Crypto-enthusiasts believe the digital currency could become closely interwoven with the energy industry of the future, improving ageing infrastructure downfalls as well as helping to reduce carbon emissions. So how will the magical virtual money help the fossil fuel and renewables sector in the coming years?
Texas, the home of many crypto start-ups, is seeing several new companies seek partnerships with Big Oil and state energy actors to integrate their operations into energy strategies for the next decade. The Bitcoin mining community believes that adding another electricity consumer to the already oversaturated system could help, maybe somewhat surprisingly.
Right now, the existing grid system – Electric Reliability Council of Texas, aka ERCOT, provides electricity to around 90 percent of the state of Texas. But it is temperamental as it requires a careful equilibrium between supply and demand to function well. It’s for this reason that crypto companies are suggesting that additional buyers in the system, that can take whatever amount of power is delivered to them at any time of day, will help maintain this balance.
Bitcoin miners could benefit from greater access to electricity, and the grid would benefit from the almost immediate responsiveness of the user. This is thanks to the ability of bitcoin machinery to turn on in a matter of seconds. Therefore, energy can be taken from and sent back to the grid as needed.
Senator Ted Cruz explained, “If you have a moment where you have a power shortage or a power crisis, whether it’s a freeze or some other natural disaster where power generation capacity goes down, that creates the capacity to instantaneously shift that energy to put it back on the grid.”
Innovations like these have arisen in response to dramatic failures in ageing U.S. infrastructure. Earlier this year, we saw the Texas electricity grid fail in response to a severe winter storm. At the same time, gas and water supplies were stalled, leading to significant energy shortages and, ultimately, in the loss of several lives. Although President Biden is currently pursuing a trillion-dollar infrastructure bill, this will only fix some of the problems and could take years to carry out. So, alternative solutions from start-ups seem increasingly appealing when looking at the alternative.
But this is not the first intervention we have seen from crypto start-ups in the energy sector. Tech companies in Houston, a digital currency hub, are recommending the construction of huge crypto-mines to run on renewable energy. It is estimated that digital currency mining uses around 0.5% of all electricity consumed worldwide or 7 times as much as Google. Therefore, switching away from fossil fuels to renewables would mean a dramatic reduction in the carbon footprint of Bitcoin and other currencies.
Tech company, Lancium, announced plans in November to construct Bitcoin mines in Texas, worth $150 million, to run on wind and solar power. As West Texas is part of the country’s ‘wind belt’ and the state has good sun quality on average, it makes it the perfect location for this type of project. In fact, the region is expecting to double its sun and wind energy output within the next five years, encouraging greater interest in tech and energy partnerships.
Crypto-energy projects are already up and running in some parts of the country. In Wyoming, for example, the company JAI mines Bitcoin for itself and energy investors who want a piece of the action, running power mining rigs from electricity converted from gas flares. Gas that would typically be released into the atmosphere is, instead, captured and reused. The company, like many others, is now hoping to expand operations to Texas and other states.
At present, gas flaring contributes around 1 percent of global carbon emissions. As governments push for net-zero and companies strive to decarbonise their operations, a crypto-energy partnership could be just what the doctor ordered. A by-product of fracked shale, gas is flared because it is seen as unprofitable. But with increasing international pressure for Big Oil to reduce its carbon footprint, digital currency companies quickly came up with a way to reuse this gas to run their mines.
As investment figures in digital currencies are climbing, the worldwide electricity use associated with this mining system will continue to rise. Contributing a significant proportion of the world’s energy use, it seems only logical that crypto companies join forces with oil, gas, and renewables firms.
Whether running off waste gas and reducing emissions or contributing to the construction of major green energy projects, it seems that the two sectors will continue to cross paths so long as digital currencies maintain their recent appeal. However, the volatility of these types of currencies could deter energy companies from investing until their future becomes more certain.
By Felicity Bradstock for Oilprice.com
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