Bitcoin’s energy usage and its indirect environmental impact has always been a topic of discussion, from early forum posts with Satoshi Nakamoto to recent discussions in the US House of Representatives.

In this report, Christopher Bendiksen and Matthew Kimmell of CoinShares Research present the results of a newly developed data model, estimating both power draw and carbon emissions across major countries and regions mining Bitcoin.

Takeaways:

  • Bitcoin mining uses approximately 0.05% of the total energy consumed globally.
  • At a current carbon intensity of 466 gCO2/kWh (December 2021), Bitcoin produces less carbon per unit of energy than the global average at 492 gCO2/kWh (2019).
  • The carbon footprint of flared and vented natural gas in the United States is more than enough to completely offset all Bitcoin mining emissions.

Oil field miners reduce emissions

Oil field Bitcoin miners serve two main benefits: (1) they repurpose otherwise wasted natural gas resources to generate useful electricity, and (2) they reduce the carbon emissions of flaring and venting natural gas at oil sites.

In the process of drilling and extracting petroleum liquids, associated dry (natural) gas is released as a byproduct. Because this gas is dry, i.e. not liquid, it cannot be collected in vats and trucked away at low costs. Without the specialised infrastructure to process, transport, and store that natural gas, it is either burned on site, or vented directly into the atmosphere.

Natural gas is predominantly made of methane. As a greenhouse gas, methane is more than 30-times more potent than CO2 over a 100-year period. In that sense, each tonne of methane emitted is considered the same as 30 tonnes of CO2-equivalent emissions (CO2e).

By removing this gas from flaring towers, oil field miners reduce the CO2e emissions of liquid petroleum wells while simultaneously extracting useful work from the otherwise wasted gas.

According to CoinShares Research, the potential for miners to reduce the carbon footprint of flared and vented natural gas is vast at 78 Mt CO2e in the United States alone. This is enough to completely offset all emissions or even have a positive net emissions impact.

Energy sources are stabilizing

The mining network’s electricity generation mix is more balanced than it has ever been, according to CoinShares Research.

Contributions of coal, gas, hydro, nuclear and wind are 35%, 24%, 21%, 11%, and 4%, respectively, with the remaining 5% representing small amounts of oil, solar, and other renewables (mainly geothermal).

Whereas in the past, the predominant power source of hashrate generation fluctuated dramatically with the Chinese wet and dry season, we at CoinShares Research now suspect the power sources to be much more stable throughout the year. The Chinese ban has reduced and stabilised both the impacts of coal and hydropower significantly, with natural gas making up most of their relative impact reduction.

Stabilizing the grid

Bitcoin mining is an essential puzzle piece in the stabilization of grids featuring high proportions of wind and solar generation.

Intermittent renewables such as wind and solar only produce energy when the Sun shines and the wind blows. Given this unpredictability, grids with a large share of intermittent power generation cannot function properly without supply or demand balancing.

If demand and supply fall out of balance, local or wide-area blackouts (supply-side) as well as grid congestion or waste (demand-side) can result. However, Bitcoin mining can solve these discrepancies as a load balancing system, by either quickly reducing consumption when power is in a shortage or increasing consumption when power is in a surplus.

The IEA estimates that in order to reach the Net Zero Emissions by 2050 Scenario, 500GW of Demand Response (balancing) capacity, almost 50 times CoinShares estimated Bitcoin power draw, will be needed by 2030. In other words, Bitcoin mining can be a significant tool to strengthen and decarbonise grids.

Concluding thoughts

The Bitcoin mining network reduces the impact of natural gas flaring, balances grid load, and generates electricity at a lower carbon intensity than the global average.

At 0.05% of total energy consumption globally, Bitcoin ultimately amounts to a rounding error on the global energy balance sheet, a small cost for a global network providing freely available, debasement protected, and censorship resistant money.

Thanks to Christopher Bendiksen and Brandon Mitchell.

Photo by Anne Nygård on Unsplash