Bitcoin mining power demand remains high despite BC Hydro freeze

BC Hydro continues to receive inquiries from potential cryptocurrency miners, even as the province has paused new connections to the power grid and new evidence questions the environmental sustainability of the so-called mining process.

Bitcoin is the primary cryptocurrency for mining, and Hydro officials hoped the collapse of its value to US$21,000 per coin at the end of November last year from a high of more than US$60,000 in April 2022 would help “sort out” the industry, according to Dave DeYagher, head of business development.

“And maybe we would go back to some normalcy,” DeYagher said. But, “We still see requests for fairly large projects.”

Cryptocurrency miners have been drawn to BC for relatively cheap hydropower that the province currently has in surplus.

For bitcoin, the first and most prominent so-called cryptocurrency, digital assets are created by computers that solve enormously complex equations to unlock fractions of individual coins. Each solution must then be verified by other computers in what the industry refers to as the blockchain. Bitcoin mines are huge data centers filled with computer servers that do the necessary calculations, often 24 hours a day, seven days a week.

Hydro has committed 273 megawatts of power generation – enough to heat and light at least 55,000 homes – to cryptocurrency miners that are already operating or in advanced stages of construction. However, the province paused as new requests began to mount, threatening to overwhelm BC’s power surplus.

The enormous demand that miners place on power grids around the world raises several questions about the sustainability of the industry.

A recent investigation by the New York Times attempted to quantify the power used by the largest bitcoin miners in the United States along with the greenhouse gas emissions associated with the generation of this electricity.

Using the analysis of the non-profit technology company WattTime, the newspaper estimated that the 34 largest bitcoin mines in the United States caused almost 15 million tons a year in greenhouse gas emissions.

Industry officials argue that the Times’ investigation unfairly maligns what they see as unlocking a new digital economy that is already entrenched.

However, WattTime’s formula found that even bitcoin miners that used renewable power for their operations could not separate themselves from emissions due to how intertwined the system is, which raises questions even for BC operations, according to economist Werner Antweiler.

“Here, in BC, you guys are cleaner, but that still doesn’t make the whole operation clean,” said Antweiler, an environmental economist at the Sauder School of Business at the University of BC. “Because you can’t dissociate a single (bitcoin) transaction from the global footprint.”

Whenever bitcoins or fractional coins are sold or exchanged, these transactions must also be verified.

“So basically the transaction that’s initiated triggers this avalanche of mining around the world on a relatively proportional basis,” Antweiler said. “So the emissions associated with each transaction are global, it cannot be localized.”

However, the industry is concerned about characterizations of its sector as an excessive consumer of electricity, compared to other industries that face less scrutiny.

BC-based bitcoin mining operations contacted by Postmedia did not respond to questions by deadline, but the Canadian Blockchain Consortium, a national association representing computer companies involved in mining has rejected criticism of the sector.

British Columbia is not alone in restricting new cryptocurrency operations. Manitoba placed a moratorium on new crypto mining last year, and Quebec has placed restrictions on the industry that include higher prices and a requirement to limit operations during high demand.

On the consortium’s website, CEO Koleya Kerringen called the restrictions flawed and did not consider the benefits that bitcoin can provide as a decentralized, peer-to-peer means of financial exchange.

Kerringen wrote that the industry estimates it is cleaner than it is made out to be because 60 percent of power globally comes from renewable sources compared to just 29 percent of total electricity generation.

Kerringen argued that Bitcoin mining could generate revenue for utilities and act as “a preferred consumer” of off-peak electricity.

Cryptocurrency mining came to BC in earnest starting in 2018, just as sawmills ended a painful round of industry downsizing, which DeYagher said offered “a perfect storm” for the emerging sector.

Bitcoin miners were able to use the existing power connections of closed factories and absorb the power needs they were no longer consuming.

Now the problem for BC is that requests from bitcoin miners now amount to 2,000 megawatts, which is almost double the output of the Site C dam that BC Hydro is building, DeYagher said.

BC is also trying to support other emerging industries under its plan to reduce greenhouse gases, encouraging the liquefied natural gas sector to electrify its operations.

“We realized that if we served all the crypto miners today, we would have nothing left for these CleanBC initiatives and nothing left to support these other new industries,” DeYagher said.

BC Hydro is in the early stages of consultations with First Nations, communities and consumers to gauge cryptocurrency interest and limitations. It hopes to have a clearer picture in the next year to 16 months.