Crypto mining operators ‘cause more power to turn on’ to meet energy demands: Reporter

The New York Times Deputy Investigations Editor Gabriel Dance joins Yahoo Finance Live to discuss how much power is used in Bitcoin mining operations, the income of Bitcoin miners, and how the industry may affect the environment.

Video Transcript

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JARED BLIKRE: The true cost of mining digital currencies. The New York Times is reporting just how much power is being used, how you could be paying for it, and what it’s doing to the environment. Joining us now is the author of the story, New York Times deputy investigations editor Gabriel Dance. Gabriel, thank you for joining us here today. Just give us a little bit of the overview, some of the research that you did coming into this story and what you found.

GABRIEL DANCE: Jared, thanks so much for having me. So yes, I became interested a few months ago in just why this industry was consuming as much electricity as it does. And what I found was that many of the companies were extremely reticent to speak to exactly how much energy they consume, where they’re located, and much more about their operations.

What I discovered was 34 operations spread across 15 states, each one using at least 30,000 times as much power as a US American home. It’s an incredibly vast amount of energy that they’re using. And of course, that results in large amount of emissions. The amount of emissions was about 16.3 million metric tons of carbon dioxide, which is about the same as adding 3.5 million gas powered vehicles to the road. So it’s not only an enormous amount of energy they’re consuming, but the resulting emissions are quite extensive as well.

JARED BLIKRE: And one of the counterarguments to people who support the energy that feeds into the energy is that a lot of these Bitcoin mining sites are placed around sources of renewable power and they’re just consuming power that wouldn’t have been produced by, I guess, carbon producing power plants in the first place. But there are the devil’s in the details, I guess you could say.

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GABRIEL DANCE: I think that’s very accurate. So yes. As you said, the miners like to say that they set up in areas where there’s a lot of excess renewable energy. But working with a non-profit that studies this type of information, What Time, what we discovered is actually in almost every location they set up, the vast amount of renewable energy is already being consumed.

So their operations actually result in fossil fuels, natural gas, coal plants turning on 85% of the time. So while they say that they operate in areas of renewable energy, the truth is most of that energy is already being used. So their operations cause more power to have to turn on to meet that.

JARED BLIKRE: What I found particularly eye-opening are some of the rebates and financial incentives that some of these companies, some of these mining companies are given specifically by the state of Texas and maybe some other places that you found in order to shut their operations.

If electricity prices or electricity use is too high, I guess maybe they get a phone call or an email. And then they shut down– the miner will shut down some of their operations. They’ll receive a stipend from the government or a payment for that. And some of those payments are amounting to tens of millions of dollars.

GABRIEL DANCE: It’s a fascinating industry they’ve forged for themselves. And when you are in the business of turning electricity into money, there’s a variety of different business models that become available when you do that. So one of those is, of course, mining Bitcoin.

But as you said, there are a few other options. One of which is when you use that much power, grid operators will actually pay you to promise that you will stop using that power if the grid becomes really strained. You’re acting as a type of insurance. And some of the miners participate in this program 85% of the year, but they’re only called upon to shut down a fraction of the time. We’re talking 3.5 hours total in 2022. Yet they’re receiving payments for 85% of the year, to your point, between all of them for tens of millions of dollars.

And they have another option, which is when the power prices spike, they’ll shut down and start selling their energy back into the market. So when other people, particularly in Texas, are paying the most for their electric bills, the miners are selling their power back in. Their extreme flexibility also allows them to shut down and avoid fees that are assessed to everybody else in ways that other people can’t possibly avoid.

Now, it is important to note that these operations, these grid stability operations are helpful to grid operators. And the Bitcoin miners love to stress that point. What they don’t like talking about so much is the fact that they’re paid handsomely to do this.

JARED BLIKRE: Well, let’s talk about solutions and assuming that Bitcoin is going to take the same amount of energy to produce. What are some of the steps that are currently being taken to mitigate the impact of that?

I remember something, maybe it was a year or two ago, being sourced and it was likened to the blood diamonds movement that we’ve seen for some of the sustainably sourced materials that come out of mines that are in conflict areas. Maybe something similar for the Bitcoin industry, which is that it’s using electricity that has been sustainably or reliably sourced from wind power or solar power, for instance. Has that gone anywhere?

GABRIEL DANCE: Well, right now, the Bitcoin industry as a whole doesn’t have enough financial credibility to do things like what Google and Facebook and Meta and some of the previous data centers who underwent some of this very similar environmental criticism about 10 years ago have done, which is, to your point, to build additional renewable energy that they either use that energy or they pay for the construction and create financial power purchase agreements with that additional new renewable energy to meet, hour-for-hour, the demand that they are putting onto the grid.

But as I said, right now, miners don’t have that kind of financial credibility. As we’ve seen with the price of Bitcoin falling tremendously over the last year, some of the miners don’t even have enough energy– or money, I’m sorry, to operate when the cost of electricity rises with the Bitcoin coming down.

So it is a complicated issue, but there are ways that they could act much more sustainably, including in West Texas where there is at times some renewable energy that is curtailed. The miners could very easily sit and use that curtailed energy when it’s otherwise not going to be used.

JARED BLIKRE: And who knows? Maybe proof of work, which is really the energy intensive form of cryptocurrency mining, maybe that will just transform into proof of stake someday as it has with Ethereum. But not for Bitcoin right now. Really appreciate you being here, Gabriel Dance.