Bitcoin and energy: is the criticism justified?

Part of the answer to this BIG question lies in analysing the energy mix used by miners to run their machines.

• How much of it is fossil fuel?

• How much of it is renewable energy?

According to the latest quarterly report from the Bitcoin Mining Council (BMC), an organisation that brings together the world's leading bitcoin miners, 59% of the energy they consume is said to come from renewable sources.

"This is a level that few industries can claim, especially the banking sector," explains Romain Nouzareth, co-founder and boss of Sato, a Canadian miner that operates with 100% energy from renewable sources (hydroelectricity in his case).

At his facility in Joliette (Quebec), he even uses the heat released by his machines to heat the neighbouring plant.

This figure of 59% renewable share should even increase in the coming years, according to Romain Nouzareth: "Miners are pragmatic economic agents, they want to get their electricity at the lowest price and renewable energies are the cheapest on the market".

According to a report published in June 2021 by the International Renewable Energy Agency (IRENA), "green" energies have effectively become cheaper than all the others. This spectacular drop in prices is thought to be linked to the improved competitiveness of solar and wind technologies over the last decade.

It is therefore likely that the share of renewable energies will increase sharply in the mix of miners. All the more so with the geopolitical context putting upward pressure on gas and oil prices.

In a year, gas prices have doubled in Europe and the Russian-Ukrainian war could continue to push up the thermometer.... In the United States, many mining facilities connected to carbon sources are also in trouble. In the state of Georgia, Compass Mining announced at the end of August that it was closing several sites because of soaring prices.

"Today it is very difficult to mine from fossil fuels, unless you find yourself in conditions, like in Kazakhstan, where the boss of the coal-fired power station also runs the electricity company and a mining farm", notes Sébastien Gouspillou, boss of Big Block Datacenter, a French mining company with a strong presence in Africa. In short, the return of cheap fossil fuel energy is not for tomorrow.

Mining can promote the energy transition

In this economic context favourable to renewable energies, mining offers another very important advantage: financing infrastructure. "It's still often more profitable to build coal-fired power stations than hydroelectric dams," laments Sébastien Gouspillou.

Why? Because dams are expensive and therefore take a long time to pay off financially, and above all because many of them are built in regions where there is not necessarily the infrastructure (connections, lines, etc.) or the demand that goes with it.

Bitcoin mining can precisely make it possible to recover surpluses and thus contribute to financing infrastructure. "We can improve the profitability of dams," continues Sébastien Gouspillou.

"For energy storage, we traditionally use batteries, but their cost is extremely high, so bitcoin mining presents interesting prospects for optimising renewable installations," stresses Damien Ernst, an energy expert and professor at the University of Liège, for his part. "But it's not the only option; converting electricity into hydrogen could also work well," he points out.

According to Sébastien Gouspillou, bitcoin mining would be akin to an "economic battery" that would improve the profitability of renewables (MicroStrategy boss Michael Saylor says the same thing). "Despite what the degrowthists say, we still need to build a lot of infrastructure to produce electricity. Bitcoin can tip the balance in favour of renewable facilities," he insists.

All told, there are more than 2,400 coal-fired power stations spread across 79 countries, and their electricity generation capacity is set to increase by 21% via new projects, notes the NGO Global Energy Monitor in its annual report.

According to the same source, no fewer than 34 countries are currently in the process of building new sites using this highly polluting energy...

"We need to succeed in making them understand that mining can be a solution for their income and the planet", stresses Sébastien Gouspillou, who says that he is "increasingly listened to". The Frenchman also points out that he has installations in Kenya and Congo, while hoping to succeed soon with other Central African countries.

A concrete example: transforming flared gas‍

Bitcoin mining can also be an asset for reducing the environmental impact of another extremely polluting activity that is often overlooked, namely "flared gas".

What is flared gas?

This is the waste that escapes with great flames from oil and gas installations when energy is extracted from underground. Flaring alone would be responsible for the equivalent of the greenhouse gas emissions released by France, according to the World Bank.

It represents a monumental waste of a natural resource that could be used for productive purposes, such as generating electricity. The amount of gas currently flared each year could power the whole of sub-Saharan Africa.

Some argue that flared gas should be seen as an opportunity for economic gain, with a number of options operators can consider to monetise their gas, including mining. "It's wasted energy, so we might as well take advantage of it to mine bitcoin, especially if it reduces emissions into the atmosphere," judges Professor Damien Ernst.

In some cases, oil companies "graciously" let miners use flared gas to avoid paying environmental fines. But it also happens that this gas is "sold" to the miners, as in the United States, which creates a market (absolutely not virtuous) for the benefit of oil companies.

The conversion of flared gas into electricity is still experimental. It is difficult to control and few miners have the capacity to do so... This could nevertheless evolve, notably via the company Crusoe Energy, which raised more than 500 million dollars last spring to develop the appropriate system. Several projects around the world are expected to get under way very soon. US hydrocarbon giant Exxon is currently conducting several experiments along these lines.

Why are we being so demanding with Bitcoin?

Of course, for political reasons! Many industries don't like Bitcoin. But its energy consumption is also a real issue that no one can avoid, especially at a time when the fight against global warming has become paramount. It's an observation that the players in the sector (not all of them) share, without wishing to shoulder all the responsibility.

"The climate is obviously a subject for us, but it's up to governments to make the strategic decisions. Our job is to come up with a solution to manage the electricity network as well as possible", he believes.

Some also advocate integrating miners more fully into the economic circuit. "Let's generate revenue from an energy that has not found a taker until now, to help lower everyone's bill," concludes Romain Nouzareth.

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