Photo: André François McKenzie/Unsplash
For someone with two companies to run, Twitter and Square CEO Jack Dorsey spends a lot of time tweeting about cryptocurrency. His Twitter bio, in its entirely, reads, “#bitcoin” (with a golden bitcoin emoji). These days, his feed is a near-constant flow of predictions for how crypto will change the world, with retweets of posts about how it can help Native Americans, support Afrofuturist art and establish small, self-sustaining, “circular” bitcoin-funded communities.
As Dorsey told the Sydney Morning Herald in 2019, he thinks bitcoin is “the best bet” when it comes to all cryptocurrencies because “it’s been the most resilient, it’s [been] around for 10 years, it has a great brand, and it’s been tested a bunch,” making it likely that bitcoin could become “the native currency of the internet.” Now, Square has a crypto arm and owns hundreds of millions of dollars’ worth of bitcoin, and it recently teamed up with the firm Ark Invest (which just bought nearly $20 million of bitcoin) to author a white paper entitled ‘bitcoin Is Key to an Abundant, Clean Energy Future’. Last week, Dorsey tweeted it out (and Tesla CEO Elon Musk replied, “True”).
Even among some crypto enthusiasts, this might count as a hot take. bitcoin is notoriously energy-intensive, due to some of the very features that make it so appealing to certain investors: Mining (or generating) new bitcoins requires running a computer processor constantly to solve complex puzzles. These puzzles protect the currency from outsiders and confirm its actual value; they also take a hefty amount of power to solve. As the popularity of bitcoin has grown and more miners have come online, it’s been estimated in multiple studies that bitcoin mining’s overall power consumption rivals or exceeds small countries’ entire electrical outputs alone – and that the energy consumption per individual bitcoin transaction (which must be recorded on the blockchain, requiring more energy use) far exceeds similar requirements for producing renewables like hydroelectricity. (That’s not even getting into the energy requirements for other cryptocurrencies.)
Meanwhile, a survey from the Cambridge Centre for Alternative Finance, which studies crypto, found that two-thirds of the global bitcoin network sources its energy from fossil fuels, contributing to vast carbon emissions. Even supposedly “green” cryptocurrencies (i.e., those mined through more efficient processing units) are still helping fuel supply shortages in an already strained market for chips and semiconductors.
The Square memo’s basic argument is that bitcoin mining could actually help incentivise more production of renewable energy, as opposed to fossil fuels. Solar and wind may be desirable for their cheapness and greenness, but their sources are erratic (the Sun doesn’t always shine, and the wind sometimes blows when you don’t need it), and there isn’t enough storage capacity for when these sources generate excess energy (because of issues with grid congestion and transmission, as well as the current lack of widely available lithium-ion batteries for storage).
According to Square and Ark Invest, bitcoin’s energy-intensive needs could actually complement ongoing renewable and storage projects by serving as an energy buyer of last resort. The idea is that if an energy producer set up a bitcoin-mining operation on site, that could help cut production costs since they’d mine some bitcoins with the extra energy. That could lead more operators to enter the renewables market, increasing supply. Finally, all of this could increase bitcoin’s mining capacity, creating evermore power demand from miners. In the paper’s view, bitcoin is a self-propelling feedback loop of economic inevitability – or at least it could be, eventually, even though it “would likely still mine with grid electricity during other periods when profitable to do so, so it wouldn’t be entirely green from day one.”
That sounds like a big if. Ark Invest claims in the memo that “without bitcoin mining, solar – an intermittent energy source – could supply only 40% of grid power before utilities would face the need to fund significant investments with higher electricity prices.” But if solar producers and battery makers and bitcoin miners join forces, the paper claims, the combination could satisfy 99% of the grid’s needs while “maintaining profitability”: Increased mining power will allow solar panel producers to build more cells without the need to worry about wasted energy, because that will be directed to the blockchain for mining; meanwhile, battery system capacity will also increase over time. Notably, the paper says that batteries will still “be the most critical technology in storing inexpensive mid-day solar power for evening peak demand.”
So: Is this actually a good idea? That’s far from clear. Because Square’s thesis depends on a lot of assumptions and economic forecasts that look fragile once factors that the paper either mentions only briefly or entirely overlooks are taken into account.
Let’s start with the primary issue this paper purports to solve: that solar and wind farms, being “intermittent” sources of energy, don’t always produce the amount of power that energy customers want, particularly during peak-demand hours. It is certainly true that the consistency of solar and wind depends on your area’s climate. But there have been strides in both technologies that are already helping solve this problem without bitcoin’s help. A large majority of states employ net metering policies to benefit homeowners who install grid-connected solar panels, allowing these customers to directly feed any excess energy they produce back into the grid while earning a credit from their utility for giving back this energy, thus saving them costs and distributing electricity back into the system for all-around use, not just mining.
Plus, new varieties of solar tech – such as PERC and tandem cells, solar trees, and double-sided cells – are increasingly efficient when it comes to solar-energy conversion, exceeding the capacity of traditional silicon and photovoltaic cells and increasing the efficacy of solar sourcing. Norway is already using thermal energy to further boost solar output and make use of panels’ leftover energy. Similar adaptable developments are benefiting wind power: High-altitude, shrouded and other alternative turbines are expanding reach and efficacy; alternative energy storage methods such as compressed air and flywheels remain viable; and hybrid wind-and-battery storage and output facilities are being constructed more often, especially as offshore wind becomes a more enticing prospect.
Energy analysts are predicting that hybrid energy plants of wind and batteries and solar can, on their own, provide reliable power during peak-demand hours for energy consumption. All of this, without crypto!
Meanwhile, the renewable industry is already looking fairly robust these days. While fossil fuel companies were devastated in the early part of the coronavirus crisis, renewable sectors were far more resilient against shutdowns and decreased production, according to an International Energy Agency report – and they even increased their overall capacity by nearly 50% in 2020. Solar was adopted more widely in countries like Australia and Vietnam throughout the year, while US government initiatives are already in place to scale up renewables not only domestically but in poorer nations as well, through subsidies and taxes and credits, grid integration, and renewable energy zones (areas whose climates are most ideal for building plants to capture renewables and produce their energy).
Meanwhile, the US Energy Information Administration said last year that renewables were finally on pace to exceed natural gas in the power mix; a recent study from Berkeley and GridLab laid out already-existing capacity and economic pathways in place to achieve a 90% clean grid by 2035, relegating natural gas to 10 percent and requiring no new construction of coal or natural gas plants. Also, onshore wind is on pace to be the cheapest form of electricity by 2025 – even without tax credits, and not including the economic impact of future offshore projects.
Some bitcoin enthusiasts are quick to point out that solar cells have jumped in price for the first time since 2013 – which can be attributed to the demand spikes and supply shortages (in solar’s case, of polysilicon) that have strained many sectors as the pandemic winds down in the US. But that squeeze is projected to subside – sooner, at least, than the shortage of semiconductors, which has been deepened by increased demand for bitcoin-mining rigs.
With these factors in mind, it is less clear that bitcoin mining is needed to drive down costs, retain overproduced energy, and drive large-scale improvements in the renewables system, which seems to be already exceeding projections on all fronts. (It’s perhaps worth noting that Ark’s claim that solar can’t scale appropriately on its own is based in part on a 2018 U.N.C. Kenan-Flagler Energy Centre report, three of whose co-authors are longtime fossil-fuel insiders.)
However, as the Square-Ark memo notes, there is an impending waste problem when it comes to used-up lithium-ion batteries, which is leading engineers to explore reuse and recycling methods, preferably ones that don’t require fossil fuels. Meanwhile, these batteries, along with PVCs and wind turbine materials, require mining (the IRL kind) of finite rare earth minerals. This stresses the need to ensure that the acquisition of these minerals does not cause new environmental problems or exploit smaller nations, that mining processes themselves become more sustainable (including, in part, by repurposing fossil fuel waste), and that countries broadening renewables don’t become solely dependent on one or two large-scale rare earths – mining nations, like China.
So another form of energy use and storage to augment batteries and renewables truly isn’t a bad idea. But there are already potentially viable battery alternatives that are less cost- and/or energy-intensive to produce at scale, including zinc-ion batteries, sodium-ion batteries, and redox-flow batteries. And it remains dubious whether bitcoin works as an ideal non-battery power savior. After all, miners “require only an internet connection,” according to the white paper – but the internet itself requires major use of rare earth materials, whether for the construction of fiber-optic cables or for use in the types of computing and data networks that keep the blockchain going. Plus, internet connections and access are increasingly energy-intensive and susceptible to climate shocks; a solution that lives or dies with the internet only adds to the heightened, fast-whirring energy costs needed to maintain the systems at hand.
As for the waste left by batteries, bitcoin should also check its own waste problem: In 2013, bitcoin enthusiasts switched from mining coins with regular CPUs, whose efficiency did not meet their necessities, to application-specific integrated circuits (ASICs). Now, ASICs use less power when cultivating bitcoin, but their only purpose is to mine, and thus these processors don’t last long – 18 months at most, lagging behind the resilience of lithium-ion batteries – and cannot be reused for other value or power generation.
More bitcoin mining using ASICs would lead to unbelievable amounts of e-waste that would pile up at a faster rate than PVCs or less toxic battery waste, according to calculations by Dutch economist Alex de Vries; more bitcoin mining using adaptable processors like CPUs would lead to a bigger and more intense electricity suck, eating up a major sector of overall energy generation no matter the source. As de Vries told me in an interview, bitcoin miners are trying to shorten the time they need for mining maximum value by using more efficient machines to run not for 24 hours, but half that time – which, in turn, leads to more use and waste. After all, bitcoin mining itself cannot become more efficient while its setup within the blockchain functions like it currently does; the puzzles that need to be unlocked to obtain scarce coins help bolster the hermetic security of the network as well as the value and ownership of the digital properties traded across the chain.
Let’s get to a third element: the types of energy bitcoin and other forms of cryptocurrency will actually incentivise. It’s worth returning to the white paper’s admission that bitcoin will have to depend on “grid electricity during other periods when profitable to do so.” Fossil fuels still dominate the grids in – and carbon emissions still rapidly emanate from – the cuntries with the largest bitcoin outposts, including China and the US. To their credit, smaller countries as well as a few larger bitcoin farms have found ways to mostly power currency through green energy, especially with hydroelectricity (although, as de Vries has also noted, hydropower in certain regions of China that is used for bitcoin often devastates local environments).
A good indicator of future power consumption might be the most cutting-edge activities of crypto miners. The Wall Street Journal and Grist both recently reported that shuttered coal plants in Montana, New York, and Connecticut had been given new life from crypto companies moving into their outposts and fueling coin operations through natural gas. The reason for natural gas, despite its methane emissions? The process of flaring, which burns leftover gas that can’t be stored or otherwise used, and releases carbon – if it’s not captured by bitcoiners first to repurpose for mining. Still, to use cheap natural gas requires taking leftovers from oil drilling. And at the current moment, both the US’s and China’s economies are still structured heavily around fossil fuels, even though both nations have made great strides in green tech.
By the very economic logic proposed in Square and Ark’s memo, bitcoin miners using extant fossil fuel factories as dirty-energy-powered hubs for crypto operations would only encourage further fossil fuel development in both countries – and indeed, states are already trying to lure in crypto treasure hunters to revitalise abandoned coal plants instead of cleaning these buildings of remaining toxic remnants and retrofitting them for clean energy efforts. Plus, China’s recent ramp-up of coal-fired energy has far outpaced that of every other nation. Unless the bitcoin network can persuade the Chinese government to halt its rapid new fossil fuel projects, there’s no evidence that incentives alone will cause crypto operations there to operate more sustainably.
The case for a greener bitcoin ultimately puts faith in the free market to sort out the kinks. But when it comes to our climate, we truly can’t afford to depend on that. Musk, who has been pumping bitcoin (and dogecoin) for months, did something of a heel turn recently when he said Tesla would no longer take bitcoin as payment as long as its environmental impact is so great. He’s still a crypto believer, apparently, just not one willing to wed the technology to his own clean energy efforts.
As Alex de Vries told me, the worthiness of a mission like Dorsey’s relies on what personal value we attribute to bitcoin’s ability to transform our way of life. But if, as the evidence suggests, the renewables transition is chugging along fine without it, and in the short term bitcoin’s only going to keep gobbling up energy while relying on fossil fuels, it’s worth asking: Why do we need bitcoin in the clean energy business? Why do we need it at all?