Can Crypto Mining Go Green? Critics are skeptical

This story was reported by Explore the West, an independent news organization dedicated to investigative journalism in the Pacific Northwest. Visit invw.org/newsletters to sign up for weekly updates.

The word “sustainable” features prominently on the website for Merkle Standard’s cryptomining operation in remote eastern Washington, which aims to be carbon neutral by the end of the year.

In Idaho, budding company GeoBitmine plans to fulfill its “environmental, social and governance mandate” by using waste heat from its computers to grow crops in a greenhouse.

And in Texas, crypto miners are trumpeting their presence as eager customers of a growing portfolio of wind and solar projects.

Across the country, cryptocurrency miners are striving to recreate the image of their industry in the minds of the public and policymakers: from volatile to reliable, from all-for-profit to altruistic, from energy-guzzling and heavy-emitting to climate-conscious.

“We want to be allies, not adversaries,” said Jay Jorgensen, founder and CEO of GeoBitmine, the Idaho company. “Allies of the earth, of energy, of energy production, of the society we live in.”

But environmental groups and researchers are skeptical. They point to the industry’s track record of contributing to greenhouse gas emissions and e-waste, as documented by federal agencies and independent researchers, and to the general volatility of crypto’s first decade-plus existence.

“I think there’s been a big shift in the PR aspect,” said Nick Thorpe, a climate and energy attorney at Earthjustice, an environmental law nonprofit that produced a comprehensive report in 2022 on the cryptomining industry’s environmental liabilities.

“(They’re) trying to say all the different talking points, like ‘We’re encouraging renewable energy … We’re near a wind farm, so therefore we’re getting 100 percent clean energy,’ which frankly is incredibly misleading and very much like greenwashing. ”

Voices from both camps are clamoring for the ear of state and federal policymakers who are just beginning to shape regulations around the nascent industry. The ongoing question is whether crypto mining will hinder or contribute to progress toward moving the country away from fossil fuels and stabilizing the nation’s electrical infrastructure.

Based on the history of the industry, even some crypto miners strike a cautious note.

“(With) the speed of movement, plus the frankly irresponsible nature of many of the participants, it would be illogical for policymakers not to be concerned,” said Malachi Salcido, a Wenatchee-based bitcoin miner with a decade of experience in the industry. “The way that will change is not by arguing or entering into conflict. It is by managing burdens responsibly over time, taking strategic long-term positions and earning trust.”

Volatility and climate toll

Cryptomining is facing increasing scrutiny of its climate impacts.

Concerns mainly center around the process of bitcoin mining, which uses a system called “proof of work.” It is energy-intensive by design, requiring computers to solve thousands of equations as quickly as possible in hopes of solving the correct sequence to earn bitcoin.

A 2022 Biden administration report stated that the industry consumed about 1 percent of the electricity used in the country and produced between 25 million and 50 million tons of carbon dioxide annually.

Like data centers, crypto mining also uses water as a coolant and flows through computers every year. The same White House report stated that crypto mining was responsible for the production of e-waste equivalent to that produced by the entire nation of the Netherlands.

But some cryptominers have innovated and pushed back, arguing that the industry has the ability to do better for the planet.

Jørgensen is among them. He has been involved in the bitcoin mining industry for two and a half years, starting as a contractor. Now he’s gathering investors to launch GeoBitmine, which he plans to set up in Idaho Falls this spring.

Jorgensen refers to GeoBitmine as an “agritech company” rather than a bitcoin mining operation. He said his focus with most of the five-acre facility is to build a greenhouse heated by the servers working to mine bitcoin. It can initially employ at least 30 people, he estimated.

In short, he said, he wants to expand the mission of bitcoin mining.

“I’m a practical guy who wants to solve problems and do it in the simplest possible way,” he said. “We have problems with water consumption, food production, and our energy grid needs to be stabilized. I found an opportunity where all these things can be put together.”

GeoBitmine aims to be carbon neutral by the end of 2023, Jorgensen said. His plan to achieve this relies on a combination of a 75 percent renewable power supply provided by PacifiCorp, energy savings from server heat reuse through the greenhouse, and carbon sequestration through the crops grown in the greenhouse.

In response to questions about the value of using so much energy to mine bitcoin, Jorgensen points to other uses of electricity such as Netflix streaming, which according to a 2020 estimate uses about 94 terawatt hours globally each year.

“You just become prejudiced against something that uses less than 1 percent of the grid,” he said. “People fear what they don’t understand.”

Salcido, CEO of Salcido Enterprises, has seen many mining operations rise and fall as the value of bitcoin fluctuated wildly during his 10 years in the industry, justifying the caution of utilities and policymakers.

Given the ongoing volatility in the industry, Salcido said, he doesn’t blame utilities for setting higher prices for crypto customers to protect their assets, or lawmakers for being cautious. He believes it is too early for crypto miners to try to burn their environmental credentials into the minds of the public.

“True sustainability requires a lot of strategic, thoughtful planning and execution, not meandering,” Salcido said. “That, combined with the fact that crypto as a new emerging, developing industry has a get-rich-quick quality, means that most people don’t see it as sustainable. And in these early market cycles, it’s not acting sustainably.”

With time and experience, he still believes that it can be like this.

A bet on potential?

An infamous cryptomining project in New York state that reopened a largely defunct coal plant to power its servers is what originally spurred Earthjustice’s work around cryptomining.

Thorpe, the nonprofit’s senior associate, became involved when the environmental impacts of cryptomining “became a bigger and bigger problem across the United States”

Earthjustice found several other examples of the industry reopening fossil fuel plants or keeping them online as it studied the industry through 2022.

Using public filings with regulators, investor presentations and media reports, the nonprofits investigated claims that cryptomining embraces greener practices and reduces environmental impact. In partnership with the Sierra Club, Earthjustice compiled this research to present to federal policymakers.

They describe their research as “the first attempt to document the explosive growth of cryptocurrency mining in the United States and examine how this industry impacts utilities, energy systems, emissions, communities, and taxpayers.”

Earthjustice found through its research that even in cases where mining claims to draw directly from renewable projects, “most mining facilities draw electricity from the grid – meaning their electricity is generated by the existing energy in place in the region, or is contracted by their utility.”

“Increased load on any grid means an increased incentive to run the coal plant that was supposed to go out,” Thorpe said. Additionally, “I have not seen any example of crypto building out additional clean energy projects solely for their operations.”

Cryptominers also say the industry can contribute in other ways because of its flexibility in power use. Unlike data centers, cryptominers can stop running their computers to ease the pressure on the network during times of high demand. Or they can increase usage at times when energy production exceeds the grid’s current capacity.

States have largely relied on subsidies or lower prices from utilities to encourage crypto miners to disconnect during power surges, rather than mandates requiring them to do so.

Jorgensen said the tactic is effective: It makes economic sense for miners to avoid increased electricity costs during peak demand and to receive the tax or rate benefits that come from disconnecting for a while.

Environmental advocates point out that taxpayers are subsidizing these incentives for crypto miners, but without getting any benefit from sharing the network with these operations.

Earthjustice also said it found many more cases of power companies being stuck holding the bag for investments they made to service crypto operations, only to have those same operations close or leave town. The group noted cases in Kentucky, Arkansas, Nebraska and Washington.

Thorpe acknowledged that the industry is still talking about ways to improve. But for climate groups, the past and present provide more convincing arguments.

“We’re focused on what’s happening right now,” he said. “Fossil fuel plants are run solely to mine bitcoin. Proof of work is designed to be energy intensive. Until that changes, I don’t see a future where it can actually follow the models of other companies like Google and Microsoft that have committed to running on carbon free electricity.”

InvestigateWest is an independent news organization dedicated to investigative journalism in the Pacific Northwest. This story was made possible with support from the Sustainable Path Foundation.