Major cryptocurrency miners in the US must now report energy use to the government

The Biden administration is now requiring some cryptocurrency makers to report their energy use after growing concerns that the growing industry could pose a threat to the nation’s electricity grid and exacerbate climate change.

The Energy Information Administration announced last week that it will begin collecting energy usage data from more than 130 “identified commercial cryptocurrency miners” operating in the US. The survey, which began this week, aims to get an idea of ​​how the industry’s energy demand is developing and where in the country cryptocurrency operations are growing the fastest.

“As cryptocurrency mining has increased in the United States, concerns have grown about the energy-intensive nature of the business and its effects on the U.S. electric power industry,” the EIA said in a new report following the announcement. “Concerns expressed to the EIA include stress on the electricity network during periods of peak demand, the potential for higher electricity prices, as well as effects on energy-related carbon dioxide emissions.”

Digital currencies like bitcoin are produced — or “mined” — by massive data centers that essentially solve complex equations to add new tokens to an online network known as a blockchain. As the currencies grew in popularity, they required ever greater amounts of computing power, drawing ever more electricity from the grid.

The new EIA report found that in 2023, the world’s crypto miners used as much electricity as the entire country of Australia, accounting for up to 1 percent of global electricity demand. In the U.S., the report said, just 137 mining facilities accounted for up to 2.3 percent of the nation’s total electricity demand last year — about the same demand as the state of West Virginia.

Because most of the electricity generated around the world, including in the US, comes from burning fossil fuels, anything that increases the demand for energy also increases how much carbon dioxide is released into the atmosphere. The clean energy advocacy group RMI estimates that US cryptocurrency operations emit 25 million to 50 million tons of CO2 each year. This is the same amount as the annual diesel emissions of the US railroad industry.

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This is a particularly worrisome issue in the US, where cryptocurrency operations are growing rapidly. According to the EIA report, which cites calculations by Britain’s Cambridge Judge Business School, nearly 38 percent of all bitcoin — the most popular type of cryptocurrency — was mined in the U.S. in 2022, up from just 3.4 percent in 2020. EIA has now identified at least 137 commercial-scale cryptocurrency mining facilities in 21 states, largely clustered in Texas, Georgia and New York.

Expansion of crypto operations also appears to increase the cost of energy in some states. In 2018, a small city in upstate New York welcomed a crypto-mining company to town only to see residents’ utility bills skyrocket, prompting local lawmakers to temporarily ban the company’s operations. “I’ve heard a lot of complaints that electric bills have gone up by $100 or $200,” Colin Read, who was mayor of Plattsburgh at the time, told Vice. “You can understand why people are upset.”

It’s a similar situation in Texas, says Ben Hertz-Shargel, who leads grid electrification research at global energy consulting firm Wood Mackenzie. Besides energy-intensive crypto mining straining the state’s already fragile energy grid, he said, taxpayers are also seeing increased electricity costs.

“Almost all hours of the year, power demand from bitcoin mines increases the real-time cost of electricity in Texas, which is determined every 15 minutes based on supply and demand,” Hertz-Shargel said in an email. “This raises electricity costs $1.8 billion a year for homeowners and businesses in the state, a 4.7 percent increase on what they currently pay.”

Crypto companies can mitigate some of these issues, including their impact on climate change, by developing their own renewable energy systems to reduce their reliance on the grid, Hertz-Shargel said, similar to what Big Tech companies like Google and Amazon are doing . But not only are crypto companies doing this, he said, they’re setting up shop next to existing renewable energy facilities, drawing clean power that would otherwise go to nearby homes and businesses.

“Every unit of clean energy consumed from the local wind or solar farm is simply diverted from another customer,” he said. “The net effect is to increase the overall power demand on the grid, which must be met by the increased dispatch of expensive and high-emission fossil generation.”

There are some cryptocurrency companies that have found ways to drastically reduce their energy footprint. In 2022, the crypto company Ethereum announced a software update that managed to reduce the carbon emissions of its mining operations by more than 99 percent.

Hertz-Shargel said other companies should follow Ethereum’s lead, or they could see even more government regulation in the future.

This story originally appeared on Inside Climate News.