Bitcoin's rising power toll: Global energy crisis looms
Bitcoin is costing nearly £80,000, and the annual electricity demand due to the mining of this cryptocurrency is 160 terawatt-hours (TWh). The issue is already affecting the United States and Russia.
There are two simultaneous discussions concerning cryptocurrencies. The first pertains to the bull market, i.e., long-term price increases driven by Donald Trump's promises. The second focuses on the rising electricity consumption by computers used for mining virtual currencies and maintaining the blockchain network.
A single bitcoin transaction uses as much electricity as the average resident of Ghana or Pakistan does in three years. The International Energy Agency estimated that in 2022, cryptocurrencies accounted for 0.4 percent (about 110 terawatt-hours—TWh) of global electricity usage, which is roughly equal to the total electricity consumption in the Netherlands. The agency's base scenario for cryptocurrencies anticipates more than a 40 percent increase in annual electricity demand by 2026 (160 TWh).
Tax on energy use
The International Energy Agency further estimated that in 2022, cryptocurrencies, data centres, and artificial intelligence (AI) collectively accounted for nearly 2 per cent of global electricity consumption (about 460 TWh). By 2026, consumption may rise to even 3.5 per cent (over 1,000 TWh), equating to Japan's current electricity usage, the fifth-largest electricity consumer globally.
Despite social and economic benefits, the International Monetary Fund (IMF) considers this a cause for concern and suggests implementing a tax on electricity consumption both by miners (3.6 pence per kilowatt-hour or 6.8 pence, considering the health impacts of pollution) and by data centres (2.4 pence per kilowatt-hour or 4.1 pence). As noted, this would globally increase budget revenues (by £4 billion and £14 billion annually, respectively), encourage the development of energy-efficient solutions, and reduce greenhouse gas emissions. By 2027, the IMF expects cryptocurrency mines and data centres to account for 1.2 percent (450 million tonnes) of global emissions.
Russia says "no" to miners
Russia is the world's second-largest cryptocurrency mining centre after the United States. According to themoscowtime.com, the country uses 14 TWh annually for mining, which constitutes about 1.5 percent of its total electricity consumption, according to Russia's energy ministry. A temporary ban on cryptocurrency mining has been implemented to prevent energy shortages.
Digital mining will be banned in Siberia from 1st December to 15th March 2025, with annual restrictions from 15th November to 15th March 2031, during the heating season. In the North Caucasus and occupied Ukraine (Donetsk, Luhansk, Zaporizhzhia, and Kherson regions), mining will be completely banned from December 2024 to March 2031.
Although cryptocurrency mining started in the United States about a decade ago, this activity began to expand rapidly in 2019. The recent surge is largely fuelled by relocating cryptocurrency mining operations to the U.S. from China after the country's stricter regulations on digital currency mining in 2021, though reports suggest that mining may still be ongoing in the country.
The United States has a problem
Estimates by the U.S. government agency (Energy Information Administration, or EIA) indicate that the energy consumed annually by cryptocurrency miners could represent up to 2.3 percent of total U.S. consumption. The administration stated that this amount of energy is enough to power over six million homes.
As cryptocurrency mining in the United States has increased—as reported in an EIA communication—so have concerns regarding the energy-intensive nature of this activity and its impact on the American energy industry. Concerns include grid overloads during peak demand periods, potentially higher electricity prices, and the impact on energy-related CO2 emissions.
In 2022 and 2023, several members of Congress alerted the U.S. Secretary of Energy about the need to establish a registry of emissions and energy consumption by cryptocurrency miners. This year, the North American Electric Reliability Corporation (NERC), a non-governmental organization, also drew attention to the risks associated with network security and efficiency in connection with the increasing cryptocurrency mining in the U.S. In its analysis, it stated that this growth could significantly impact demand and resource forecasts as well as system operations.
Assessing the electricity consumption of cryptocurrency miners is difficult for several reasons. Firstly, mining can be conducted in facilities of varying sizes, from single workstations to massive data centres, making it challenging to identify them among millions of end customers in the United States. Secondly, identifying and tracking cryptocurrency mining facilities is difficult due to these operations' tendency to relocate in search of cheaper electricity.
The Public Utility Commission of Texas (PUCT) has launched a mandatory registry for miners to ensure the reliability of the power grid and meet the needs of all Texans. Cryptocurrency mine owners must provide the commission with information about their location and electricity demand each year, which is also necessary for PUCT to safeguard energy price stability.
