US Senate panel is investigating how crypto mining increases energy consumption

WASHINGTON — So-called mining for digital assets, or cryptocurrency, uses as much electricity as some entire nations, and U.S. senators studied the issue Tuesday in their first hearing focused on the energetic impact of digital currencies.

Crypto mining in both Nebraska and Pennsylvania has been discussed in particular by members of the Senate Environment and Public Works Committee.

Democratic Senator Ed Markey of Massachusetts, who offered his legislative proposal to improve the transparency of crypto mining, likened it to “digital coal rather than digital gold” and implored the industry – Bitcoin is the most popular currency – to “work smarter, not harder” by improving energy efficiency as the world confronts the impacts of climate change.

“Bitcoin mining in the United States consumes as much electricity as we need to light every single home in our country, and that demand on our electrical grid is only going to grow,” Markey said in his opening statement.

Markey’s bill, unveiled Monday, would require cryptocurrency asset operators to report emissions to the Environmental Protection Agency and mandate the agency to conduct a study of the energy use required by thousands of rugged, specialized computers to run new transactions add to decentralized digital accounting, he said. The text of the law has not yet been published.

The hearing before the Senate Subcommittee on Clean Air, Climate and Nuclear Safety included testimonies from Rob Altenburg of PennFuture, a Pennsylvania-based clean energy advocacy group; Courtney Dentlinger, an executive with the Nebraska Public Power District, a public utility company; and Anna R. Kelles, a member of the New York State Assembly.

The subcommittee’s top Republican, Senator Pete Ricketts of Nebraska, pushed back on environmental concerns.

Reminding fellow members that CNBC ranked his state #1 last year for cultivating a cryptoeconomy, Ricketts said he was “particularly interested in this topic of whether this industry could lead to more economic development.”

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“Crypto asset mining is hardly the only industry that relies on large data server banks,” Ricketts later continued. “Finance, technology, government, higher education and many others consume significant amounts of electricity to meet their computing needs. We should provide the tools for open competition in a free market and not allow politicians or Washington DC bureaucrats to pick winners and losers.”

Cheap electricity in Nebraska

Both Nebraska and Pennsylvania are home to crypto mining operations.

Cheap electricity in Nebraska — which is 100% powered by public utilities — makes the state an attractive option for the crypto data centers, where acres of extremely fast computers locked in metal shipping containers try to guess long combinations of numbers in order to a new transaction to be verified, some at speeds of up to trillions of guesses per second.

An 11-acre crypto-mining facility in Kearney, Nebraska, uses as much electricity as the city of 33,790 residents, according to local news analysis released in January.

However, the industry has had “significant benefits” for the state, Dentlinger of the Nebraska Public Power District told lawmakers, citing the example that just one of Nebraska’s crypto-mining facilities received $1.8 million in state sales taxes and generated $3.8 million in local taxes over a 12-year period. month period.

Dentlinger also argued that a customer’s constant demand for electricity would benefit the broader customer base.

“In our predominantly non-metropolitan and rural service area, business diversification and economic growth is critical as these areas continue to experience population decline,” she told lawmakers. “Indeed, local leaders have been very receptive to crypto mining facilities, recognizing the potential for significant economic development benefits for their communities.”

Crypto operations emerge in Pennsylvania

PennFuture’s Altenburg argued that there is a different story in Pennsylvania, one where regulators can’t keep tabs on crypto operations popping up across the state.

Last year, a site inspection by the Pennsylvania Department of Environmental Protection found that a Clearfield County company had been connected to a natural gas well without obtaining a permit. Big Dog Energy ran 30 natural gas generators to power its crypto operations. The EPA took the lead in the investigation.

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Altenburg told lawmakers it was “impossible to know which or how many of Pennsylvania’s thousands of fracked gas wells are being used in this way.”

Another company, Stronghold Digital Mining, burns waste coal to power crypto operations. The company — which argues it is a “green” bitcoin miner to find a use for an environmental hazard — sources from the ubiquitous piles of waste coal statewide and converts them to two sites, one in Venango County between Pittsburgh , in Strom um and Erie and the other in Carbon County northwest of Allentown, according to the company’s website.

“Waste coal is a problematic fuel to say the least. As the name suggests, it has little energy value compared to ordinary coal, requiring power plants to burn even more to produce the same amount of electricity. They emit more ozone precursors, particulate matter, acid gases, heavy metals and are the second most carbon-intensive generation after residual oil,” said Altenburg.

Why crypto mining needs energy

Cryptocurrency mining involves using robust computing power to complement digital ledger technologies like “blockchain”.

The decentralized digital financial record of transactions is a ledger or database in which users or “miners” on a shared network can agree on entries, sometimes referred to as “blocks”, via an “agreement mechanism”.

Energy consumption varies depending on which consent mechanism is used. For example, Bitcoin relies on a “proof-of-work” mechanism that ensures ledger security, in part, by requiring miners to have access to dedicated computers and significant amounts of energy.

Another popular cryptocurrency, Ethereum, recently switched to a “Proof of Stake” mechanism that uses a fraction of the energy — accounting for 0.001% of the world’s energy consumption as of 2021 — because it relies on miners to stake their crypto risk assets to enforce accounting book integrity.

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US power consumption for crypto

A September 2022 report by the White House Office of Science and Technology Policy warned that cryptocurrency mining consumes a significant amount of energy, which has only increased over the past five years.

Crypto assets worldwide consume 120 to 140 billion kilowatt hours per year — or roughly exceeds the total energy consumption of countries like Argentina or Australia, according to the report.

The US accounts for a third of the world’s crypto asset operations and consumes about 0.9% to 1.7% of the country’s electricity consumption, which is roughly equivalent to the energy needed to power all home computers or residential lighting in the US the OSTP is used.

President Joe Biden mandated the interagency report in a far-reaching March 2022 executive order to “Ensure Responsible Development of Digital Assets,” which included examining energy-related impacts and potential barriers to meeting the government’s climate goals.

These goals include reducing greenhouse gas emissions by 50% by 2030, achieving a zero-carbon electricity grid by 2035, and achieving net-zero emissions by mid-century.

Markey’s bill was referred to the Senate Committee on Environment and Public Works.

Sens. Jeff Merkley, a Democrat from Oregon, and Bernie Sanders, an independent from Vermont, have signed on as co-sponsors.

Markey likened reducing energy consumption in cryptocurrency mining to updating energy standards for equipment or reducing vehicle fuel consumption.

“We are not striving to end refrigeration or automotive. What we’re saying is that we should be more efficient, we should be more aware of the avoidable emissions into our atmosphere,” Markey said. “On the one hand, economically speaking, this (cryptocurrency) is a very innovative sector and they count themselves as innovators. But all we ask of them is to look at innovation across the board.”