The Merging of the Bitcoin Mining Industry and the Energy Sector

December 10, 2021 | 

The Merging of the Bitcoin Mining Industry and the Energy Sector

The migration of various crypto mining activities to Texas was taken as the start of the cryptocurrency industry’s journey in transitioning to a greener mining process. While a lot of thought was given before the state was chosen as the perfect venue for the energy-consuming process, the more significant reason for this was Texas’ environmental advantages. The state has some of the world’s cheapest energy prices and is currently in the process of expanding its renewable energy industry. Not to mention, it is a crypto-friendly political environment crucial for the crypto world to prosper.

Along with the popularity and recognition that the crypto industry has been receiving are the environmental concerns from energy experts and climate campaigners. Bitcoin mining industry has also taken its migration to Texas as an opportunity to address the criticisms about its detrimental impact on the environment. The migration was taken as an important step in minimizing its carbon emission.

The crypto industry’s utilization of renewable energy was considered a contradiction to some beliefs that this type of energy source was unfit for the mining process. For them, natural energy sources were not suited for older mining equipment that uses a higher hashrate. However, further research and studies have proven that Bitcoin mining was actually beneficial to the renewable energy industry, as much as the latter is advantageous to the former.

Environmental Concerns of Crypto Mining

Bitcoin miners race to solve complex math problems in creating a new block of verified Bitcoin transactions. The first one to do this will be given the Bitcoin block award as an incentive. As new participants enter the realm, more miners are also needed.

Bitcoin mining requires a massive amount of electricity. This process consumes the same amount of energy that small countries like Malaysia and Sweden need every year. For Bitcoin alone, mining consumes 112.00TW hours per year. If it were a country, it would be included in the top 30 energy consumers worldwide.

As the trend continues to rise, some believe that its energy consumption would be out of hand and would take as much energy as the entire world consumes. Considering that global leaders were urged to take the necessary steps to mitigate climate and environmental concerns, the crypto industries’ imminent danger to the environment should not be ignored. Decarbonization is crucial as the world was reported to potentially face devastating climate impacts by 2030, which are detrimental to communities and ecosystem.

The Merging of the Bitcoin Mining Industry and the Energy Sector

Renewable Energy Use Fits Bitcoin Mining

The Bitcoin industry is planning to subsidize renewable-energy generation. As the industry realized that wind and solar power sources were cheaper and more profitable, the former considered converging with the energy sector.

Discussions with mining entrepreneurs and energy experts showed that this was actually a good idea. In the mining process, miners’ decisions on how much energy to use and what datacenter model to employ must depend on the age of their mining machines. This concept is called “lifecycle mining”. For newer hardware, stable electricity with strong uptime guarantees is needed. They are usually brought to higher-assurance data centers. This concept would be more profitable as more mining can be done with lesser capital use.

On the other hand, older units are better taken to the “ASIC retirement homes” where they can withstand greater disruption. Crypto trading participants usually encourage miners to look for cheaper power sources when using older equipment. Older units have lower opportunity costs, so the use of renewable energy would be economical for miners. Nuclear and hydro energy are low-carbon sources are best suited for high-end application-specific integrated circuits (ASICs).

A new hybrid model is making rounds in the crypto realm. The industry can tap electricity it needs for crypto mining from places like West Texas where the energy supply is abundant. With this system, no natural energy would be wasted, and it will also be a good revenue source for Texas’ energy sector. High efficiency would be achieved by both industries. In the event that no excess energy can be provided for the crypto industry, the mining process can be shut off. Renewable energy becomes more cost-effective since it is monetized even without its demand for grid use.

The Use of Waste Methane

The use of waste methane as Bitcoin mining’s energy source is also being considered. Waste methane is a natural byproduct of oil extraction. Transporting it to refineries would be very costly for companies, so they choose to just flare the gas. Energy experts think that the mining industry should take this opportunity and include waste methane as their energy source. The Bitcoin mining industry can capture natural gas and transfer it into a generator on the well pad, so they can use this for mining. With this, methane would be put into good use and would be less destructive to the environment since it produces fewer greenhouse gas emissions compared with gas flaring. However, compared with other energy sources, methane is more inefficient as it is not consumed in the reaction.

“Demand response” Programs

Bitcoin mining industries will not be greatly affected if there are ever power outages. They are systematically prepared in these situations. As some countries face an energy crunch, energy experts put forward the concept of “demand response” programs. These programs are the formal or informal agreements to minimize their demand when there is a lower supply of electricity. The Bitcoin mining industry can stop its operation and opt to provide electricity to households. Miners can still earn through rebates. Instead of hustling to increase energy supply, such as turning on gas turbines to compensate for a sudden loss of wind, grid operators might urge mining data center operators to reduce their use. This option eliminates the requirement for fossil-fuel-powered plants to be triggered as frequently.

Bitcoin miners’ search for alternative energy source resulted in some ideas and concepts of how the industry can also help the energy sector. Studies and dialogues among energy experts and mining entrepreneurs have shown how the two industries would benefit each other. More importantly, Bitcoin mining can reduce carbon emissions through renewable energy sources, which is crucial in addressing environmental concerns given that the crypto industry continues to boom.