In recent years, a few reports have been published that Bitcoin is bad for the environment and that global bitcoin mining consumes more electricity than small countries. While this metric is mathematically true, the premise that it is bad for the environment is false. Here’s why Bitcoin is an energy solution, not an energy problem.
Where Does Electricity Come From?
If you are reading this article right now, you are probably using electricity. Do you know where that electricity came from? Do you know what resources were consumed to create that electricity? I’m willing to bet that you don’t. Hopefully, this article will help to shed some light on where it comes from, how it gets to you, and how Bitcoin is actually a solution to the global energy crisis.
Fossil Fuels
Every time you turn on a light, open your garage door, use your blow dryer or charge your phone, you are using electricity. Have you ever really given much thought to where that electricity comes from or what resource was consumed in order to enable you to have that electricity?
For most, the answer is “No, not really”.
The majority of the world’s electricity comes from burning coal, oil, natural gas, and other combustibles.
For a minority of the world’s population, they use renewable energy sources to power their cities and homes.
Energy Supply & Demand
In order to better understand how certain types of electricity are generated, it helps to first understand the supply and demand for electricity.
In most of the world, electricity comes from a power plant that is largely centralized and often monopolized by a government or utility company. Energy consumers in each locale purchase that electricity based on the supply and demand for electricity at certain times of the day.
Energy is at its lowest demand in the middle of the night when the majority of people are asleep. In the morning energy demand spikes as people get up and get ready for work and school. Demand then dips down during the middle of the day before it reaches its daily peak in the evenings when people get home from work and need to use electricity to power their homes.
Throughout all of these different demand periods, the supply from fossil fuel can be ramped up and down to meet the demand. By simply choosing when to burn fossil fuel, power suppliers are able to accurately match energy supply with energy demand at different times of the day. Solar and wind power suppliers aren’t able to control the supply of wind and solar energy since they have no control over when the sun shines and when the wind blows.
Renewable Energy Curtailment
More and more energy is being produced from renewable energy sources but renewables aren’t without their problems. If a solar farm or wind turbine produces electricity when there isn’t a buyer (demand) that electricity has nowhere to go. Essentially it gets wasted. To deal with this lack of demand, renewable energy sources have to reduce their production. This reduction is called curtailment.
The result of energy curtailment is that renewables have to turn down their production even if they are capable of producing at 100% of their capacity. This dilemma is made obvious by a demand graph called “the Duck Curve. This curve gets its name because it looks like a duck’s back.
Energy curtailment disproportionately affects solar energy production since solar is only produced during the day when the sun is shining. Wind continues to blow at all times of the day, hydroelectric dams can store a certain amount of water for later use and geothermal produces 24 hours a day.
This video by Vox does a pretty good job of explaining how curtailment is affecting the power grid and renewable energy suppliers. Unfortunately, they don’t know about bitcoin’s potential to solve the problem of energy curtailment and the duck curve but we will touch on that in another article.
Is Bitcoin Mining An Energy Problem?
The main arguments from skeptics of bitcoin’s energy consumption all seem to be focused on the fact that global bitcoin mining consumes more electricity than a number of small countries.
What they’re missing is that bitcoin is mostly being mined by clean renewable energy. What’s even more exciting is that bitcoin has the potential to subsidize the renewable energy sector without reducing the amount of electricity available to consumers. Bitcoin’s consumption of electricity is also necessary to secure the network so it would be more accurate to say that all that electricity is used to keep Bitcoin secure.
As the title of this article states, I believe that bitcoin is an energy solution, not an energy problem, and here’s how…and why.
Bitcoin Is An Energy Solution!
Now for the exciting part where we get to discuss how Bitcoin is going to help to more efficiently distribute the global energy supply and act as a constant demand for grid operators who are working to balance the energy grid. Since the cost of mining bitcoin is relative to the cost of the electricity required to mine them, bitcoin miners gravitate towards parts of the world where energy is abundant, cheap, and even “free”.
This is an incentive for bitcoin mining companies to innovate and find the cheapest methods to produce electricity. As the quest for cheap electricity intensifies, businesses, engineers, governments, and economists are all looking for ways to harness wasted energy.
Here are some of our favorite methods.
Natural Gas Bitcoin Mines
When oil is extracted from the ground, it releases trapped natural gases. These natural gases are often methane. What most people don’t know is that methane gas is actually a greenhouse gas that is much worse for the environment than CO2.
In order to reduce the environmental impact of oil drilling, this methane gas is burnt off in a process called “flaring”. All that means is that they set the methane on fire to burn it into CO2 which emits much less greenhouse gas. I’m not 100% sure of the environmental impact of methane as a greenhouse gas but I’ve found numbers that say it is as low as 26x worse than CO2 while other reports say that it is 56x worse. Based on those sources, I will say that methane that doesn’t get burnt off is 26x to 56x worse for the environment than burning it.
You may be asking, “Why don’t they capture this natural gas and use it to heat homes and power infrastructure?”
That’s a great question. That is the obvious first option but if the amount of gas is small and insignificant enough, it would consume more resources than it is worth to harvest.
Imagine spending 10 gallons of gas to save 5 gallons of gas. It’s not only cost prohibitive but is also creates a “cure” that is worse than the problem.
Mining bitcoin with flared gas allows energy companies to convert wasted energy into revenue. Not only does this reduce the energy waste of natural gas but it also incentivizes bitcoin miners to move away from using electricity that is already on the grid and would otherwise be utilized by consumers.
Bitcoin is an energy solution for the fossil fuel industry to put wasted flared gas to work mining bitcoin.
Hydro Bitcoin Mines
Rain falls. Snow melts. Rivers rush. Tides flow in and out. What do all of these have in common? They are all forces of nature that cost humans nothing to produce. They happen all the time all around us in nature and this energy is wasted if we don’t harness it.
Mining bitcoin with hydro energy allows for clean, cheap and renewable energy to be produced with one of the lowest environmental impacts in the energy sector.
Solar Bitcoin Mines
Every day, the earth receives more energy than we know what to do with from the sun. The amount of energy that falls on the earth’s surface every day is enough to fulfill all of the world’s energy needs for an entire year. To capture this energy we use solar panels and concentrated solar farms to convert that energy into electricity.
Mining bitcoin with solar energy is possibly one of the best opportunities for bitcoin mining. Since solar energy is produced in the middle of the day (when the sun is shining) and energy demand is at one of its low points, much of solar energy that gets produced is curtailed (wasted). Since we don’t yet have an effective means to store that surplus energy, this is an amazing opportunity for bitcoin miners to convert that surplus into bitcoin.
Wind Bitcoin Mines
Humans have been harnessing the power of the wind for thousands of years. It has been used to propel ships across the sea, used to power windmills to grind grain into flour, and is now widely used to turn wind energy into electricity.
Again, since there still isn’t a cost-effective solution for storing wind (and solar) energy, electricity produced by wind turbines needs to be consumed when it is produced or it gets wasted.
Mining bitcoin with wind energy that currently doesn’t have a buyer allows wind turbines to sell 100% of the energy they produce and completely avoid any energy curtailment.
Geothermal Bitcoin Mines
Geothermal energy is generated 24 hours a day in certain parts of the world where volcanic activity is high. Approximately 25% of Iceland’s electricity is generated from geothermal energy sources. Since geothermal electricity is only available in certain parts of the world, there’s a unique opportunity for mining bitcoin in these locations where there is an abundance of volcanic activity. In places where geothermal energy is available, Bitcoin mining has flourished thanks to these low-cost sources of clean electricity.
Heating Homes, Offices & Greenhouses with Bitcoin Miners
Bitcoin mining not only generates new bitcoins, but it also produces a byproduct that often gets overlooked. I am talking about heat. A lot of heat actually. Since Bitcoin miners are hard at work competing to win the next block reward, bitcoin miners get hot to the touch and if you don’t have a way to expel that heat, you run the risk of overheating your bitcoin miners.
In colder climates, people actually pay money to heat their homes (gasp!) but some see the excess heat generated by bitcoin miners as a means of reversing their heating bills if they have access to cheap electricity. Instead of paying money to heat homes, offices, schools, and even greenhouses, we could actually be getting paid to heat. What’s even better is that if we use any of the methods mentioned above, we could do so without generating any additional greenhouse gases.
Bitcoin Mining Subsidizes Renewable Energy
As part of an international effort to curb the use of fossil fuels, governments all around the world have committed to the adoption of renewable energy sources over the next few decades. Part of this global initiative is subsidizing the production of renewable energy sources. Unfortunately, the increase in these new energy sources hasn’t been all sunshine and rainbows. Much of this new green energy gets wasted due to a surplus in supply, power grids that can’t handle the electrical load and no efficient means to store that electricity for later use.
This is where some of the most fascinating elements of bitcoin mining come into play. Since much of what we’ve listed above is much less carbon-intensive than burning fossil fuels, we could actually see the complete elimination of wasted energy from renewables. If a power plant is producing electricity and some of that supply is being curtailed, bitcoin mining creates the ability to convert 100% of curtailed electricity into revenue which is what power companies want. Instead of using taxpayer money to subsidize renewables, we ought to first look into bitcoin mining as a means to reduce overhead for our existing renewables infrastructure.
Final Thoughts
While it is absolutely true that bitcoin mining utilizes an incredible amount of electricity to make bitcoin the most secure payment network in the world, it also offers a unique opportunity for energy producers and consumers.
Since Bitcoin miners will always find the cheapest electricity possible, mining offers a “lowest bid” to purchase all unused electricity and solve the problem of energy curtailment.
It’s likely that within the next decade we will find an efficient way to store unutilized energy but that doesn’t solve the problem in the short term. Until renewables are able to be stored, Bitcoin is an energy solution to harness the power of all unused and curtailed energy around the world.
Bitcoin Is An energy Solution, Not An Energy Problem: Infographic
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