EIA Will Investigate Electricity Use by Crypto Mining Operations

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Former Defense Secretary Donald Rumsfeld once mused aloud about the "known unknowns" confronting national security planners: "Known unknowns," Rumsfeld said, are "things we know we don't know." Were he alive today, he might say the amount of electricity being used by U.S. cryptocurrency mining operations is another known unknown that is worth knowing more about.

What is known, but without a great deal of detail, is that crypto mines--basically huge data centers housing thousands of racks of computer servers--use a lot of electricity, both to power the servers and to run air conditioning to cool the inside temperature. The U.S. Energy Information Administration (EIA), the statistical and analytical branch of the U.S. Department of Energy (DOE), last week issued a report, "Tracking electricity consumption from U.S. cryptocurrency mining operations," which said that electricity use by crypto mining companies "has grown very rapidly in recent years, accounting for between 0.6% to 2.3% of all U.S. electricity use."

"This additional electricity use has drawn the attention of policymakers and grid planners concerned about its effects on cost, reliability and emissions," noted the EIA report. "Key challenges associated with tracking cryptocurrency mining energy use include the difficulty of identifying cryptocurrency mining activity among millions of U.S. end-use customers and the dynamic nature of the crypto market, where mining assets can be moved rapidly to areas with lower electricity prices."

In other words, there are a lot of known unknowns worth knowing about crypto mines' electric demand. One thing the EIA does know is that many of those projects migrated from China. EIA's February 1 report said, "Although cryptocurrency mining began in the United States about a decade ago, the activity began to expand rapidly in 2019. Recent growth is largely due to cryptocurrency mining operations relocating to the United States from China after that country cracked down on digital currency mining in 2021."

"As cryptocurrency mining has increased in the United States, concerns have grown about the energy-intensive nature of the business and its effects on the U.S. electric power industry," the EIA report continued. "Concerns expressed to EIA include strains to the electricity grid during periods of peak demand, the potential for higher electricity prices, as well as effects on energy-related carbon dioxide (CO2) emissions."

Crypto miners use several measures to create and track transactions. All these measures use large numbers of computer servers, which generate a lot of heat that must be dissipated with large, electricity-gobbling air conditioner systems. Given the large electric needs of crypto mining operations, and the modular nature of their business, operators often change locations to take advantage of lower-cost electricity.

The EIA's concerns about the electricity impacts of crypto mining mirror those raised by an international sibling agency, the International Energy Agency (IEA) (Paris, France), which in a recent report said global electric demand from crypto mining, data centers and artificial intelligence have risen sharply in recent years and could double by 2026. For more on that, see January 25, 2024, article - IEA Cheers Expected Surge in Non-Emitting Electric Generation.

The EIA's February 1 report said it has requested and received from the Office of Management and Budget (OMB) an "emergency" authorization to begin collecting monthly data on electricity use by crypto mines to develop a more rigorous estimate of their electricity use. The data will be collected over the next six months.

The agency noted increasing concerns about electricity use by crypto mines on the part of members of Congress as well as electric reliability organizations. Members of Congress have written to EIA asking for "information that could better identify the effects of cryptocurrency mining on electricity and energy-related CO2 emissions. In those letters, the members of Congress emphasized the need for the development of a 'mandatory disclosure regime' regarding emissions and energy use by cryptocurrency miners."

Grid planners, the EIA report continued, "have also begun to express concern over the rapid growth in electricity demand associated with cryptocurrency mining. For example, the North American Electric Reliability Corporation (NERC) indicates in its latest long-term reliability assessment that "due to unique characteristics of the operations associated with cryptocurrency mining, potential growth can have a significant effect on demand and resource projections as well as system operations."

For example, the Electric Reliability Council of Texas (ERCOT) (Austin, Texas) has 41 gigawatts (GW) of requests for new cryptocurrency mining capacity, for which 9 GW of planning studies have been approved, according to NERC.

While the growth of crypto mining in Texas may be extraordinary, it is not isolated: The EIA report also lists major crypto mining clusters in the Southeastern and Northeastern U.S.

Click on the image at right to see a map of U.S. clusters of crypto mining clusters, by electricity demand.

"The increased demand associated with cryptocurrency mining can present challenges to the operation of electricity grids," noted the EIA report. "After some early problems where electricity prices spiked due to a sudden surge in cryptocurrency mining, wholesale and retail markets have been able to make adjustments to handle the new load."

"We have been able to track electricity use at a group of five small U.S. power plants in Montana, New York, and Pennsylvania where cryptocurrency mining has occurred," the report continued. "The combined power generation at these five generating facilities rose sharply beginning in 2021 when cryptocurrency miners established operations. Once more, the amount of direct-use electricity within the plant itself--used to feed the mining operations--has increased to a larger percentage of the plant's output. Prior to the installation of the cryptocurrency mining equipment, output from the five plants had been much lower. The previous underutilization of these power plants has attracted cryptocurrency miners to these facilities given prospects of dedicated electricity at low rates."

Click on the image at right to see the EIA's estimate of annual power consumption at five crypto mines since 2015.

The agency noted that some grid operators have instituted programs that provide incentives for large electricity consumers to curtail their use during periods of peak demand. Cryptocurrency miners have become regular participants in these programs, known as demand-response, resulting in operations being cut back or shut down temporarily.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).