50 Shades of Green for Bitcoin Mining - Mitchell Dong
Elon Musk and China have raised alarms about bitcoin using too much energy and not being a sustainable entity. In response, North American bitcoin miners are gathering data on energy consumption and the energy sources for the power generation they use. They hope to use this data to show that they are “green”. But what is really “green”?
I contend that there are different shades of green; from dark to light green, to yellow, brown and black shades of green, all depending on their environmental benefit or detriment.
First are truly green scenarios. These would include bitcoin miners located on grids that are 100% renewable. This would include certain geographies which receive ALL of their power from hydroelectricity, wind, solar, geothermal and biomass like in Iceland, British Columbia, Tasmania, Tilos, Bhutan, Costa Rica, Congo, Ethiopia, Kodiak Island, Paraguay, Denmark, Scotland, and Uruguay.
Truly green or “dark green” would also include bitcoin miners that are completely off of the grid and connected to dedicated hydro, solar or geothermal plants. For example, those with sufficient battery storage to allow miners to run 100% off grid, and do not buy any power from a grid.
A “light green” scenarios would be miners that are located in grids which have a portion, e.g. 25% to 50% renewables. Some of these miners pay their utility an extra 1 cent per kwh to receive a special allocation of renewable energy so that they can claim to be 100% renewable on an accounting basis. How green they are depends on what other fuels are used to produce electricity, e.g. nuclear or bridge fuels like natural gas may be “yellow,” but coal is certainly “black”.
Very light green scenarios include miners who buy Renewable Energy Credits and/or Carbon Offset Credits from facilities that produce qualified credits. This approach helps their green-level, but the mining facility might still use fossil fuels.
There are also other scenarios, which in my opinion are not truly green, but are environmentally beneficial. Examples include miners that use vented or flared gas, a by-product of oil production. Methane is a very damaging greenhouse gas and burning this methane for mining would help to mitigate climate change. Diverting otherwise flared gas to engines to make electricity for mining makes a good use of a wasted product, and avoids consuming other fuels to make electricity. Despite the benefits, a fossil fuel is still being burned. Some environmentalists would like to see the industry phase out of oil completely, a crucial element that is used to run our cars and homes, and then someday, waste gas would no longer be produced at all. This is the idea behind transferring to all electric vehicles, with the electricity produced by renewables someday.
In the same ambiguous-green category is the collection and burning of methane from landfills and to produce electricity for mining. Perhaps burning biomass or garbage to make electricity for bitcoin mining could also be put into this category. I would rate these as all “yellow or brown” as they still combust hydrocarbons and release CO2 into the atmosphere.
I am not a fan of burning waste coal to make electricity for mining. I do not support any forms of burning coal to make electricity for any use, because it is not green enough.
Nuclear power for mining is carbon-free and would be truly green. There are nuclear power plants that are no longer in competition given the low natural gas prices and more wind power coming onto the grid. This excess nuclear capacity can be used to power bitcoin mining facilities. However, environmentalists criticize our current methods for the disposal of nuclear waste due to the extremely low risk of releasing radioactive materials from a nuclear station, such as the what happened during the accidents at Three Mile Island, Chernobyl and Fukushima.
In my view, black energy is electricity produced from burning coal or oil. There are countries such as China, Mongolia, India, Kazakhstan, South Africa and Poland that get 60–80% of their power from coal; while other countries, like Australia at 50%, the US at 20% and Europe almost at 10% do not use as much coal. Fortunately the trend is downward for coal, and countries and utilities are phasing out coal in favor of solar, wind and other renewables.
Oil is still used on many island states, such as Puerto Rico where I currently reside. Oil supplies half the energy for electricity generation here. Other islands such as Hawaii, Cypress and many Caribbean nations still use oil for power generation. These grids are to be avoided at all cost for bitcoin mining unless the mining operation can be completely off grid with solar, wind and batteries. Fortunately, these countries have plans to go carbon neutral by mid-century.
How green is your bitcoin mining operation?
About the author: Mitchell Dong is a solar power developer and cryptocurrency miner and trader. He has been developing solar, hydro, cogeneration power facilities for 40 years in the US, Africa and China. He has also been a trader of physical uranium and electric power for the US and Scandinavia. He runs a hedge fund that trades cryptocurrency on behalf of bitcoin miners in Asia and USA and is actively sourcing low cost power for bitcoin miners globally.