For someone with two companies to run, Twitter and Square CEO Jack Dorsey spends a lot of time tweeting about cryptocurrency. His Twitter bio, in its entirely, reads, “#bitcoin” (with a golden Bitcoin emoji). These days, his feed is a near-constant flow of predictions for how crypto will change the world, with retweets of posts about how it can help Native Americans, support Afrofuturist art, and establish small, self-sustaining, “circular” Bitcoin-funded communities. As Dorsey told the Sydney Morning Herald in 2019, he thinks Bitcoin is “the best bet” when it comes to all cryptocurrencies because “it’s been the most resilient, it’s [been] around for 10 years, it has a great brand, and it’s been tested a bunch,” making it likely that Bitcoin could become “the native currency of the internet.” Now, Square has a crypto arm and owns hundreds of millions of dollars’ worth of Bitcoin, and it recently teamed up with the firm Ark Invest (which just bought nearly $20 million of Bitcoin) to author a white paper titled “Bitcoin Is Key to an Abundant, Clean Energy Future.” Last week, Dorsey tweeted it out (and Tesla CEO Elon Musk replied, “True”):
Even among some crypto enthusiasts, this might count as a hot take. Bitcoin is notoriously energy-intensive, due to some of the very features that make it so appealing to certain investors: Mining (or generating) new Bitcoins requires running a computer processor constantly to solve complex puzzles. These puzzles protect the currency from outsiders and confirm its actual value; they also take a hefty amount of power to solve. As the popularity of Bitcoin has grown and more miners have come online, it’s been estimated in multiple studies that Bitcoin mining’s overall power consumption rivals or exceeds small countries’ entire electrical outputs alone—and that the energy consumption per individual Bitcoin transaction (which must be recorded on the blockchain, requiring more energy use) far exceeds similar requirements for producing renewables like hydroelectricity. (That’s not even getting into the energy requirements for other cryptocurrencies.) Meanwhile, a survey from the Cambridge Centre for Alternative Finance, which studies crypto, found that two-thirds of the global Bitcoin network sources its energy from fossil fuels, contributing to vast carbon emissions. Even supposedly “green” cryptocurrencies (i.e., those mined through more efficient processing units) are still helping fuel supply shortages in an already strained market for chips and semiconductors.
The Square memo’s basic argument is that Bitcoin mining could actually help incentivize more production of renewable energy, as opposed to fossil fuels. Solar and wind may be desirable for their cheapness and greenness, but their sources are erratic (the sun doesn’t always shine, and the wind sometimes blows when you don’t need it), and there isn’t enough storage capacity for when these sources generate excess energy (because of issues with grid congestion and transmission, as well as the current lack of widely available lithium-ion batteries for storage). According to Square and Ark Invest, Bitcoin’s energy-intensive needs could actually complement ongoing renewable and storage projects by serving as an energy buyer of last resort. The idea is that if an energy producer set up a Bitcoin-mining operation on site, that could help cut production costs since they’d mine some Bitcoins with the extra energy. That could lead more operators to enter the renewables market, increasing supply. Finally, all of this could increase Bitcoin’s mining capacity, creating evermore power demand from miners. In the paper’s view, Bitcoin is a self-propelling feedback loop of economic inevitability—or at least it could be, eventually, even though it “would likely still mine with grid electricity during other periods when profitable to do so, so it wouldn’t be entirely green from day one.”
That sounds like a big if. Ark Invest claims in the memo that “without bitcoin mining, solar—an intermittent energy source—could supply only 40% of grid power before utilities would face the need to fund significant investments with higher electricity prices.” But if solar producers and battery makers and Bitcoin miners join forces, the paper claims, the combination could satisfy 99 percent of the grid’s needs while “maintaining profitability”: Increased mining power will allow solar panel producers to build more cells without the need to worry about wasted energy, because that will be directed to the blockchain for mining; meanwhile, battery system capacity will also increase over time. Notably, the paper says that batteries will still “be the most critical technology in storing inexpensive mid-day solar power for evening peak demand.”
So: Is this actually a good idea? That’s far from clear. Because Square’s thesis depends on a lot of assumptions and economic forecasts that look fragile once factors that the paper either mentions only briefly or entirely overlooks are taken into account.
Let’s start with the primary issue this paper purports to solve: that solar and wind farms, being “intermittent” sources of energy, don’t always produce the amount of power that energy customers want, particularly during peak-demand hours. It is certainly true that the consistency of solar and wind depends on your area’s climate. But there have been strides in both technologies that are already helping solve this problem without Bitcoin’s help. A large majority of states employ net metering policies to benefit homeowners who install grid-connected solar panels, allowing these customers to directly feed any excess energy they produce back into the grid while earning a credit from their utility for giving back this energy, thus saving them costs and distributing electricity back into the system for all-around use, not just mining. Plus, new varieties of solar tech—such as PERC and tandem cells, solar trees, and double-sided cells—are increasingly efficient when it comes to solar-energy conversion, exceeding the capacity of traditional silicon and photovoltaic cells and increasing the efficacy of solar sourcing. Norway is already using thermal energy to further boost solar output and make use of panels’ leftover energy. Similar adaptable developments are benefiting wind power: High-altitude, shrouded, and other alternative turbines are expanding reach and efficacy; alternative energy storage methods such as compressed air and flywheels remain viable; and hybrid wind-and-battery storage and output facilities are being constructed more often, especially as offshore wind becomes a more enticing prospect. Plus, energy analysts are predicting that hybrid energy plants of wind and batteries and solar can, on their own, provide reliable power during peak-demand hours for energy consumption. All of this, without crypto!
Meanwhile, the renewable industry is already looking fairly robust these days. While fossil fuel companies were devastated in the early part of the coronavirus crisis, renewable sectors were far more resilient against shutdowns and decreased production, according to an International Energy Agency report—and they even increased their overall capacity by nearly 50 percent in 2020. Solar was adopted more widely in countries like Australia and Vietnam throughout the year, while U.S. government initiatives are already in place to scale up renewables not only domestically but in poorer nations as well, through subsidies and taxes and credits, grid integration, and renewable energy zones (areas whose climates are most ideal for building plants to capture renewables and produce their energy). Meanwhile, the U.S. Energy Information Administration said last year that renewables were finally on pace to exceed natural gas in the power mix; a recent study from Berkeley and GridLab laid out already-existing capacity and economic pathways in place to achieve a 90 percent clean grid by 2035, relegating natural gas to 10 percent and requiring no new construction of coal or natural gas plants. Also, onshore wind is on pace to be the cheapest form of electricity by 2025—even without tax credits, and not including the economic impact of future offshore projects.
Some Bitcoin enthusiasts are quick to point out that solar cells have jumped in price for the first time since 2013—which can be attributed to the demand spikes and supply shortages (in solar’s case, of polysilicon) that have strained many sectors as the pandemic winds down in the U.S. But that squeeze is projected to subside—sooner, at least, than the shortage of semiconductors, which has been deepened by increased demand for Bitcoin-mining rigs.
With these factors in mind, it is less clear that Bitcoin mining is needed to drive down costs, retain overproduced energy, and drive large-scale improvements in the renewables system, which seems to be already exceeding projections on all fronts. (It’s perhaps worth noting that Ark’s claim that solar can’t scale appropriately on its own is based in part on a 2018 UNC Kenan-Flagler Energy Center report, three of whose co-authors are longtime fossil fuel insiders.)
However, as the Square-Ark memo notes, there is an impending waste problem when it comes to used-up lithium-ion batteries, which is leading engineers to explore reuse and recycling methods, preferably ones that don’t require fossil fuels. Meanwhile, these batteries, along with PVCs and wind turbine materials, require mining (the IRL kind) of finite rare earth minerals. This stresses the need to ensure that the acquisition of these minerals does not cause new environmental problems or…