Along a dirt-covered road deep in Texas farm country, the
cryptocurrency company Argo Blockchain is building a power plant for the
internet age: a crypto “mining” site stocked with computers that generate new
bitcoins.
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But unlike other bitcoin mining operations, which consume large
quantities of fossil fuels and produce carbon emissions, Argo claims it’s
trying to do something environmentally responsible. As Peter Wall, Argo’s chief
executive, led a tour of the 126,000-square-foot construction site one morning
this month, he pointed to a row of wind turbines a few miles down the road,
their white spokes shining in the sunlight.
The new facility, an hour outside Lubbock, would be fueled
mostly by wind and solar energy, he declared. “This is bitcoin mining nirvana,”
Wall said. “You look off into the distance and you’ve got your renewable
power.”
Facing criticism from politicians and environmentalists, the
cryptocurrency mining industry has embarked on a rebranding effort to challenge
the prevailing view that its electricity-guzzling computers are harmful to the
climate. All five of the largest publicly traded crypto mining companies say
they are building or already operating plants powered by renewable energy, and
industry executives have started arguing that demand from crypto miners will
create opportunities for wind and solar companies to open facilities of their
own.
The effort — partly a public-relations exercise, partly a
genuine attempt to make the industry more sustainable — has intensified since
last spring, when China began a crackdown on crypto mining, forcing some mining
operations to relocate to the United States. A trade group called the Bitcoin
Mining Council also formed last year, partly to tackle climate issues, after
Elon Musk criticized the industry for using fossil fuels.
Crypto mining does not involve any picks or shovels. Instead,
the term refers to a verification and currency creation process that is
essential to the bitcoin ecosystem. Powerful computers race one another to
process transactions, solving complex mathematical problems that require
quintillions of numerical guesses a second. As a reward for this authentication
service, miners receive new coins, providing a financial incentive to keep the
computers running.
In bitcoin’s early years, a crypto enthusiast could mine coins
by running software on a laptop. But as digital assets have become more
popular, the amount of power necessary to generate bitcoin has soared. A single
bitcoin transaction now requires more than 2,000 kilowatt-hours of electricity,
or enough energy to power the average American household for 73 days,
researchers estimate.
To achieve that, some miners are reviving broken-down coal
plants, or using low-cost natural gas to power their computers. Last month, a
study in the journal Joule found that bitcoin mining worldwide may be
responsible for about 65 megatons of carbon dioxide a year, comparable to the
emissions of Greece.
According to the study, the bitcoin network’s use of green
energy sources also dropped to an average of 25% in August 2021 from 42% in
2020. (The industry has argued that its average renewable use is closer to
60%.) That’s partly a result of China’s crackdown, which cut off a source of
cheap hydropower. But it reflects fundamental economic incentives, too, said
Alex de Vries, one of the authors of the Joule study. Renewable energy is an
intermittent power source — the sun shines only part of the day, and wind
speeds fluctuate considerably.
“What a miner is going to do if they want to maximize the profit
is put their machine wherever it can run the entire day,” de Vries said.
Bitcoin’s ballooning energy use has long outraged
environmentalists. But the criticism that made the strongest impression came
from Musk, a longtime bitcoin booster, who said on Twitter in May that Tesla,
his electric car company, would no longer accept cryptocurrency payments
because of the “increasing use of fossil fuels for bitcoin mining and
transactions.”
His tweet sent the mining industry into crisis mode. Michael
Saylor, the CEO of the software company MicroStrategy, which invests heavily in
bitcoin, got in touch with Musk to discuss the climate issue. A group of mining
executives, including Saylor and Wall, later met with Musk over Zoom.
“He wanted to make sure that the industry is on the side of
sustainability, and he gave us some coaching,” Saylor recalled. “His
encouragement was: ‘Find out how clean is the energy, how sustainable is the
energy. Figure out how much you’re using.’” (Musk did not respond to a request
for comment.)
After the call, Saylor set up the Bitcoin Mining Council, a
forum for the industry to share ideas and coordinate environmental strategy.
One member, TeraWulf, has pledged to run cryptocurrency mines using more than
90% zero-carbon energy. It has two projects in the works — a retired coal plant
in upstate New York fueled by hydropower, and a nuclear-powered facility in
Pennsylvania.
“Everyone I talk to now is talking about carbon neutrality,”
said Paul Prager, the CEO of TeraWulf. “The language has absolutely changed.”
But financial priorities and technological barriers in the
crypto mining industry, which includes more than a dozen publicly traded
companies like Argo, are preventing a complete shift to renewable power. In
late 2020, Marathon, one of the largest publicly traded mining companies,
started mining bitcoin at a coal-powered plant in Montana, citing the easy
access to cheap energy.
In recent months, Texas has become a hot spot for crypto mining,
attracting more than two dozen companies. The state has an unusual incentive
structure that’s well suited to the nascent industry: The Texas grid operator
offers what amounts to a discount to companies that can quickly unplug when
electricity demand spikes statewide, allowing energy to flow to ordinary
homeowners. Many crypto mines can turn on or off in seconds, allowing them to
take advantage of the incentive with minimal inconvenience.
That deal was part of the attraction for Argo, a London-based
company founded in 2017 that runs two other mines in Quebec, using mostly
hydropower. Wall said Argo was also drawn to the ample green energy in West
Texas. The facility outside Lubbock will be connected to the western sector of
the Texas energy grid, where about 85% of electricity comes from wind and solar
infrastructure, including a set of turbines that sit practically next door to
the Argo construction site.
But Wall can’t guarantee that Argo’s new center will have no
carbon footprint. That would require bypassing the grid and buying energy
directly from a renewable power company.
“A lot of those renewable energy producers are still a little
bit skeptical of cryptocurrency,” he said. “The crypto miners don’t have the
credit profiles to sign 10- or 15-year deals.”
In the future, he said, Argo plans to build its own solar panels
on site in Texas and broker deals with local renewables companies to buy energy
directly.
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