EIA Unveils Growing Impact of Cryptocurrency Mining on U.S. Electricity Consumption

By IndraStra Global Editorial Team

Cover Image Attribute: This image is computer-generated using AI and is intended solely for illustrative purposes./ INDRASTRA-CREATIVES-AI202402001

Over the past few years, the increase in the need for electricity due to cryptocurrency mining in the United States has raised questions among policymakers and energy grid planners. The U.S. Energy Information Administration (EIA) has conducted a detailed analysis to examine the extent of this impact and the potential consequences for the country's energy infrastructure.

The Growing Concern

According to preliminary estimates from the EIA, the amount of electricity used for cryptocurrency mining in the United States accounts for approximately 0.6% to 2.3% of the nation's total electricity consumption. This sudden surge in demand has raised concerns about its impact on electricity costs, grid reliability, and carbon emissions. Policymakers and grid planners are facing the challenge of tracking and managing this escalating demand, which is further complicated by the ever-changing nature of the cryptocurrency market.

Estimating Electricity Use

The  EIA is facing the challenge of estimating electricity use by cryptocurrency mining operations. To address this, the EIA employs two methods: top-down and bottom-up. The top-down approach involves using data from the Cambridge Centre for Alternative Finance's index, which estimates global and national electricity use from cryptocurrency activities. The EIA has also developed its own bottom-up approach to collect data on individual cryptocurrency mining operations' location and electricity usage.
To obtain a more accurate picture of electricity consumption associated with cryptocurrency mining, the EIA has secured emergency clearance to collect more detailed data on a monthly basis from February through July 2024. This data collection aims to address the urgency of the situation and provide a better understanding of electricity usage by cryptocurrency mining operations.

Rise of Cryptocurrency Mining in the U.S.

Cryptocurrency mining, which began in the United States around a decade ago, witnessed significant expansion in 2019. The recent growth can be attributed to mining operations relocating to the U.S. from China, following China's crackdown on digital currency mining in 2021. Despite this, concerns have surfaced regarding the energy-intensive nature of cryptocurrency mining and its potential impact on the U.S. electric power industry.
Several members of Congress have emphasized the need for a "mandatory disclosure regime" to better understand the effects of cryptocurrency mining on electricity consumption and energy-related carbon dioxide emissions. Grid planners, such as the North American Electric Reliability Corporation (NERC), express concerns about the unique characteristics of cryptocurrency mining operations and their potential effects on demand, resource projections, and system operations.

Cryptocurrency Mining Methods

Cryptocurrency mining, particularly for Bitcoin, relies on a proof-of-work approach involving complex cryptographic puzzles that demand significant computational power. Miners are rewarded with transaction fees and new cryptocurrency coins for adding blocks to the blockchain. Unlike Bitcoin, some cryptocurrencies, like Ethereum, use a proof-of-stake approach, consuming significantly less electricity.
Cryptocurrency mining facilities primarily rely on specialized hardware capable of performing trillions of calculations per second, measured as a hash rate. These facilities can range from individual workstations to massive data centers with modular units, allowing for easy relocation.

Electricity Challenges and Strategies

Cryptocurrency mining is an energy-intensive process that requires a large amount of electricity to power high-performance computers that solve complex mathematical problems. As a result, the primary operating cost for cryptocurrency mining facilities is electricity, which can be a significant expense for these facilities. To minimize costs, mining facilities employ various strategies, such as sourcing low-cost electricity from nearby power plants, utilizing direct connections to power-generating sources, or tapping into low-cost or stranded energy sources.
Moreover, some cryptocurrency mining facilities relocate to areas with access to renewable energy sources, such as wind farms. This strategy not only reduces electricity costs but also aligns with the growing demand for environmentally sustainable practices in the industry. By harnessing renewable energy sources, mining facilities can lower their carbon footprint and contribute to a greener future.

Impact on Electricity Grids

With the increasing popularity of cryptocurrency mining, the demand for electricity has surged, causing significant challenges for the electricity grids. During peak demand periods, there have been instances of sudden spikes in electricity prices, which have led to a considerable strain on the grids. Grid operators have been implementing various programs to address this issue. One such program is the Large Flexible Load (LFL) program, introduced by the Electric Reliability Council of Texas (ERCOT), which encourages large consumers, including cryptocurrency miners, to reduce their usage during peak periods. By curbing their electricity consumption, these consumers can help prevent electricity price hikes during peak hours and reduce the strain on the electricity grids.

Estimating Cryptocurrency Mining Electricity Usage

The EIA estimates the electricity consumption associated with Bitcoin mining in the United States using a top-down approach, which involves using the Cambridge Bitcoin Electricity Consumption Index (CBECI). According to CBECI, the electricity usage associated with U.S. Bitcoin mining is expected to be between 0.6% to 2.3% of total U.S. electricity demand in 2023.
Additionally, the EIA used a bottom-up approach to identify 137 cryptocurrency mining facilities, of which 52 provided location and capacity data. Based on this data, the total electricity usage at these facilities is estimated to be 2.3% of the average annual power demand in the United States.

Map Attribute: A total of 137 facilities to date; the 52 facilities for which EIA have location and capacity data are represented in the above map. These sites are located in 21 states, with most in Texas, Georgia, and New York. The representative size shown for a facility is based upon estimates contained in our bottom-up approach. The number in brackets represents the number of facilities. / Source:  U.S. Energy Information Administration

Monitoring and Future Steps

As the popularity of cryptocurrencies continues to grow, so does the demand for electricity to power the mining operations. However, monitoring the electricity consumption associated with these activities has been difficult due to the diversity of facilities, frequent relocations, and limited data availability. To address these challenges, the EIA has taken a commendable step by conducting a mandatory survey to systematically evaluate electricity usage related to cryptocurrency mining. The data collected from this survey will provide critical insights for informed planning decisions and public education.  

Chart Attribute: Form EIA-923, Power Plant Operations Report / Source: U.S. Energy Information Administration

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