Crypto mining and data centres – the green challenge

Crypto mining and data centres are two sides of the same coin when it comes to energy use and management – but the similarity divides.

Crypto mining operations and data centres are both in essence banks of IT systems – energy hungry with the demand for round-the-clock computation and the necessary cooling.

But whereas data centres are considered necessary with the move towards cloud solutions and services, crypto mining and Bitcoin mining, in particular, has attracted a mixed reaction, particularly from policymakers concerned about the limited wider benefits.

As calls have been made for restrictions, including bans – for example, from authorities in Sweden – crypto miners have fought back with a range of measures they are taking, as are data centres, to shore up their ‘green’ credentials and demonstrate a more sustainable approach on a voluntary basis.

Renewable energies

The most obvious and potentially easiest option is to power mining with renewable energies. In its latest report, the Bitcoin Mining Council estimates that by the end of Q2 of 2022 the Bitcoin mining sustainable electricity mix had increased to almost 60% globally, with a 6% increase over the past year.

The Council, a voluntary global forum, claims its data on which this figure is based now covers over half of the global Bitcoin network, with the members and other participants in its survey achieving a two-thirds sustainable power mix.

With this data, the Council claims Bitcoin mining is “one of the most sustainable industries globally”.

Over the same period, the efficiency of the Bitcoin network also improved significantly due to technological advances – from 14.4EH/GW in Q2 2021 to 21.1EH/GW in Q2 2022.

With further advances, further efficiencies can be expected, although at the same time the mining effort is increasing over time as the number of Bitcoins minted reduces and the cap is approached.

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Waste energy use

Another approach growing in popularity is the use of waste energy, including nuclear and flared gas, for crypto mining.

An example of the former, one of several in US states including Ohio and Pennsylvania, is miner EZ Blockchain, which is utilising otherwise wasted nuclear power in West Point, Georgia.

An example of the latter is Norway headquartered Earth Wind & Power formed by a former Minister of National Public Security and Deputy Minister of Petroleum and Energy, Ingvil Smines Tybring-Gjedde, which has proofs of concept underway in Indonesia.

Grid services

A third option, still limited in application, is the use of crypto mining and data centres to deliver flexibility to the grid. An example is crypto miner Hive Blockchain Technologies, which is partnering with demand response specialist Sympower to deliver flexibility to Sweden’s grid.

Energy reporting

As a principle, the decarbonisation of crypto mining is obviously important for its future and solutions such as Energy Web’s Zero and the Crypto Climate Accord are emerging to support this process.

But the key issue for the policy and lawmakers and what they are likely to win on remains the value to wider society.

The most extreme response is a ban, such as was implemented in China, once the world’s biggest mining hub, which simply sent miners rushing in search of other lowest cost energy countries but also has resulted in sending the activity ‘underground’ in that country.

While there have been calls for a ban in Europe, this has so far not happened and is unlikely to do so.

“It is true that mining requires energy. On the other hand, industries, e.g. the video games and entertainment industry, data centres, travelling, etc., also consume high-energy resources. Should we, therefore, ban everything and deprive Europe of a source of innovation and potential growth?” asks Stefan Burger, Rapporteur for the forthcoming Markets in Crypto Assets (MiCA) regulation.

Speaking following the latest agreements on MiCA reached at a meeting of the European People’s Party group on June 30, he adds that for him it was always clear that MiCA mustn’t ban proof of work, i.e. Bitcoin mining principally.

“It is good that Parliament, the Commission and the Council have taken the path of technology openness together” – that being, with the detail of the wording still to be agreed upon and probably from 2025 on, that crypto asset providers should disclose the energy consumption and environmental impact of assets.

That of course doesn’t rule out further restrictions in the future but should provide the data to monitor changes over time.

Valuing crypto assets

The European Central Bank has offered potential actions around the valuation of crypto assets, with what could become a standard framework with the pricing of climate risk.

The proposals include that public authorities should evaluate whether the outsized carbon footprint of certain crypto assets undermines the achievement of their green transition to net zero.

Investors also should evaluate whether investing in certain crypto assets is in line with their environmental, social and governance (ESG) objectives, while financial institutions should incorporate the climate-related financial risks of crypto assets into their climate strategy.