From wind farms in West Texas to an old aluminum refining operation outside Austin, crypto miners are flooding into Texas take advantage of some of the cheapest power in the country and positioning the state to become the state’s crypto mining leader. But the accompanying surge in energy consumption is drawing scrutiny from Congress when the world is trying to not only clean up its energy system but also reduce demand to fight climate change.
At a hearing this month before the House Energy and Commerce Committee, the chairman. Rep. Frank Pallone, D-N.J., questioned the sustainability of crypto mining’s business model.
“One estimate found that the energy required to process (one) transaction on the bitcoin network could power a home for more than 70 days,” Pallone said. “Last year, there were hundreds of thousands of transactions on this network. Just imagine the climate implications.”
A recent study by scientists at Cambridge University found crypto mining operations globally consume 135 terawatt hours of electricity per year, more than the entire country of Argentina.
The majority of that electricity comes from hydroelectric dams and coal and natural gas plants, the scientists found. In New York, for instance, one firm has restarted an old coal-fired power plant to provide energy for its crypto mining operations.
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In Texas, so far, crypto miners are being met with open arms. The Texas Legislature last year passed a bill creating a task force to aid the development of the cryptocurrency industry in Texas, with Governor Greg Abbott writing on Twitter, “It’s happening. Texas will be the crypto leader.”
That along with the state’s cheap power prices are attracting crypto mining firms from around the world, most of which were forced to look for new homes after the Chinese government banned cryptocurrency last year.
EZ Blockchain, a Chicago firm, has proposed setting up mobile computer rigs in Texas’s oil and gas fields, powering their mining operations with natural gas that would otherwise be flared.
Marathon Digital, based in Las Vegas, announced last month it was installing more than 100,000 bitcoin mining computers around Texas, primarily adjacent to wind and solar farms in West Texas.
“This industry has transformed over the last year since China shut down mining,” said Charlie Schumacher, director of corporate communications at Marathon. “The U.S. is unique because we have excess power here and we have a friendly regulatory environment. But we’ve gone through this transition so quickly it’s raised a lot of questions.”
Even as some crypto companies make strides to employ clean energy for their operations and reduce their energy consumption by using more efficient equipment, the sheer scale of their energy demand is giving many pause.
And as new miners flood the industry, there’s little sign of a slowdown. Electricity consumption for mining bitcoin, the most popular crypto currency, has almost doubled over the last two years, according to the Cambridge scientists.
“We’re making all these great strides to decarbonize and reduce our energy use and now were promoting this incredibly energy intensive new industry and wiping out any climate gains were struggling to make,” said Luke Metzger, executive director of Environment Texas, an activist group. “It seems very wasteful and not what we need right now.”
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Concerns about the environment, as well as concerns that all this demand for electricity could have negative effects on the consumer market, seem eminently reasonable to me. It’s nice that coin miners were willing to power down during this cold front, but what assurance do we have they will do so next time? Some regulation is needed, and I’d like to see some exploration of a way to tax high energy use by crypto companies, as a way to ensure that they won’t distort the market. The one thing I am sure of is that doing nothing and hoping it all turns out for the best is unlikely to work. Put some guardrails in place, and enforce violations. We can debate over what that looks like, but that needs to be the goal.