Bitcoin’s Power Needs May Be OverblownBy
Cryptocurrency mining may never dominate world’s energy needs
Credit Suisse sees limited upside for utility investors
There’s a growing debate over how much power will be sucked up by the world’s growing ranks of cryptocurrency miners.
Last week, Morgan Stanley analysts said miners of Bitcoin could use as much as 140 terawatt-hours of electricity in 2018. That’s nearly 1 percent of global demand and enough to seize the limelight from electric cars as the explosive new source of power consumption.
On Tuesday, Credit Suisse Group dumped cold water on the notion that Bitcoin would create “uncontrolled growth” in power demand. The bank’s analysts recalled overly bullish predictions about demand from marijuana growers and data center operators who later found ways to curb their electricity use. Credit Suisse predicted a similar buzzkill for cryptocurrencies.
“This is a far cry from the power and environmental Armageddon that some have feared,” the analysts, led by Michael Weinstein, wrote in the report.
The debate underscores how difficult it’s been to project demand from a cryptocurrency craze that already has utilities and renewable energy developers worldwide marketing their supplies to the sector. When Bitcoin skyrocketed in 2017, the electricity demand associated with it climbed to about 20.5 terawatt-hours a year, according to a report by Bloomberg New Energy Finance. Miners earn Bitcoin-denominated rewards for performing complex, energy-intensive calculations needed to confirm transactions in the cryptocurrency.
While higher prices have spurred more mining, it’s impossible to know where the market is headed, said Isabelle Edwards, a BNEF analyst. If prices remain high, energy consumption will do the same. But the amount of electricity needed to mine Bitcoins could fall if there are improvements in computing technology. Meanwhile, if prices fall, it’s “almost inevitable that some miners will go out of business,” Edwards said.
Morgan Stanley cautioned that demand projections are "clearly not an exact science" but suggested that Bitcoin mining could fuel the growth of renewable energy from the U.S. to China.
A Canadian utility has already voiced enthusiasm. Hydro-Quebec has said it’s in "very advanced" talks with miners about relocating to the province and that it envisions the miners soaking up about five terawatt-hours of power annually -- equivalent to about 300,000 Quebec homes -- from the surplus created by the region’s hydroelectric dams.
Credit Suisse urged caution for investors hoping to "benefit significantly" from the growth in electricity demand. While Bitcoin miners currently use about as much electricity as Ireland, they are "very unlikely" to reach the "ultra-high-end" threshold of 350 terawatt-hours a year -- a level that would amount to 1.4 percent of global demand, according to the analysts.
At current Bitcoin and electricity prices, power and fuel suppliers may have as much as $5 billion in "global annual revenue opportunity." That compares to the more than $6 trillion of global energy expenditures each year.
“This is a small portion of global electric usage and an even smaller portion of total global energy expenditures,” the report said.
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In the end, efficiency dashed hopes for surging demand from data centers and marijuana cultivators. Pot growers upgraded to energy-efficient LED lights, pumps and cooling systems once they no longer needed to hide their plants from the police. Data-center operators, meanwhile, learned that bigger was better.
As for electric cars, Credit Suisse sees them taking up about 7 percent of global electricity demand by 2040. That figure would probably "dwarf anything from Bitcoin," the analysts said.
— With assistance by Michael Bellusci