Cryptocurrencies are big enough that they are major players in certain markets – insofar as the mining activity goes. What does that mean?
It means power companies are leary of miners because they bring other costs to the table. Consider what’s happening out in Washington State:
Source: Lake Chelan Cams
Though a lot of mining still happens in Chelan, Douglas and Grant counties, thanks to the abundant hydropower that miners prize for their energy-intensive processors, the region’s crypto industry is a shadow of its former Wild West self.
Many of the miners who flocked to the Wenatchee area during the last decade have either gone out of business or moved to other states, like Texas.
And while the three public utility districts still get inquiries from would-be miners looking for juice to run the complicated calculations that underlie cryptocurrencies, it’s nothing like the heyday from about 2014 to 2017. Back then, investors from as far away as China were eyeing about two-thirds of the region’s total hydropower output. Today, crypto mining accounts for maybe 4% of the combined output of the five hydroelectric dams.
“It’s been fairly quiet,” says John Stoll, managing director for customer utilities at Chelan County PUD, which at one point had power requests for more than 200 megawatts of power, or more than the county’s existing residents and businesses were using. The PUD’s current mining load is 8 megawatts, or around 3.5% of local load. [The Seattle Times]
At the levels miners operate, you don’t just plug your computer into the wall and start mining. Both you and your power company have to plan for this energy draw.
It’s only going to get worse. I mean, algorithmically, the plan is for it to get harder and harder to mine. That’s the explicit plan for Bitcoin.
And the current value of a Bitcoin? It appears to be stuck in a range of $20K to $25K per coin, which remains more than 50% off its highs. At these levels, energy has to come cheap to make mining economically lucrative.
And if the supplier is charging you a special, elevated price, then you have a bigger problem. Here’s what I meant by the other costs of cryptocurrencies:
Part of that new quietude is forced. To shield local power grids from crypto’s boom-bust dynamic and short-term investment horizons, the utilities adopted new rates and other policies for their hydropower, which typically goes for around 2.5 cents to 5 cents per kilowatt hour, compared to around 15 cents for U.S. average.
Chelan County, for example, charges miners roughly triple what it charges residents for electricity. Douglas County caps its total crypto mining load at 39 megawatts (it’s currently just under 33 megawatts) and steps up rates for crypto miners 10% every six months. In Grant County, rates for “evolving industry” customers, as crypto miners are known, get bumped a few cents up if miners’ total current and requested power demand exceeds 5% of total county demand, which it has since March.
That dynamic means the power company finds it more difficult to plan for the future, and power companies hate that because power generation, at least until renewables become dominant, is an expensive project. Build too much excess capacity and the power company goes bankrupt – or raises rates.
That makes miners unpopular, mining an eyebrow-raiser, and cryptocurrencies an expensive, unnecessary hobby.
