Heavy breach of crypto mining in the EU may come this winter

EU crypto winter

Thought crypto winter was bad? Experience the real, potentially harsh winter about to hit Europe. Officials believe shutting down a key segment of the crypto industry could be a solution to the energy crisis.

A crash in crypto mining could save precious gas supplies. The European Commission proposed that the EU members should take this measure to provide relief to private customers in times of high energy demand.

• The EU has a plan to cut gas use by at least 15% until March.
• A number of groups, including the International Energy Agency, have laid out plans for how to do that by cutting back on commuting or lowering thermostats. Heavy industry can also play a role.
• But so could the crypto industry. “In the event that there is a need for load shedding in the electricity systems, member states must also be ready to stop the mining of crypto-assets,” the European Commission said in a report.

Targeting the crypto mining industry might make sense. The EU must cut gas use now, while not imposing a heavy burden on private users. And a crash in crypto mining can bring immediate returns.

• Miners have cited the flexibility they have in shutting down and spinning up their operations based on the cost and availability of energy as an advantage compared to other industries, arguing that they can actually help stabilize grids and lower energy costs.
• Given that the biggest efficiency gains for heavy industry are likely to be years away, as is the prospect of getting heat pumps in every basement in the EU, this flexibility could pay big dividends.
• EU member states can test how serious miners are about stabilizing the network.

Crypto mining’s energy footprint is well established. This is especially true for proof-of-work mining – which is used by bitcoin, the most popular crypto ecosystem. The European Commission called it “outdated”.

• Energy consumption for crypto mining has “more or less doubled compared to two years ago,” the report said.
• The EU is home to 10% of all proof-of-work mining globally. Although not a large share, the EU is in the middle of an energy crisis and reducing demand as much as possible is the name of the game.

The report also cited the need to retire proof of work over the long term, pointing to Ethereum’s recent merger as a way forward. The network went from proof of work to proof of stake, reducing energy consumption by 99%. The commission said “we need to go the extra mile to make this happen,” and has a number of measures in place to do so. But first, it may be to cut energy use now, so that the light and heat remain on this winter.

— Benjamin Pimentel

Green hydrogen lifts off 🚀

The war in Ukraine has shifted the cost calculation for hydrogen production. The conflict has resulted in sky-high gas prices, accelerated investments in green hydrogen made with renewable energy. The new industry is now “decades ahead of pre-war forecasts”, according to a new analysis from the Carbon Tracker think tank.

Governments and investors from 25 countries have committed $73 billion to green hydrogen since the war began. The largest investments come from the combined public and private sectors of Germany ($10.4 billion), Morocco ($9.7 billion) and the United States ($9.5 billion). By comparison, the market was valued at just $1 billion last year.

It is a game-changer for the industry. Green hydrogen is still a fairly nascent technology, but the uncertain supply of methane gas – which is usually used to make hydrogen – from Russia could put the green hydrogen industry and technology far ahead of schedule.

• In “most regional markets”, including Europe and Asia, green hydrogen is now the most cost-effective form of hydrogen.
• That’s not necessarily because it’s gotten cheaper, but because the cost of hydrogen from coal and especially gas has skyrocketed by more than 70% since Russia’s invasion of Ukraine, Carbon Tracker said.

Governments can promote even faster green hydrogen development. Money isn’t the only way to boost the fuel. With the right incentives in place, Carbon Tracker found that the cost of green hydrogen could be “one of the cheapest forms of energy” available by 2030.

• Legislators can introduce subsidies, both for investors and for the industry itself. Tax credits are one example of industry-directed subsidies, such as those included in the Inflation Reduction Act in the United States
• Establishing banks or other financial bodies solely dedicated to expanding the green hydrogen market could also accelerate growth.
• And tracking programs that verify that green hydrogen is indeed made from renewable energy sources can ensure the integrity of the entire system.

Accelerating the development of green hydrogen does not mean that the fuel is a savior. Making it requires renewable energy, which we don’t have in abundance right now, as well as abundant amounts of fresh water. While industries such as steel, cement and shipping can benefit from green hydrogen given the lack of alternatives outside of fossil fuels, governments must also ensure that they do not commit to hydrogen when other carbon-free resources are readily available.

— Lisa Martine Jenkins

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