Can Renewable Energy Make Crypto Mining Greener?

Crypto has a bad rep for climate. Bitcoin, the largest cryptocurrency in the world, now consumes more electricity annually than Argentina, a country of 45 million people.

There is growing dissatisfaction with the power consumption of crypto. Kosovo has banned mining because of its footprint. In Europe, Sweden’s financial watchdog, the Finansinspektionen, recently called on the EU to do the same.

But a startup thinks crypto can get greener — and, moreover, has a key role to play in the green energy transition.

The startup, Lake Parime, helps renewable energy companies mine bitcoin using their excess energy. By creating a lucrative side business for the renewable energy market, the company hopes to encourage the construction of cleaner energy infrastructure.

It is one of the few companies in the world that is already trying to use renewable energy to power crypto. Perhaps the best known is Jack Dorsey’s Block (formerly Square), which opens a solar-powered bitcoin mine in Texas, using solar power and Tesla storage.

In Sweden, Canadian company HIVE Blockchain uses a hydroelectric plant to power its Ethereum mining facility. There’s also KryptoVault in Norway, which runs on 95% hydropower and 5% wind power.

The Cambridge Center for Alternative Finance estimated in 2020 that 39% of crypto is mined by carbon neutral means.

Bitcoin and crypto mining farm.

Turning energy companies into bitcoin miners

Founded in the UK in 2019, Lake Parime’s plan is to help energy companies monetize any excess renewable energy they produce by building data centers on their sites that divert excess energy to the energy-intensive computing.

That might mean video rendering or machine learning, but the most lucrative use case — and the one Lake Parime is initially focusing on — is bitcoin mining.

“We turn energy companies or people with access to large amounts of clean energy into bitcoin miners and provide them with the infrastructure and services around it,” explains Sath Ganesarajah, founder and CEO of Lake Parime.

👉 Read: Meet Europe’s biggest crypto miner

Lake Parime is working with “one of the largest wind operators in the UK and Europe” to mine bitcoin using the excess energy it generates.

Wind turbines generate excess energy when grid demand is low and wind power is high.

Lake Parime’s argument is that diverting that power into crypto mining means both decarbonizing the crypto sector and making renewable energy a more lucrative business, which will hopefully reduce the sector’s risks for Investors.

There are other companies, such as the American company Crusoe Energy, which use the excess natural gas to operate the crypto and electric data centers. The gas would otherwise be flared by oil and gas companies, in a process known as flaring.

Crusoe tells his process reduces CO2 by approximately 63% compared to continuous flaring, though critics say it’s just a lucrative scramble for fossil fuel companies.

So should we divert clean energy to crypto mining?

To mine crypto, you need a stable power source.

“If you’re a miner, you want 24/7 power,” says Alex de Vries, a data scientist working on a PhD on the sustainability of crypto assets — and who also built the Bitcoin energy consumption index.

“If you’re not using your device, you’re not making money, and every time you turn off your machine, there’s a loss of revenue that will never come back,” he says.

Wind energy, by nature, fluctuates. This means that people trying to use it to mine crypto would see their systems shut down and their income reduced, or use a backup power source when there isn’t enough excess wind power. The most common source of relief, de Vries says, is fossil fuels.

Lake Parime said it “uses excess power generated when local grid demand is low and ‘effectively fills the gap’ with grid power” when there is no excess. The company says it is working on a new model that would include batteries to store the surplus so the system can run longer on the excess renewable energy.

De Vries also criticizes the model of diverting excess renewable energy to crypto. Wind power on its own is not stable enough to run the grid, but if it were to be combined with other sources, like solar, and better storage technology, we could create a more stable grid. from renewable energies and move further away from fossil fuels.

This is a criticism that has been leveled at Lake Parime for his work in New Zealand. He works on the operation of data centers using excess energy from a hydroelectric plant.

The New Zealand project has however been criticized by local groups, who say the infrastructure will divert renewable energy away from local communities.

Ganesarajah of Lake Parime says it is a misconception that data centers divert energy from alternative uses and that the Lake Parime model runs on excess power.

“I think the key takeaway is that as a big consumer of energy, the system puts money back into the energy system, which can then be reinvested in energy, infrastructure, security and future production.”

Can Crypto Ever Be Sustainable?

But some are skeptical of the possibility of making crypto sustainable – or its place in incentivizing the adoption of renewable energy.

There is an argument that as more and more institutional investors turn to bitcoin, this incentivizes miners to use renewable sources.

The argument does not hold, Internal Development Lecturer Peter Howson says: because miners will always go to the cheapest energy source possible to get the best returns – and because it’s hard to determine where miners’ energy is coming from, credit won’t go anyway not to those who use renewable energies.

“It’s really hard to make this process more sustainable because, if you think about what mining really is, it’s really nothing more than running number generators,” says de Vries. .

“In the bitcoin network, miners generate 200 random numbers every second. Every 10 minutes they will make a correct guess and this will create the next block for the blockchain. The rest is simply thrown away. So we’re really using all that energy to make these random numbers. It’s really hard to turn this into a lasting story, because what you’re doing is pointless.

Freya Pratty is a reporter at Sifted. She tweets from @FPratty and writes our sustainability-focused newsletter You can register here.

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