A new study finds that Bitcoin mining paired with green hydrogen could help speed up a transition to clean energy — an eyebrow-raising claim, considering strong evidence that the cryptocurrency is a big polluter.
To avoid any misconceptions, The Verge spoke with researchers to understand the very narrow scenarios in which this concept might work, and possible pitfalls given the complicated reality of Bitcoin mining.
The study, published in the journal PNAS, calls Bitcoin and green hydrogen fuel a “dynamic duo” no less than seven times. It envisions an ideal scenario in which the profits of Bitcoin mining are used to invest in clean hydrogen production and renewable energy.
“It all depends on who uses [Bitcoin] — just the same as a knife.”
The devil is in the details. Bitcoin would have to be mined using clean energy. And a big caveat in the study is that it proposes that energy companies or climate groups do the mining, not your average Bitcoin miner that has no financial incentive to deploy more renewable energy onto the grid. In fact, for this to take place, there would need to be policies in place to ensure that funds earned from Bitcoin mining are actually spent on clean energy.
“It all depends on who uses [Bitcoin] — just the same as a knife. We could use it for a meal, we could also use it as a weapon, right?” says Fengqi You, one of the authors of the paper and a professor in energy systems engineering at Cornell University. “In this context, we are not going to mine Bitcoin as the open market trading currency at all.”
Bitcoin mining operations are estimated to produce nearly as much greenhouse gas emissions annually as the country of Morocco. Bitcoin mines are data farms filled with specialized hardware that solve computational puzzles around the clock for a chance to validate new transactions on the blockchain. They earn Bitcoin as a reward, the price of which has recently spiked above $70,000.
The new study offers a potential scenario: why not spend those profits to spur growth in solar and wind energy? It proposes doing that in a roundabout way using an intermediary: green hydrogen, which is made with renewable energy (as opposed to a majority of the hydrogen that is on the market today, which is made with fossil fuels).
The challenge with solar and wind is that they’re intermittent energy sources that fluctuate throughout the day and year. You could solve this problem with rechargeable lithium-ion batteries, but they haven’t advanced enough to be very efficient for long-term energy storage. That’s where green hydrogen and Bitcoin mining might step in, the study posits.
The authors call hydrogen and Bitcoin “energy carriers.” When solar and wind are used to make green hydrogen, that hydrogen stores or ‘carries’ the energy as fuel that can be used later — even when the wind dies down and the sun doesn’t shine. Bitcoin, if used to purchase green hydrogen and / or support the deployment of more solar and wind farms, could be considered a virtual energy carrier, according to this paper.
You says it would be like using Bitcoin as a gift card to spend on clean energy. Policies would have to put guardrails in place so that the money isn’t spent on anything else, similar to a gift card that’s only valid at a specific store. The system could expand solar capacity by up to 25.5 percent and wind capacity by up to 73.2 percent in the US, according to the paper.
But that’s contingent on a lot of hypothetical scenarios. In the real world, it would be tough to replicate. Opening up and operating a Bitcoin mine doesn’t come cheap; traditional Bitcoin mines run around the clock to recoup their costs and turn a profit.
“They’re running things as fast and as crazy as they can right now.”
“They’re not thinking very far into the future,” Joshua Rhodes, a research scientist at The University of Texas at Austin and a non-resident fellow at Columbia University, said of Bitcoin mining firms. “They’re running things as fast and as crazy as they can right now to get the money in right now and not really interested more so in the long-term, decade-long investment cycles something like this requires.”
Utilities would face steep starting costs to mine Bitcoin, and would be saddled with more limitations if they want to support clean energy.
Rhodes, who is also a founding partner for the consulting firm IdeaSmiths, worked on an analysis for the crypto mining company Lancium in 2021. It found that Bitcoin mines that want to incentivize renewable energy growth would have to power down around 15 percent of the year, whenever wind and solar power generation are low, to actually reduce greenhouse gas emissions from electricity consumption.
Bitcoin companies in Texas, a hotspot for mining where Rhodes’ analysis was conducted, have paused mining in the past, but only because they were paid. The state’s grid operator has paid crypto miners tens of millions of dollars in energy credits to prevent blackouts during electricity demand peaks and supply shortages. The program has perpetuated the idea that Bitcoin can provide the same energy storage benefits as a battery, even though there’s little motive to curtail mining without financial incentives.
Ultimately, Bitcoin can only ever be compared to half a battery, Rhodes says. Energy goes in, but it doesn’t come out. “I don’t think it’s appropriate to call Bitcoin an energy carrier,” Rhodes tells The Verge. “You can maybe make an argument for it to be called an enabler, which is I think what they’re trying to do here, but the idea of calling it an energy carrier perpetuates the thought that you can get energy out of this thing somehow, which is not possible.”
You and his co-author published a similar paper last year that found that Bitcoin mining could potentially generate profits for renewable energy projects. Again, the findings apply to a very specific scenario: mining that uses surplus renewable energy from new solar and wind farms that are still waiting to get connected to the grid.
There’s a backlog of infrastructure waiting to get connected to the grid. On paper — at least in this latest study — a Bitcoin mine, hydrogen facility, solar and wind farms could all work in tandem. In reality, they might be in competition with each other for a limited supply of transformers, inverters, and all the other equipment needed to hook them up to the grid.
Even in a scenario where it’s a utility running the show and mining Bitcoin to fund clean energy ambitions, success still depends on Bitcoin prices that fluctuate wildly. The price might be around $70,000 today, but it’s only now climbing out of the Crypto Winter that pushed prices below $20,000.
“I won’t say impossible, but [the price of Bitcoin] is unlikely going to be zero, right? … Once there’s a value, there’s a way to use these mines as a tool,” You says. “But how the future market will look like, nobody knows.”
The authors received funding from the National Science Foundation, but no support from industry. You also says he doesn’t personally own any crypto.
https://www.theverge.com/24112638/cryptocurrency-bitcoin-mining-renewable-energy-hydrogen-study
