Costa Rica’s overabundance of renewable energy caused the Costa Rican Institute of Electricity to pull the plug on a hydroelectric plant called Paos I, located in the country’s central valley after it had been in operation for 30 years.
It was a troubling time for owner Eduardo Kopper as he brainstormed ways to try to maintain jobs for his employees. He then connected the dots: bitcoin. As a huge energy consumer that has a carbon footprint similar to Kuwait’s, it equalled opportunity. A few months later, after a brief stint of inactivity, the plant was back on line, but this time as a renewables-powered cryptocurrency mining centre.
According to the article, Brazil is debating a tax exemption for renewable-powered crypto mining just as there is a major push for mining in the Americas, especially in the United States.
How does it work?
Blockchain technology, by its very nature, demands massive energy consumption.
“New bitcoins are ‘mined’ by solving complex math puzzles, a feature called ‘proof of work.’ This ensures the blockchain network is decentralized,” according to the article.
This also demands exceptionally high processing power as miners jockey to solve the problems first.
Aware of the environmental impacts, more than 200 companies and people launched the Crypto Climate Accord, Cognizant of the environmental impact of the energy-hungry currency, more than 200 companies and individuals launched the Crypto Climate Accord last year, pledging to net-zero operations by 2030, largely by switching to renewable power sources.
The “green mining” movement was already mostly green, according to the article: “A study by cryptocurrency analysis firm CoinShares estimated that in 2019, at least 74 percent of Bitcoin’s global energy consumption came from renewables, much of it cheap Chinese hydropower.”
Then, in 2021, the Chinese government banned cryptocurrency and all things cryptocurrency-related, partly due to the energy consumption.
“Sweden, meanwhile, has called on the European Union to ban crypto mining, arguing that it diverts renewable power that could be used to decarbonize other sectors, putting climate targets in jeopardy,” according to the article.
Costa Rica may be the exception
In a perfect world, Costa Rica would export its surplus power to neighboring Nicaragua, but the infrastructure is not in place to import it, according to Jose Daniel Lara, a Costa Rican energy researcher at UC Berkeley.
Meanwhile, bitcoin mining has saved Kopper from having to keep his hydropower plants shuttered and the ability to convert the electricity into something that does not require power grids.
What Kopper created with Paos I, the crypto-mining centre, is the first of its kind in Costa Rica. It has shifted things for him and his 25 employees, who have been able to maintain their jobs. In addition to renting some CPUs to mining companies abroad, he is also mining bitcoins himself.
Crypto mining functioning as a grid-stabilising technology
The technology company Lancium is creating bitcoin mines that run on renewable energy in Texas, looking at such projects as a means to stabilise the grid. Essentially, the company hopes to address one of the major issues with renewables: when electricity production fluctuates with the weather, there can be grid congestion that can result in blackouts. This is often when fossil-fueled power stations are ramped up or down, to balance “renewables-heavy power systems.” The company can ramp mining up or down as determined by how much power is available, this, in turn could actually be a boon to supporting the expansion of renewable power, reducing the use of fossil fuels.
A shift to the model
While green mining can help remedy bitcoin’s carbon footprint in the long term, there are also additional measures that can be taken in the industry.
Economist and Bitcon expert Alex de Vries sees the models utilised by Cardano and Binance could be a big part of the answer. The models use “proof of stake” in which miners put their own coins at stake to conduct transactions, in lieu of solving computational problems. This reduces hardware competition and only requires an internet connection. It also reduces the energy consumption significantly.