Tech
The Department of Energy will monitor energy used in cryptocurrency mining
The cryptocurrency minting business here in the United States is growing day by day. In January 2020, only 3.4% of the world’s bitcoin mining took place here. This figure has risen to almost 38% in just two years.
As we’ve talked about on this show, mining bitcoin and some other cryptocurrencies it burns a lot of electricity. The Energy Information Administration is interested in following this activity, combing through media articles and company reports. But the federal agency decided not toor start collecting information from cryptocurrency miners themselves where they operate and how much energy they use.
Marketplace’s Lily Jamali asked Mark Morey, senior consultant for electrical analysis at the EIA, about the project. The following is an edited transcript of their conversation.
Marco Morey: The difficulty is that although we were able to conduct our own survey, there are many resources we could do, we actually don’t have a good idea of the extent to which energy use by cryptocurrency miners is occurring , both regionally, and in the total amount, just a lot of unknowns. That’s why we designed this survey and got approval to send it to a group of respondents. And that’s what brought us to where we are today in regards to the press release and the study that you saw last week.
Lily Jamali: Yes, and I’m really impressed by the statistics in your recent analysis on this. You estimate annual electricity consumption from cryptocurrency mining in the United States to be between 0.6% and 2.3%. Both sides of this range seem like a lot to me, but it’s also such a wide range, which I think shows how little we really know about the scope of this activity.
Morey: It is true. It’s a wide range. But let’s take a step back and look at the numbers first. If you look at the total amount of electricity, obviously when you get these percentages, you have to have two numbers: You have to have the number for what we believe comes from energy use from cryptocurrency mining operations versus the total. And the total is the number we collect. This is one of the great attributes of EIA: we collect all kinds of data. So we have very solid numbers on what electricity demand has been month over month, year over year. So we have a good measurement to get that percentage. When you look at those percentages, those are strictly estimates.
But as the report published on Friday states, it was a top-down analysis that we conducted using several existing sources that track not so much the energy itself, but also just the overall activity in the cryptocurrency mining area. So we looked at estimates provided by others from top to bottom and then made our own from bottom to top. So we did internal investigations into the number of sites we saw that were mining cryptocurrency. We looked at reports, we looked on the Internet, we looked at financial documents, basically everything we could to try to come up with a census. The second part was to, after identifying individual sources, see if they published a number in terms of megawatts of capacity that they believed or estimated they would use. So this allowed us to come up with a number. If we were to multiply the number of sites we found by the amount of energy they claim to consume, to get a figure from the bottom up. And the whole range is simply take a look at very little activity in terms of cryptocurrency mining versus a large amount or the maximum amount. And that’s where those percentages come from. But clearly these are just estimates, which is why we need better, more concrete data, which is the reason for the survey.
Jamali: And how difficult has it been to identify cryptocurrency mining up to this point because these facilities are very mobile, right? They can pick up and leave, go to a place where electricity is cheaper, so it seems like an added complication in keeping all of this under control.
Morey: Absolutely. And not only are the structures themselves mobile, but the machines found in those structures are also mobile. You could find out where maybe a structure was in one place, they decided to move it because maybe there was cheaper electricity in another place, so they could move all the cars. Or we’ve seen cases where one location had many machines, but then some were purchased and moved to another location. So there was a significant relocation of facilities going on, which also led us to why we came out and asked for approval to do this survey.
Jamali: Will you engage with community officials in any of these locations? I know, based on my reporting on cryptocurrency mining, my impression has been that they want this information too, because there’s a black box for a lot of these people who run the local utility, who run the administrative office of the local county. They can’t charge fees if they don’t know how much is being used. I was a little surprised by the extent of the opacity of it all.
Morey: Well, the information we are collecting is purely trying to identify the location and amount of energy used in these facilities. We are trying to get the information by month. And I should also say that the survey is focused on a facility-level reporting structure, which means if you’re a company and you have three or four facilities, we’re trying to collect data for those individual facilities so we can understand as there is a lot of activity going on there. Now, as far as the information is concerned, once we receive it, it is up to us to then compile it in such a way that people understand the extent of energy consumption for this sector. And this will all be public information.
Jamali: What are some tangible outcomes that could come from this data? What do you hope?
Morey: Well, we hope to get a good appreciation for the energy use of this sector. Much of this survey is an effort just to understand the scope of this. Is it more than we expect or is it less? So that’s really where we’re at at this point.
Jamali: And for what purpose? What do you do with this information once you have it in your hands?
Morey: So, ideally, it will be publicly available information that people can use that will hopefully help them understand this energy sector better. So if you go to our website, you’ll find dozens of these surveys. And I think people go there to discover data that represents what’s happening in the energy sector.
In case you were wondering if this new push for data from the EIA has anything to do with the recent approval of spot bitcoin exchange-traded funds, Morey assured us that it doesn’t. That decision was announced last month by the Securities and Exchange Commission. Analyst Ben Hertz-Shargel of the consultancy Wood Mackenzie he told us recently he expects demand for the original cryptocurrency, bitcoin, to only grow because of that decision.
But information gathering is not welcomed by the cryptocurrency industry. That of the market Henry Epp reported on this view. He spoke with a representative from the Texas Blockchain Council who told him that crypto mining companies could be at a competitive disadvantage if federal authorities released what he called proprietary information. To no one’s surprise, legal action is being considered.