The US government has just signed off an emergency probe into how much power cryptocurrency miners are drawing from America’s electricity grid.
More specifically, the Energy Information Administration, part of the US Department of Energy, has been granted funding for a six-month study into cryptocurrency energy use, which will involve collecting and analyzing grid utilization data from scores of mining operations.
The EIA justified [PDF] the emergency nature of its investigation by arguing an ongoing bitter cold snap in the country along with a recent spike in the price of Bitcoin, and thus demand for the digital money, could cause an unnecessary drag on the US power grid this year and push up people’s bills.
“The price of Bitcoin has increased roughly 50 percent in the last three months, and higher prices incentivize more cryptomining activity, which in turn increases electricity consumption,” wrote EIA administrator Joseph DeCarolis in a letter last month.
The combined effects of increased cryptomining and stressed electricity systems create heightened uncertainty in electric power markets
“At the time of this writing, much of the central United States is in the grip of a major cold snap that has resulted in high electricity demand. The combined effects of increased cryptomining and stressed electricity systems create heightened uncertainty in electric power markets, which could result in demand peaks that affect system operations and consumer prices.”
Cryptocurrencies like Bitcoin use a system known as “proof of work” to validate transactions and add them to the blockchain, producing currency for miners in the process. This requires performing calculations over and over to solve increasingly difficult mathematical puzzles that are primarily done by specialized mining hardware that consumes a decent chunk of electricity.
Ethereum, the second most popular cryptocurrency after Bitcoin by market cap, switched to a “proof of stake” system, which aims to use far less energy, in 2022. Various crypto-coins use either proof of work or proof of stake.
Digiconimist, which has been tracking Bitcoin energy usage for years, claims the electrical energy used by Bitcoin miners right now amounts to an estimated 138 TWh per year, and topped out in the first half of 2022 at 205 TWh per year. A single Bitcoin transaction apparently eats up around 762.89 kWh – the same amount of energy the average US household would use in 26.15 days.
Of course, all that power consumption generates a lot of heat, which means water usage for cooling and whatnot is absurd as well. A single Bitcoin transaction, Digiconimist claims, uses 12,023 litres of H2O – about the amount you’d find in a modest backyard above-ground pool – while the entire global Bitcoin mining industry is said to use around the same amount of water in a year as Switzerland.
The energy usage of cryptocurrency networks rises and falls with prices. With Bitcoin’s value on a continual climb for much of 2023 and into this year, energy consumption by miners is only on the rise.
Taking a quick first look
The EIA will begin sending surveys to 82 cryptomining firms in the United States next week, which it said will be required to respond with details of their energy usage, including any electricity generated for themselves.
“We have developed general estimates of electricity use by US cryptocurrency mining operations by employing both top-down and bottom-up approaches,” the administration said in a preliminary analysis of cryptomining energy usage published on Thursday.
“In order to develop more rigorous estimates of electricity use by US cryptocurrency miners … we plan to begin collecting data on a monthly basis from February through July 2024.”
The Register asked the EIA as to the ultimate goal of the survey – specifically if it plans to use the data to develop restrictions or regulations on power usage by cryptocurrency miners, but the agency declined to answer and said it was just getting a better understanding.
“EIA is in a unique position to collect information directly from the companies, and the data we collect will help our assessment,” an EIA spokesperson told us.
The EIA told us it hopes to develop a base snapshot of cryptomining companies and their energy usage, quantify how much energy usage by identified miners fluctuates, pinpoint energy sources, and identify regions where cryptomining is concentrated.
“We will specifically focus on how the energy demand for cryptocurrency mining is evolving, identify geographic areas of high growth, and quantify the sources of electricity used to meet cryptocurrency mining demand,” DeCarolis said in a canned statement.
The EIA estimates that cryptocurrency mining is responsible for between 0.6 to 2.3 percent of all US electricity consumption. According to the watchdog, they’ve been hearing more concerns from grid operators since China cracked down on cryptocurrency mining in 2021, causing operations to migrate outside the Middle Kingdom.
“Strains to the electricity grid during periods of peak demand, the potential for higher electricity prices, as well as effects on energy-related carbon dioxide (CO2) emissions” were all cited, the EIA said. “Grid planners have also begun to express concern.”
The approval for the EIA’s cryptocurrency mining survey expires on July 31, 2024. The findings from the next six months will determine whether the agency gets funding to carry on collecting and assembling this kind of data, we’re told. ®