Cryptocurrency offers opportunities, challenges for power market participants

Power demand from cryptocurrency mining data operations offers opportunities and challenges around decarbonization of the US economy, panelists said Sept. 15 at the fall conference of the Independent Power Producers of New York.

Cryptocurrency data mining "uses huge amounts of energy, some say too much energy," said moderator Denny Galindo, an investment strategist at Morgan Stanley, who pointed out that his company recommends neither to buy nor sell cryptocurrency but recognizes that it is "not going away."

Doug Miller, global markets lead for Energy Web, said, "We shouldn't be telling people how to use electricity."

Energy Web is developing a decentralized operating system to enable customers to provably minimize their carbon footprint using blockchain technology.

Gas plant, data mine

Greenidge Generation, a 106-MW natural gas-fired steam turbine plant in Dresden, New York, represents that relationship between power demand and supply as the facility also supports a cryptocurrency mining operation, which started in March 2020.

Of particular concern is New York's 1999 Climate Leadership and Community Protection Act, which targets 100% zero-emission electricity by 2040. Dale Irwin, Greenidge's plant manager, and Addie Jenne, legislative counsel for the New York State Association of Electrical Workers Construction Business Managers, said gas-fired generation represents "a bridge" to reach the CLCPA goal.

New York has closed virtually all of its coal-fired generation, Jenne said, so it is now importing power generated by "legacy coal plants in other states."

"Natural gas, if you want to keep the lights on, if you want to keep the heat on, if you want air conditioning ... we're going to need ... into the future, because wind and solar are intermittent," Jenne said. "We obviously need natural gas generation to get us to the goal of CLCPA."

Morgan Stanley's Galindo said China had banned Bitcoin mining within its borders in May. Since then, such facilities have been moving to other locations with inexpensive, and possibly less environmentally sustainable, electricity such as the former Soviet republics of Georgia, which relies heavily on hydropower, and Kazakhstan, which relies heavily on fossil fuels.

"I don't think we should be chasing away industries because of the amount of power they use," Jenne said. "There are other states and certainly other countries that are not committed to the [zero-emissions] goals of New York State."

Reliability benefits

Energy Web's Miller said natural gas is not necessarily the long-term solution for ensuring reliability as intermittent resources proliferate.

"Our electric grids are becoming way more complex," Miller said, and some countries have used that complexity to facilitate the flexibility needed to maintain grid reliability with increasing shares of intermittent resources.

Some experts have suggested that cryptocurrency data centers could be used to modulate the frequency of transmission grids during periods of high volatility, such as when extreme weather events – excess heat, excess cold, hurricanes, wildfires – cause large amounts of resources or loads to drop offline.

Jenne said, "We can use that energy and demand to help us in New York ... to meet the targets of the CLCPA."

Miller said that if cryptocurrency data mining operations could pledge to obtain all of its power from renewable energy, either by direct power purchase agreements or by buying renewable energy credits, it would add about 100 million RECs to the annual demand of 7.3 billion RECs.

"We've had some conversations with different cryptocurrency exchanges," Miller said, but have encountered complications in how various market participants might prove their renewable energy commitments.