The Department of Energy will track energy used in crypto mining
The business of minting cryptocurrencies here in the United States is growing bigger by the day. In January 2020, just 3.4% of the world’s bitcoin mining took place here. That figure ballooned to almost 38% in just two years.
As we’ve talked about on this show, mining bitcoin and some other cryptocurrencies burns through a lot of electric power. The Energy Information Administration has been interested in tracking this activity, sifting through articles in the media and company reports. But the federal agency has decided to start collecting information from cryptocurrency miners themselves about where they operate and how much energy they use.
Marketplace’s Lily Jamali asked Mark Morey, senior adviser for electricity analysis at the EIA, about the project. The following is an edited transcript of their conversation.
Mark Morey: The difficulty is even though we were able to conduct our own survey, there are lots of resources we could do, we really don’t have a good handle upon the extent to which energy use by cryptocurrency miners is occurring, both regionally, total amount, just a lot of unknown. So that’s why we came up with this survey and have gotten approval to send it out to a collection of respondents. And that’s what led to where we are today with regards to the press release and the study that you saw last week.
Lily Jamali: Yeah, and I’m really struck by the stat that’s in your recent analysis on this. You estimate annual electricity use from cryptocurrency mining in the U.S. is somewhere between 0.6% and 2.3%. Either side of that range sounds like a lot to me, but also it is such a wide range, which I think speaks to how little we really know about the extent of this activity.
Morey: That’s true. It is a wide range. But let’s back up and look at the numbers first. If you look at the total amount of electricity, obviously when you’re coming up with these percentages, you have to have two numbers: You have to have the number for what we believe energy use is from crypto mining operations versus the total. And the total is the number we collect. That’s one of the great attributes of EIA, is we’re collecting all kinds of data. So we have a very solid number about what electricity demand has been month by month, year by year. So we have a good measuring to come up with that percentage. When you look at those percentages, those are strictly estimates.
But as the report said that was published on Friday, it was a function of a top-down analysis that we conducted using several existing sources that track not so much energy per se, but also just overall activity in the crypto mining area. So we looked at those estimates that were provided by others on a top down, and then we did our own bottom up. So we did internal investigations about the number of sites that we saw that was doing cryptocurrency mining. We looked at reports, we looked on the internet, we looked at financial documents, just about anything we could to try to come up with a census. The second part of that was after we identified individual sources, we would then see if they published a number in terms of megawatts of capacity that they believe or estimated that they were using. So that allowed us to come up with a number. If you were to multiply the number of sites we found by how much energy they said they were consuming to come up with a bottom-up figure. And all the range is just sort of taking a look at very little activity in terms of crypto mining versus a large amount or the maximum amount. And that’s where those percentages come from. But clearly, those are just estimates, which is why we need better, more concrete data, which is the reason for the survey.
Jamali: And how hard has it been to identify crypto mining activity to this point because these facilities are very mobile, right? They can pick up and leave, go to a place where electricity is cheaper, so that seems like an added complication in keeping tabs on all of this.
Morey: Absolutely. And not only are the facilities themselves mobile, but the machines that are in those facilities are also mobile too. You could find where maybe a facility was located in one location, they decided to move it because maybe there was cheaper electricity in another location, so they might move all of the machines. Or we’ve seen instances where you had a location that had a lot of machines, but then some were bought and moved into another location. So there was significant transferring of facilities that were going on, which also has led us to the reason why we’ve come out and asked for approval to do this survey.
Jamali: Are you going to be engaging with community officials in any of these places? I know that, based on my own reporting on cryptocurrency mining, my impression has been they want this information too, because there is a black box to a lot of these people that run the local utility, that run the local county administrative office. They can’t charge taxes if they don’t know how much use is happening. I was sort of surprised by the extent of the opacity of this.
Morey: Well, the information we’re collecting is strictly trying to identify the location and the amount of energy being used at these facilities. We’re trying to get the information by month. And I should also say, the survey is focused around a facility-level reporting structure, meaning that if you’re a company and you had three or four facilities, we’re trying to collect data for those individual facilities so we can understand how much activity is going on there. Now, with regard to the information once we’ve received it, it’s up to us to then compile it in a way that will give people an understanding about the extent of energy use for this sector. And that’s all going to be public information.
Jamali: What are some tangible outcomes that might come of this data? What are you hoping for?
Morey: Well, we’re hoping to get a good appreciation for the energy use of this sector. A lot of this survey is an effort just to get an understanding of the magnitude of this. Is it greater than we’re expecting, is it less than that? So that’s really where we are at this point.
Jamali: And to what end? What do you do with that information once you have it in hand?
Morey: So ideally, it’ll be publicly available information for people to use that hopefully will help them get a better understanding of this energy sector. So if you go on to our website, you’ll find dozens of these surveys. And I think people go there to find out data that represents what’s going on in the energy business.
In case you were wondering if this new push for data by the EIA has anything to do with the recent approval of spot bitcoin exchange-traded funds, Morey assured us it does not. That decision was announced last month by the Securities and Exchange Commission. Analyst Ben Hertz-Shargel of the consultancy Wood Mackenzie told us recently he expects demand for the original cryptocurrency, bitcoin, will only grow because of that decision.
But the information gathering isn’t sitting well with the cryptocurrency industry. Marketplace’s Henry Epp has been reporting on that angle. He spoke with a rep from the Texas Blockchain Council who told him crypto mining companies could be at a competitive disadvantage if federal authorities release what he calls proprietary information. To no one’s surprise, legal action is being considered.
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