How Bitcoin Is Improving the Environment
It’s no secret that Bitcoin mining utilizes large amounts of energy for its computational processing. As concerns over the climate crisis continue to rise, industries all around the world are facing increasing pressure to reduce the amount of non-renewable energy sources consumed and the emission of carbon into the atmosphere. The Bitcoin network’s energy usage is easily quantifiable, making it an attractive target for scrutiny. In fact, no other industry has energy usage that is as transparent and easily calculable as the Bitcoin network. The debate over Bitcoin’s energy usage has been around since its inception, and it still persists today. Rather than getting swept up in the sensational headlines and articles criticizing energy usage, it is important to understand the actual breakdown of the energy data.
According to CoinShares’ recently published report on the Bitcoin mining network, it was estimated that the network drew 82 TWh of electricity in 2021, a 9% increase from 2020. As of December 2021, the current annualized draw is 89 TWh. To put this in perspective, the Bitcoin network consumed 0.05% of the total global energy consumed in 2019 which practically amounts to a rounding error when it comes to global energy consumption. For comparison, NYDIG reported that domestic tumble dryers and data centers used 108 TWh (0.07%) and 204 TWh (0.13%), respectively, in 2020.
CoinShares also quantified the sources of energy used to power the network and broke down the energy mix into the following categories: coal, gas, hydro, nuclear wind, and other (a mixture of small amounts of oil, solar, and mainly geothermal). Their findings show that 39% of the energy sources consumed on the network are renewable.
Lastly, CoinShares estimated the carbon emission of Bitcoin mining for 2021to be 41 metric tons (Mt) of CO2. In comparison, the emissions resulting from the gold industry are estimated to be between 100 and 145 Mt ofCO2 annually. Galaxy Digital estimates the global banking system used 264TWh of energy in 2019. Using the average global carbon intensity of 492gCO2/kWh, CoinShares was able to equate this to 130 Mt of CO2emissions per year. For additional context, it was estimated that the global aviation industry, marine transport sector, air conditioners, and electric fans, data centers, and tumble dryers each emit 1,982; 1,503; 984; 100; and 53Mt of CO2 annually, respectively, which can be visualized below.
Stranded and Wasted Energy
Bitcoin’s energy consumption is unlike other industries in that its core variable input is electricity. Therefore, Bitcoin miners focus primarily on acquiring cheap electricity sources to maintain profitability, which sets them apart from normal electricity users. For this reason, miners seek out inefficiencies around the world, looking for stranded and wasted energy sources. They are the dung beetles of the energy world, looking to take advantage of the energy that no one else wants or can use. Since Bitcoin mining is not restricted by geographic location, miners have the flexibility to go wherever they can find the energy and an internet connection. On the other hand, normal industrial energy consumers are limited to energy sources that are close to civilization and have the proper infrastructure to transfer the energy—which is often not economically feasible or technologically possible.
As miners relocate to areas with underutilized and affordable power sources, they naturally seek out innovative solutions to obtain efficient energy production. For example, one common method miners utilize for taking advantage of stranded energy involves transporting mining rigs via shipping containers to an energy source, resembling a plug-and-play setup.
Given the flexibility that mining provides, Bitcoin miners have developed several strategies to capitalize on several sources of wasted and stranded energy. This report will take a closer look at the following four energy sources:
- Stranded natural gas
- Stranded geothermal energy
- Coal refuse
- Recycled waste tires
Stranded and Wasted Energy from the Oil and Gas Industry
Oil is the lifeblood of the modern industrial world. While it is one of the most relied-upon energy sources, oil is also one of the most disliked industries in the world. The reality is that even as the world shifts to using renewables as the primary source of energy, there will always be a case for oil. Oil is used in the majority of plastic products, clothing materials, appliances, building materials, and most obviously as gasoline for transportation. Oil sector consumption is broken down into the following categories: transportation (66%), industrial (28%), residential (3%),commercial (2%), and electric power (1%). Lyn Alden, the independent investment analyst, and strategist points out that when thinking about the future of energy consumption, it is important to keep in mind that newer energy sources historically have not replaced previous energy sources. The previous energy sources typically remain flat or even continue to grow, while the newer energy sources grow faster and become more dominant.
U.S. oil and gas production yields nearly 12 million barrels of crude oil per day, with natural gas as a by-product. Natural gas is a non-renewable source of energy used globally for heating, cooking, and electricity generation. Because oil drilling sites typically reside in remote locations where pipeline and powerline infrastructure is non-existent, natural gas is often left stranded as it cannot be economically brought to market. As a result, oil companies are forced to dispose of the gas via one of two processes. The first is venting, which involves releasing the gas directly into the atmosphere. When natural gas (mostly methane) gets vented into the atmosphere, it causes more than 30 times the greenhouse effect of carbon dioxide over a 100-year period, leading many states to implement regulations on how much gas can be vented. Since venting the gas directly into the atmosphere is extremely harmful to the environment, the majority of the gas ends up being disposed of through the second process known as flaring. Flaring involves collecting unwanted gas with a boom or stack and combusting it for disposal. When the gas is flared in the absence of wind,99% of the methane can be combusted, leaving just CO2 and water. However, normal windy conditions reduce the average combustion efficiency to 68%. When winds reach conditions above 6 m/s, efficiency can drop a stark 10–15%, resulting in substantial amounts of methane leaking into the atmosphere even while flaring.
Flaring is not only a poor solution to preventing methane from entering the atmosphere, but it is also a huge waste of energy. The industry has spent billions of dollars looking for possible solutions, and an unusual one has fallen at their doorstep. Bitcoin miners have figured out how to monetize the stranded gas and manage it in a less environmentally hazardous fashion. Companies like Crusoe Energy and Upstream Data have emerged to provide a solution that pairs Bitcoin mining data centers (in shipping containers) with natural gas engines to monetize the wasted energy and convert it into useful work. The gas is also combusted inside controlled environments, preventing any methane from leaking into the atmosphere. This has led to the inception of many partnerships between Bitcoin miners and major oil and gas companies as they begin to use this novel solution to deal with the problem that has plagued them since the birth of the American oil industry in 1859.
The amount of wasted energy from flaring in the U.S. is significant, to say the least. Coinshares estimates that 69 TWh of wasted power in the U.S. is lost annually to flaring, which has resulted in a carbon footprint of 78 Mt of carbon dioxide equivalent (MtCO2e) emissions. In other words, the wasted energy from flaring in the U.S. is currently equal to 78% of the energy used by the global Bitcoin network. Not only can the wasted flared energy be repurposed for powering a significant portion of the Bitcoin network, but it can also be done in a fashion that reduces carbon emissions.
Geothermal energy is heat from deep within the Earth’s crust that can be harnessed for clean electricity generation. The heat comes from reservoirs of hot water and steam that exist at varying temperatures and depths, scattered around the world. These reservoirs typically find their way to the surface through volcanoes, hot springs, or geysers. The most active geothermal resources reside along the boundaries of major tectonic plates. Therefore, countries like Iceland, El Salvador, New Zealand, Kenya, and the Philippines rely on it heavily for their electricity consumption. Iceland, for example, gets over one-third of its total energy consumed from geothermal power plants, which also makes up 90% of the energy used for residential heating. The main advantage geothermal has over other renewable energy sources is its capability to provide year-round baseload power without having to rely on battery storage or the grid.
Geothermal energy’s greatest limitation is that the majority of known reservoirs are located in remote areas, far from traditional consumers. SinceBitcoin mining is location agnostic, miners are able to take advantage of these underutilized and stranded energy sources. This has led Bitcoin mining companies, like Genesis Mining and Bitfury, to flock to countries like Iceland for cheap, abundant geothermal power. More recently, NayibBukele, president of El Salvador, began experimenting with using state-owned geothermal power plants to mine Bitcoin with the energy from their volcanos. President Bukele’s vision is to design a full Bitcoin mining hub around the country’s geothermal energy resources.
The potential of geothermal energy is massive. One estimate claims that just 0.1% of the heat content below the Earth’s crust could supply humanity's total energy needs for 2 million years. Globally, the installed capacity of geothermal energy has been increasing over time, reaching 14gigawatts in 2020. As geothermal technology continues to advance, geothermal energy is destined to play a larger role in providing clean, renewable energy to the grid.
The United States’ coal mining legacy has left significant environmental issues and liabilities, particularly in Pennsylvania. Coal refuse is the material left behind from coal mining which has resulted in over 770 abandoned coal refuse piles. Pennsylvania’s Department of Environmental Protection (PADEP) has identified that these piles contain over 220 million tons of coal refuse. The PA DEP acknowledges that their database is incomplete, with other estimates suggesting that the amount of coal refuse is actually in the billions of tons. Over 8,300 acres are covered with coal refuse, with some piles being hundreds of feet deep. Coal refuse is one of the largest wastewater contaminants in PA due to acid mine drainage discharge from the piles. The acidic discharge contains iron, manganese, and aluminum along with other metals and materials that have impacted more than 3,300miles of streams. This has caused the streams to turn orange, creating water pollution and negatively impacting aquatic life. The coal refuse sites also have a high probability of spontaneously combusting, leading to uncontrolled toxic air pollutants and greenhouse gasses being emitted into the atmosphere. Back in 2021, the PA DEP reported over 45 piles burning uncontrollably. Coal refuse piles negatively impact land, water, and air quality, thereby posing a risk to public health and safety.
Until the late 1980s, there was no plausible way to clean up the mess left behind by coal miners. With the invention of circulating fluidized beds(CFBs), it became possible to burn coal refuse for energy in waste coal power plants, while achieving a lower emission of pollutants. The process mixes in limestone with the coal refuse, which absorbs the sulfur, resulting in an output of ash that can be used productively.
Waste coal power plants have reclaimed around 3,700 acres of land over the past three decades, with 9,000 acres remaining according to the PADEP. However, these waste coal power plants encountered a problem. They were competing with cheaper energy sources on the power grid and losing. It was not economically viable to entirely rely on the grid for revenue, especially when the grid often did not even need the power from the powerplants, which threatened their closure. For the environmental cleanup to continue, a new and more profitable revenue source was needed, and fortunately, Bitcoin served that purpose.
Stronghold Digital Mining was formed to continue the coal refuse clean-up using Bitcoin mining as a method of economically sustaining the operation. The company describes itself as a 21st-century crypto miner, remediating the impacts of the 19th- and 20th-century coal mining in some of the most environmentally neglected regions of the US. Their process removes the majority of the toxic emissions and produces beneficial ash that can be used in cement and to neutralize any remaining acidic materials at the coal refuse sites. Their ash is also classified as a certified fertilizer by the PA Department of Agriculture, meaning it is safe enough to be used on crops. The PA DEP also works closely with Stronghold to identify and deal with any coal refuse sites that require immediate attention.
Along with helping clean up this environmental disaster zone, Strongholdhelps stabilize the local energy grid. Stronghold is a vertically integrated miner. This means they have their own power asset and data centers, and the generated power never leaves the facility. The only exception is when the company is called upon to provide energy to the grid during shortages. Because their operation is capable of running profitably 24/7, Stronghold is able to redirect the energy flow from their miners to the grid within a moment's notice. If a typical power plant was offline and was called upon to provide power to the grid, it could take up to 24 hours to turn online, whereas Stronghold can act immediately.
In just the U.S., over 300 million waste tires are created every year. This amounts to nine waste tires being trashed every second of every day. This shocking statistic does not take into account the scrapped tires that don’t pass the tire manufacturer’s rigorous safety standards, which can amount to almost a 10% production yield loss. The U.S. Tire Manufacturers Association reported in 2019 that almost 76% (down from 96% in 2013) of scrap tires were recycled into products such as rubber-modified asphalt, mulch for landscaping, and tire-derived fuel, with the remaining 14% being sent to landfills. Tire-derived fuel is a fancy term for burning tires for power generation, and it makes up 49% of the “recycled” tires. This process is not considered a recycling process by the U.S. Environmental Protection Agency (EPA) but is accepted since it is a better alternative to having the tires accumulate in landfills.
While the number of scrap tires generated has continued to increase on average by 7% annually since 2013, the total number of scrap tires recycled has been decreasing on average by 3% annually. In addition, 56 million scrap tires remain stockpiled in landfills in the U.S. Clearly, progress regarding the tire waste issue has stalled over the past six years. In order to continue making progress, new, more sustainable, and economically viable markets are needed to incentivize the waste tire cleanup effort.
One company that has innovated on the traditional tire recycling process has been Product Recovery Technology International (PRTI). PRTI is transforming how waste tires are handled through their newly invented process called PRTI Thermal DeManufacturing. This process allows PRTI to break down a tire into useful industrial commodities through a near-zero-waste, environmentally helpful, and revenue-positive recycling process. The process uses carefully managed temperature and pressure to break the rubber down into oil, carbon, steel, and energy. Other than the energy, the commodities produced through the process are then resold. The energy generated from the recycling process allows PRTI to be a self-sustained operation, utilizing the power to run their recycling operation and to also power in-house Bitcoin miners. This essentially turns PRTI into a waste-to-energy Bitcoin mine. The additional revenue generated from mining also makes it economically viable to truck in loads of tires from a further distance for recycling.
The modular design of PRTI’s process allows them to easily scale their operation and build new sites around the world, closer to the source of waste tires. One of their North Carolina plants produces around 6.15 MW of energy—the equivalent of roughly a 20-acre solar farm.
PRTI has also partnered directly with tire manufacturers to offload the tires that don’t pass the manufacturing and safety standards. With plans to develop 171 additional plants in the US, PRTI aims to transform America’swaste into valuable commodities, eliminating the need for burning, burying, and grinding tires.
Compared to total global energy consumption, Bitcoin miners consume a negligible amount of energy, with over a third of that energy coming from renewables. Rather than competing with traditional energy consumers, miners are seeking cheap energy sources that are often stranded or wasted. Many companies have developed innovative methods to leverage stranded or wasted energy sources while also leaving a positive impact on the environment. Companies like Crusoe Energy, Stronghold Digital Mining, and PRTI, for example, are frequently misrepresented in the media and criticized for their first-order effects (releasing CO2 into the atmosphere), while ignoring the importance of their second-order effects (providing an environment-friendly service by reducing harmful greenhouse gasses and by preventing further land, water, and air quality degradation).
Bitcoin’s energy consumption is incredibly quantifiable, and now, its potential positive environmental impact is also becoming quantifiable. One day, it could be possible that Bitcoin operates entirely on renewable energy, but until that day, Bitcoin miners will continue to find the cheapest source of electricity through innovative solutions that add underutilized or wasted energy into the Bitcoin energy mix. These innovations alone may be enough to justify Bitcoin’s energy consumption to some people, but ultimately, Bitcoin’s justification depends on whether people believe its energy consumption adds value to society. And at the end of the day, value is subjective.