Bitcoin mining

Bitcoin mining

April 10, 2018 | By Keith Martin in Washington, DC

Bitcoin mining could use as much electricity in 2018 as all electric vehicles are expected to use in 2025, according to a report by Morgan Stanley.

Some US utilities in such places as New York and Washington state are increasing rates for bitcoin miners, defined as “high-density load customers,” because of the stress put on distribution lines. The typical definition is a customer who uses at least 250 kilowatt hours of electricity per square foot in a year.

With so much demand, some electricity suppliers are taking notice. 

A gas producer in Calgary “decided that it is better off using its gas to generate power to mine bitcoin than trying to sell the gas,” according to Crae Garrett, head of the Norton Rose Fulbright energy practice in Canada. Iron Bridge Resources Inc. produces enough gas currently to power a 45-megawatt power plant. The company said it is getting next to nothing for the gas, so it hired experts in cryptocurrency mining and launched its own pilot-scale mining operation with plans to expand.

Atlantic Power decided against acting for now on a suggestion by one of its shareholders earlier this year to try to sell electricity from three uncontracted power plants to bitcoin miners. 

Demand by bitcoin miners should decline in the long run. A new block of bitcoins is released every 10 minutes to the first person to solve a complicated series of equations. However, the number of bitcoins in each new block is reduced by half every four years, with the next reduction coming in 2020.

New start-up energy companies are appearing using platforms created on blockchain for such diverse purposes as to allow members access to sites where they can buy retail electricity more cheaply than from the local utility, coordinate sharing of excess electricity from rooftop solar panels among neighbors, and handle billing for charging electric vehicles. (For more on the potential energy-related uses of blockchain, see “Blockchain and the Energy Sector” in this issue.)

Blockchain energy companies raise capital through “initial coin offerings.” GTM Research reports that $300 million was raised by such companies since the third quarter 2017 through January 2018. It expects another 25 ICOs through June this year. It says ICOs account for 75% of the funding for blockchain energy companies currently, but more capital should come over time from utilities as they experiment with the technology. 

Regulatory issues make such initial coin offerings more challenging in the United States than in capital markets outside the US. (For more details, see “Initial Coin Offerings” in this issue.)