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By HAYVN Research
The discourse surrounding Bitcoin mining’s environmental impact has intensified in both academic and industrial domains. Estimates vary, though the Bitcoin network consumes approximately 72TWh per year, equivalent to the electricity consumption of Colombia. However, Proof-of-work mining is among the unique industries with an inherent incentive framework that promotes the usage of what would be otherwise-wasted energy, without necessitating behavioural changes or governmental directives. Below, we provide a global update on how Bitcoin miners can contribute to achieving climate goals in a way that is both realistic, fast, and inclusive. For a more comprehensive analysis, view our research Episode on how the blockchain can aid in the ESG transformation.
Proof of Work’s Energy Consumption
The Bitcoin network uses a consensus mechanism known as Proof of Work (PoW). This mechanism necessitates miners to solve complex computational problems to validate transactions and create new blocks on the blockchain, employing specialised hardware known as mining rigs. While these rigs are crucial for maintaining the network's integrity, they are also known for their significant energy consumption, often drawing power from fossil fuel-based sources and thus contributing to carbon emissions.
These mining rigs, often equipped with Application-Specific Integrated Circuits (ASICs) optimised for mining tasks, demand a substantial amount of energy to operate continuously. Such substantial energy consumption equates approximately to a carbon footprint of more than 60 megatons of CO2 annually, comparable to the carbon footprint of Switzerland. The chart below shows Bitcoin’s increasing power consumption over time.
Using Stranded Methane
Methane, a potent greenhouse gas, often finds itself wasted in various industrial processes, particularly in the oil and gas sectors where it is either vented into the atmosphere or flared. It traps 80 times more heat than carbon dioxide over a 20-year period. The utilisation of wasted methane for Bitcoin mining has emerged as a promising avenue to address both the environmental concerns associated with mining and methane emissions. Capturing and converting wasted methane into electricity to power mining operations presents a cleaner and more sustainable energy source.Â
The Intergovernmental Panel on Climate Change (IPCC) stated that the 1.5 degrees celsius target cannot be achieved without reducing methane emissions by 45% to 50% by 2030. Over a span of 20 years, methane has exhibited a global warming impact 84 times that of carbon dioxide. By incinerating leaked methane, miners have the potential to eradicate 5.32% of total global emissions by 2045, which equates to 23% of all global methane emissions. This means that Bitcoin mining has the potential to achieve half of the methane reduction target as laid out by the IPCC. Perhaps validating the process, the World Economic Forum (WEF) recently showcased, in an explanatory video, the mitigation of flaring and utilising wasted methane for data centres and mining, indicating a growing recognition of the potential to address environmental challenges​​.
Several recent initiatives across different regions have shown the application of this concept. For instance, Link Global Technologies in Alberta, Canada, is utilising trapped methane gas from inactive natural gas wells to power Bitcoin mining and data centres. This initiative is particularly significant given the approximately 91,000 inactive oil & gas wells in Canada, whose methane leakage pose a substantial threat to the environment. By harnessing this otherwise wasted methane, Link Global Technologies is not only preventing harmful emissions but also providing a stable and cost-effective energy source for energy-intensive industries like Bitcoin mining and data centres​​.
Moreover, Nodal Power has garnered $13 million in seed funding to drive its project of mitigating methane emissions at landfills by powering data centres, reflecting the financial and environmental viability of such initiatives​​.
In essence, the integration of wasted methane utilisation in Bitcoin mining operations denotes a significant stride towards reducing the environmental footprint of the cryptocurrency sector. This practice not only showcases an innovative approach to address the environmental issues associated with Bitcoin mining but also aligns with the broader global initiative to transition towards more sustainable and renewable energy sources.
Geothermal
Geothermal energy, extracted from the natural heat of the Earth, primarily captured through the extraction of hot water and steam from underground reservoirs. This heat can be converted into electricity using various technologies
El Salvador has recently made headlines with its initiative to use geothermal energy from volcanoes for Bitcoin mining. This initiative is part of a broader $1Bn renewable energy project aimed at creating a Bitcoin city near the Conchagua volcano. A significant milestone was the launch of the Lava Pool, the world's first geothermal-powered Bitcoin mining pool, on October 5, which is a collaboration between Volcano Energy and Luxor Technology Corporation. This venture represents a substantial step towards utilising renewable energy for cryptocurrency mining in El Salvador, and profits generated from Bitcoin mining are planned to be reinvested into improving the nation's energy transmission and distribution infrastructure​​.
President Nayib Bukele has extended an invitation to Bitcoin miners to utilise approximate95 megawatts of 100% clean, zero-emissions geothermal energy from volcanoes provided by a state-owned geothermal electric company. Of the 107 megawatts generated by the geothermal plant, five are allocated for Bitcoin mining operations. A document titled ‘Carbon-neutral bitcoin for nation states’ mentions a recommendation for El Salvador to achieve a hashrate of 14 petahash/s using its geothermal facility, aligning with the total mining rate of 165 exahash/second, though it doesn't provide a direct correlation to carbon emissions reduction. While these developments underscore the renewable and clean energy aspects of the initiative, specific data on its impact in terms of climate goals or carbon emissions reduction isn't provided in the available sources.
Other Initiatives
Natural Gas
Digital asset miners have leveraged stranded natural gas to fuel their infrastructure, particularly in instances where the gas volumes are insufficient to warrant the construction of a pipeline—a venture costing about $5Mn per mile. Tapping into these energy sources is often unviable for several alternative uses such as heating residential buildings or hospitals, as the energy would require transportation via either electricity pylons or gas pipelines. Among the services agile enough to establish operations in these remote areas, Bitcoin and data centres emerge as notable contenders. Unlike data centres, which cannot fully withstand variable energy generation or shutdowns without significantly impacting their services, miners possess mobility, allowing them to cease transaction validation at any given time with minimal network repercussions. This arrangement also favours producers, enabling them to monetise their gas instead of letting it go to waste.
In certain regions, natural gas that is extracted alongside oil is often flared or vented, as it may be economically unfeasible to transport it to market. Companies like Upstream Data in Canada and Crusoe Energy Systems in the US have developed solutions to mine Bitcoin using this otherwise wasted natural gas, reducing emissions associated with flaring and venting.
Hydropower
In some cases, hydropower plants produce more electricity than the grid can handle, especially during times of high water flow. Bitcoin miners can set up operations near these plants to utilise this excess electricity that would otherwise be wasted. For example, Bitmain has set up mining operations near hydropower plants in China to take advantage of excess energy production during the rainy season.
Several recent instances highlight the utilisation of excess electricity from hydropower plants for Bitcoin mining. A hydroelectric plant in New York repurposed its operations for Bitcoin mining, finding it more profitable than selling electricity to the grid. In China's Sichuan Province, authorities and utilities have lowered electricity rates to encourage the use of cheap and green energy from hydroelectric plants for Bitcoin mining. Additionally, Bitcoin mining operations can aid hydroelectric plants in managing energy demand by consuming excess electricity during periods of low demand, such as off-peak hours or seasonal changes. A notable example is HydroMiner in Austria, which leverages hydropower for Bitcoin mining and reports an 85% lower cost of electricity than the European average, utilising two hydro projects in Schonberg in Lower Austria and Murau in Styria for this purpose. These examples demonstrate a mutually beneficial arrangement where Bitcoin mining operations strategically positioned near hydropower plants capitalise on excess electricity, contributing to efficient energy management and lower operational costs for the miners.
Closing Thoughts
Perhaps the most distinctive feature that Bitcoin mining has in relation to using alternative forms of energy, is that it can help achieve climate goals while not requiring a government directive or change in behaviour. In this, it is the profit seeking activities of certain participants, looking to lower their costs, that can end up using energy that would be otherwise wasted, or left in a state more damaging to the environment.
In regions with a high percentage of renewable energy, there can be times when more electricity is generated than the grid can handle, such as on windy days in areas with a lot of wind turbines, or sunny days in areas with a lot of solar panels. Bitcoin mining can act as a flexible load that can consume this excess electricity, reducing the amount of renewable energy that is curtailed or wasted.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.