The Biden administration announcedthat large mining operations should report their crypto mining energy consumption. The Energy Information Administration (EIA) issued apress releaseon account of the potential threat from rising crypto mining energy consumption to the country’s power grids and environment.
Miners consume as much energy as Washington State
According to data of the EIA, there are 137 known commercial miners in the country, whose crypto mining energy consumption is equivalent to 90 terawatt-hours annually or around 2.3% of the national energy consumption. This is the same percent consumed by the entire state of Washington, the government officials alarm. In 2022, the state of Utah used just0.8 percent of the electricityin the US.
Crypto mining energy consumption around the world is equivalent to the consumption of Australia in 2023. The EIA will run a survey to collect data, specifically focused on how crypto mining energy consumption is evolving, identifying high-growth geographic areas, and quantifying the sources of consumption.
The results of the survey will be used to explore the energy implications of the country’s flourishing cryptocurrency mining industry.
The US hosts the largest crypto mining industry
WhenChina banned cryptocurrencies in 2021, crypto miners flocked to the US in search of cheaper crypto mining energy consumption and laxer regulations. In several years, the country’s share of the world’s mining operations had grown from 3.5% to 38%. With that, it became the biggest crypto mining industry in the world.
Mining hubs in Texas, Florida, New York, Kentucky and elsewhere have vastly increased crypto mining energy consumption due to demand to operate around the clock.
The first step
The EIA is allowed to mandate any company engaged in “major energy consumption” to reveal data on its use. At the end of January, the EIA sent the White House aletterasking for urgent approval to inspect crypto mining facilities, with which it took the first step in building such a regime. In the letter, the officials wrote that the price of Bitcoin hadgained 50 percentin the last quarter, potentially leading to even higher crypto mining energy consumption. This could put additional pressure on power grids already under strain from winter storms and cold weather.
The case for miners
This case doesn’t look good – to put things in perspective, some jurisdictions have even moved to ban crypto mining. For their part, crypto mining firms insist they benefit local populations. Leading Bitcoin miner Riot Platforms stated in apress releasethat they gave hundreds of Texans jobs and were helping revive struggling local economies.
The industry disputes the claims of excessive crypto mining energy consumption. In aletterto the Environmental Protection Agency, the Bitcoin Mining Council claimed that mining did not generate any emissions at all. They said crypto miners were like any other consumer who purchased electricity available on the open market.
Analyzing the pitfalls of crypto mining energy consumption reporting
The first pitfall involves reporting CO2and not CO2e, which is frequently the result of a legacy issue from CRC reporting. CO2e means “carbon dioxide equivalent” and measures the total emissions of greenhouse gases.CO2 only provides information about carbon emissions and does not measure any other greenhouse gases.
No clear methodology
The EIA has not indicated any methodology to determine crypto mining energy consumption. Examples of recognized methodologies include the ISO 14064-1:2018, the corporate standard of the GHG Reporting Protocol, and the Climate Disclosure Standards Board Framework. These methodologies are based on key principles. For the GHGP, these are accuracy, consistency, relevance, transparency, and completeness. When making a disclosure, one should indicate they have applied these principles by releasing statements on estimates, omissions, and assumptions.
This begs the question of whether the government knows what it’s asking miners to report. It reflects a dilemma from the recent past, when the SEC filed numerous lawsuits against crypto exchanges for illegally selling securities but did not define “security.”
No way to indicate efficiency
For transport data, there is no conversion of fuel to energy consumption (kWhs). Moreover, there is no data on intensity metrics to indicate efficiency over time (e.g. production units, CO2e per employee, area occupied, etc.).
Crypto mining energy consumption reporting should be as complete and transparent as it can be. The focus should move away from compulsory reporting and consider additional voluntary disclosures.
Downsides of energy efficiency measures
While one cannot argue reporting has benefits, there are undisputable downsides. If deemed excessive, there will be requirements to reduce crypto mining energy consumption by making mining more energy efficient. Upgrading to more efficient appliances and systems is costly, and there will be additional expenses for maintenance, installation, and subsequent repairs.
After the Ethereum Merge in 2022, the Ethereum Mainnet reduced its carbon emissions by more than 99 percent. However, there are signs Ethereum’s Merge was “priced-in” and ether is currently overvalued.
If energy efficiency is the overarching goal in terms of crypto mining energy consumption, mining performance may suffer. Thankfully, there may be unexpected ways to generate clean energy.
Finally, there may be lower energy savings than expected depending on use patterns, weather, and other factors that are difficult to account for in advance.
