Can Bitcoin Mining Really Support Renewable Energy?

A new study has found that Bitcoin mining along with green hydrogen could help speed a transition to clean energy – an eyebrow-raising claim, considering strong evidence that the cryptocurrency is a major polluter.

To avoid any misconceptions, The Verge spoke with researchers to understand the very narrow scenarios in which this concept can work, and possible pitfalls, given the complicated reality of Bitcoin mining.

The study, published in the journal PNAS, calls Bitcoin and green hydrogen fuel a “dynamic duo” no less than seven times. It envisions an ideal scenario in which the profits from Bitcoin mining are used to invest in clean hydrogen production and renewable energy.

The devil is in the details. Bitcoin will have to be mined with clean energy. And a major caveat in the study is that it suggests energy companies or climate groups are doing the mining, not your average Bitcoin miner who has no financial incentive to deploy more renewable energy on the grid. In fact, for this to happen, there will need to be policies in place to ensure that funds earned from Bitcoin mining are actually spent on clean energy.

“It all depends on who uses it [Bitcoin] – just the same as a knife. We can use it for a meal, we can also use it as a weapon, right?” said Fengqi You, one of the authors of the paper and a professor of energy systems engineering at Cornell University. “In this context, we are not going to exploit Bitcoin as the open market trading currency at all.”

Bitcoin mining operations are estimated to produce almost as many greenhouse gas emissions annually as the country of Morocco. Bitcoin mines are data farms filled with specialized hardware that solves arithmetic puzzles 24 hours a day for a chance to validate new transactions on the blockchain. They earn Bitcoin as a reward, the price of which has recently risen above $70,000.

The new study offers a potential scenario: why not spend those profits to spur growth in solar and wind energy? It proposes to do this in a detour by using an intermediary: green hydrogen, which is made with renewable energy (as opposed to a majority of the hydrogen on the market today, which is made with fossil fuels). .

The challenge with solar and wind is that they are intermittent energy sources that fluctuate throughout the day and year. You can solve this problem with rechargeable lithium-ion batteries, but they haven’t advanced enough to be very efficient for long-term energy storage. This is where green hydrogen and Bitcoin mining can come in, the study says.

The authors call hydrogen and Bitcoin “energy carriers.” When sun and wind are used to make green hydrogen, that water stores or ‘carries’ the energy as fuel that can be used later – even when the wind dies down and the sun doesn’t shine. Bitcoin, if used to purchase green hydrogen and/or support the deployment of more solar and wind farms, could be considered a virtual energy carrier, according to this paper.

You say it would be like using Bitcoin as a gift card to spend on clean energy. Policies will need to put safeguards in place so that the money is not spent on anything else, similar to a gift card that is only valid at a particular store. The system could expand solar capacity by up to 25.5 percent and wind capacity by up to 73.2 percent in the U.S., according to the paper.

But it depends on many hypothetical scenarios. In the real world, this would be difficult to replicate. Opening and operating a Bitcoin mine does not come cheap; traditional Bitcoin mines run all day to recoup their costs and make a profit.

“They don’t think very far into the future,” Joshua Rhodes, a research scientist at the University of Texas at Austin and a non-resident fellow at Columbia University, said of Bitcoin mining companies. “They’re running things as fast and as crazy as they can right now to get the money in, and aren’t really interested anymore in the long-term, decade-long investment cycles that something like this requires.”

Utilities will face steep startup costs to mine Bitcoin, and will be saddled with more restrictions if they want to support clean energy.

Rhodes, who is also a founding partner for consulting firm IdeaSmiths, worked on an analysis for crypto mining company Lancium in 2021. It found that Bitcoin mines looking to spur growth in renewable energy would need to shut down around 15 percent of the year. , when wind and solar generation is low, to effectively reduce greenhouse gas emissions from electricity consumption.

Bitcoin companies in Texas, a hot spot for mining where Rhodes’ analysis was conducted, have paused mining in the past, but only because they were paid. The state’s grid operator paid crypto miners tens of millions of dollars in energy credits to prevent outages during electricity demand peaks and supply shortages. The program advanced the idea that Bitcoin could offer the same energy storage benefits as a battery, even though there is little motive to limit mining without financial incentives.

Ultimately, Bitcoin can only be compared to half a battery, says Rhodes. Energy goes in, but it doesn’t come out. “I don’t think it’s appropriate to call Bitcoin an energy carrier,” Rhodes tells The Verge. “You might make an argument that it’s called an enabler, which is what I think they’re trying to do here, but the idea of ​​calling it an energy carrier perpetuates the idea that you’re somehow getting energy out of this thing can get. , which is not possible.”

You and his co-author published a similar paper last year that found that Bitcoin mining could potentially generate profits for renewable energy projects. Again, the findings apply to a very specific scenario: mining using surplus renewable energy from new solar and wind farms still waiting to be connected to the grid.

There is a backlog of infrastructure waiting to be connected to the network. On paper — at least in this latest study — a Bitcoin mine, hydrogen facility, solar and wind farms could all work in tandem. In reality, they may be in competition with each other for a limited supply of transformers, converters and all the other equipment needed to connect them to the grid.

Even in a scenario where it is a utility running the program and mining Bitcoin to fund clean energy ambitions, success still depends on wildly fluctuating Bitcoin prices. The price may be around $70,000 today, but it is only just emerging from the Crypto Winter that pushed prices below $20,000.

“I wouldn’t say impossible, but [the price of Bitcoin] it’s unlikely to be zero, right? … Once there is a value, there is a way to use these mines as a tool,” says You. “But what the future market will look like, nobody knows.”

The authors received funding from the National Science Foundation, but no support from industry. You also say that he doesn’t personally own any crypto.