A Symbiotic Bitcoin Mining and Renewables Relationship?
By: Deepa Ramachandra
Tags: Esg, Renewable Energy, Blockchain, Bitcoin Mining

Can Bitcoin Mining & Renewables Forge a Symbiotic Relationship? Image Source: Shutterstock

In recent years, a lot of deliberation is happening around the contributors of greenhouse gases. Scores of people have labeled Bitcoin mining as bad for the environment. Why is this discussion necessary? Is it possible to make mining green while building a mutually profitable relationship with renewables?

“Climate change is widespread, rapid, and intensifying, and some trends are now irreversible, at least during the present time frame” — Intergovernmental Panel on Climate Change (IPCC) report, Aug 2021.

The report gives irrefutable evidence that human induced climate change is already creating irreversible and never seen before weather extremes. The UN Secretary General António Guterres, reacting to the report’s finding, warned that we are “perilously close” to hitting the barrier of 1.5 degrees above pre-industrial levels of global warming. He emphasized that immediate and sustained reductions in carbon dioxide (CO2) and other greenhouse gas (GHG) emissions are vital for steadying global temperatures in 20 to 30 years.

While examining the reasons for high CO2 emissions, one source is often called out — Bitcoin Mining. The proliferation of mining in China, where cheaply available coal was mainly used to power the resource intensive mining rigs, is singularly why crypto mining gained this infamy.

Why Does Mining Eat Up So Much Electricity?

“Mining” is the mechanism that the Bitcoin network uses to ascertain what records go into the “block.” Several machines with powerful ASIC processors compete to generate a unique cryptographic hash that has a predefined number of leading zeros. These “hash-generating machines,” however, need a lot of electricity to operate.

It is not easy to accurately determine the energy used for mining, as it is difficult to establish how many machines are actively mining in the network. Usually, the total computational power of the network or the miners’ rewards is used to estimate the energy consumption. As per some estimates, Bitcoin mining currently consumes over 92 TWh of electricity annually. Bitcoin consumes 0.41% of the total electricity produced in the world.

Image Source:​​ Cambridge Bitcoin Electricity Consumption Index

A further concern is the average electricity used per transaction. Though the total consumption is approximately 20% of global energy consumption, the per transaction requirement is over 1000 times more.

Image Source: Statista

More miners compete, higher the hash rate difficulty, though enough to pull some miners out of the game. Fewer miners, lower is the hash rate and thereby reduced energy consumption.

Yet, energy consumption alone will not provide reliable proof of Bitcoin’s carbon emissions. What percentage of energy supply comes from renewables? Which energy source contributes the most to mining? It is difficult to find accurate answers to these questions as most of the consumption reporting today is voluntary. And based on estimates, the renewable energy use in Bitcoin mining varies widely from 39% to 73%.

Using Renewables to Power Bitcoin Mining

Yet, today, more than ever, there is a spur from environmentalists and Bitcoin patrons to switch to lower carbon emitting energy options instead of the harmful gas spewing coal. The recent crackdown in China and Elon Musk’s retraction from Bitcoin payments for Tesla are a few examples of how fossil fuel based electricity is proving to be an Achilles heel for crypto.

So, what options do the mining community have? And what would it cost to switch to greener energy supplies?

Water

The most commonly used renewable source of electricity for Bitcoin mining is water. Hydroelectricity is the most reliable among all renewables and does not result in any GHG emissions. Since we can predict its availability, it is possible to produce more electricity when needed while keeping the production low when demand is less.

Earth

Next, the heat from within the Earth is another dependable energy source as it will last until the planet exists. Geothermal heat pumps are highly efficient as they usually use 20 to 30 percent less electricity than conventional sources for heating and cooling purposes.

Hydro, geothermal plants involve low maintenance and operational costs, making them cost-effective options over the long term. El Salvador is exploring this option for Bitcoin mining.

Biomass

Next, biomass is a carbon neutral energy source. Here the amount of carbon released commensurates what is absorbed by the plants and animals in their lifetime. Furthermore, garbage, wood, and manure, which are the most used sources for biomass energy, are consistently produced.

Sun and Wind

Finally, we come to the electricity generated from solar and wind power. These zero carbon energy sources are true renewables with low operating costs. They are always available and are inexhaustible.

But, at What Cost?

But, using renewable energy sources comes with its own difficulties. First, running the mining facilities on solar and wind is not possible due to their intermittent nature. Rains are seasonal as well, and hence water for generating electricity is not feasible all through the year. Besides, the mercurial climate changes make it difficult to predict water availability.

Secondly, setting up a hydroelectric or geothermal plant is expensive. The costs can run to millions of dollars. In the case of biomass plants, there is an additional cost involved in gathering, transporting, and storing the wood, manure, and garbage required.

The space required for these plants is also significant, making it difficult to set up these energy sources closer to where they are needed the most, such as crowded cities. Consequently, it becomes necessary to invest in means to transport the generated electricity and cover long distances. It significantly adds to the cost.

For the miners who run their ASIC machines round-the-clock to reap maximum profits, it is vital to look for the cheapest and most consistent form of electricity.

Bitcoin Mining To Spur Sustainable Energy Use

Solving the intermittency problem is key to the widespread adoption of renewables, especially solar and wind. It requires increasing the energy storage and improving the transmission capacity for it to reach longer distances, all of which require investing more money. But, the lack of persistent demand is dissuading people from making heavy investments. They fear that the returns would be less and unpredictable.

Some studies find Bitcoin mining could be the source of constant demand. If Bitcoin miners create reliable and sustained energy demand, it will encourage the energy producers to generate and store substantially more renewable energy.

Another notable feat of Bitcoin mining is using natural gas, a byproduct from the oil rigs, to power its mining units, reducing the gas flared into the atmosphere. By an estimate, a total of 688 TWh of energy could be recovered from global gas flaring, enough to power the Bitcoin network 8.4 times. Furthermore, setting up the mining farms closer to the oil rigs cuts down the transportation costs. Hence, the supplied electricity is cheaper.

Is Forging a Symbiotic Relationship Sufficient?

Although, some regard the effect of Bitcoin mining on the environment as beyond its transition to renewable energy. They argue the e-waste generated by mining equipment significantly impacts the environment when they end up in landfills. Notwithstanding, it is essential to start addressing each and every cause of climate change. If switching to renewable energy sources for Bitcoin mining could contribute to a greener future, it is necessary to move ahead. Similarly, if Bitcoin mining could help with the proliferation of renewables, then it is worth trying. A symbiotic relationship that is mutually beneficial is worth a shot.