocurrency companies.

It is estimated that bitcoin mines across the US in March 2021 used 1.2 GW. So what feedstocks are prominent in the US? Despite worries about coal there they are well founded a large portion of the mix still comes from renewables. Though hydroelectric makes up 8% of US demand it makes up 63% of power used during BTC mining in the US according to a Cambridge University Study. Hydroelectric was the largest of any power source used in mining BTC in the USA. Please see Table Below.

Miners will be driven to environmentally friendly feedstocks if they make sense economically. These days in certain contexts they most certainly do. Bitcoin mining will change the economics of energy as most BTC energy sources can be centered in remote locations where energy is now stranded. With BTC miners freeing that energy it has potential to help whole undeveloped regions. Half of the world’s crypto mining happens at Sichuan during its rainy season. {Verdict Magazine,June 21,2021.}

The most efficient way to generate the highest hashes/kW is through the usage of solar energy and hydroelectric.Eighty percent of the cost of mining BTC comes from energy . The high impact of electricity prices on miners operational expenses has already seen bitcoin mines relocating to Texas for cheap wind and natural gas. Also in Canada and the Northwest there are bitcoin miners seeking to take advantage of hydroelectric opportunities.

Solar Installation Mining Bitcoin

While there is no doubt coal is a significant feedstock we should note that natural gas another relatively clean burning fuel is prevalent in mining and used in Combined Cycle Power Plants. As stated earlier wind and solar are also heavily represented. Oil only makes up 15 % as it simply is not that cost efficient as a feed stock. Please see table below.

The global bitcoin mining industry’s sustainable electricity mix more than doubled to around 56% during the June quarter, making it one of the most sustainable industries worldwide, according to a report by the Bitcoin Mining Council (BMC).

A key proponent of renewables in bitcoin mining has been Jack Dorsey of Square. Some key points made in Square’s memo Bitcoin Clean Energy Initiative include that the energy demand profile of cryptocurrency ‘miners’ is well-suited to helping balance intermittent power supply, However, the Bitcoin Clean Energy Initiative suggests bitcoin mining could help accelerate the transition to renewable power by acting as a flexible load option and easing wind and solar deployment bottlenecks. It notes that this means bitcoin miners can actually complement clean energy production and storage technologies and allow electricity grids to deploy “substantially more renewable energy”.

I personally feel all the renewable sources should be put to work now even if it means public- private partnerships in several cases. We have made great progress with green energy and there is no reason not to see that continue in the era of cryptocurrency. Why for cryptocurrency? It is becoming a very substantial part of the economy in and of itself and the blockchain technology has far reaching, simply incredible applications. This is a business that is going to transpire no matter how naysayers may scoff so it should be done in the most environmentally friendly way possible.

Cheers

Michael Salvador Koenigsberger

Please see Charts and Pictures Below

Hydro Electric Has a Prominent Role in Mining-Russia’s Biggest BTC Mine

Bloomberg.com
Solar Installation -BTC Mining

Source: University of Cambridge’s 3rd Global Crypto asset Benchmarking Study