The Energy Information Administration on Feb. 1 detailed its plans to focus on evaluating the electricity consumption associated with cryptocurrency mining activity.
“Given the dynamic and rapid growth of cryptocurrency mining activity in the United States, we will be conducting a mandatory survey focused on systematically evaluating the electricity consumption associated with cryptocurrency mining activity, which is required to better inform planning decisions and educate the public,” EIA said an analysis posted on its website.
EIA noted that electricity demand associated with U.S. cryptocurrency mining operations in the United States has grown very rapidly over the last several years.
“Our preliminary estimates suggest that annual electricity use from cryptocurrency mining probably represents from 0.6% to 2.3% of U.S. electricity consumption,” it noted.
“This additional electricity use has drawn the attention of policymakers and grid planners concerned about its effects on cost, reliability, and emissions,” EIA said.
The federal agency said that key challenges associated with tracking cryptocurrency mining energy use include the difficulty of identifying cryptocurrency mining activity among millions of U.S. end-use customers and the dynamic nature of the crypto market, where mining assets can be moved rapidly to areas with lower electricity prices.
EIA said that it has developed general estimates of electricity use by U.S. cryptocurrency mining operations by employing both top-down and bottom-up approaches.
“Our top-down approach involves data from the Cambridge Centre for Alternative Finance, which maintains an index that estimates global and national electricity use from cryptocurrency activities. We also developed our own bottom-up approach, which involves collecting data pertaining to the location of individual cryptocurrency mining operations and the amount of electricity each facility says it may use.”
In order to develop more rigorous estimates of electricity use by U.S. cryptocurrency miners, EIA has requested and received an emergency clearance pursuant to Office of Management and Budget procedures established at 5 CFR Part 1320, Controlling Paperwork Burdens on the Public.
EIA plans to begin collecting data on a monthly basis from February through July 2024.
“We expect to be able to publish more detailed information about cryptocurrency mining use of electricity in the United States with newly acquired data in mid- to late 2024,” the agency noted.
Top-Down Approach to Determine Crypto Mining Electricity Usage
The Cambridge Bitcoin Electricity Consumption Index (CBECI), which is published by the Cambridge Centre for Alternative Finance, provides estimates of power demand from operations mining for Bitcoin and Ethereum on a daily and annual basis.
“Using CBECI estimates, we can approximate the Bitcoin-related electricity demand in the United States,” EIA noted.
The methodology used in the CBECI is based on a hybrid top-down approach that builds a basket of real-world hardware, which represents a typical mining unit, with an underlying assumption that mining participants awarded Bitcoin are rational economic agents, the federal agency said.
The CBECI daily and annual estimates include lower and upper theoretical bounds and an estimated amount using best-guess assumptions. The inclusion of these bounds reflects the inherent uncertainty in their estimates, EIA pointed out.
The index is updated every 24 hours because cryptocurrency miners ramp up or down their activities in response to price fluctuations and the availability of mining equipment, so electricity use can change quickly.
The CBECI tracks the geographic distribution of Bitcoin mining, allowing for the estimation of electricity use in different countries.
The CBECI estimates that the global share of Bitcoin mining occurring in the United States rose from 3.4% in January 2020 to 37.8% in January 2022, the last month for which published estimates are available.
“Assuming the share of global activity in the United States remains approximately 38%, we estimate electricity usage from Bitcoin mining based in the United States to range from 25 TWh to 91 TWh,” EIA reported.
That estimate represents 0.6% to 2.3% of all United States electricity demand in 2023, which was 3,900 TWh.
A Bottom-Up Approach to Determine Crypto Mining Electricity Usage
Another approach to estimating cryptocurrency mining’s effects on electricity use in the United States is to build up an estimate from what is known about individual facilities.
To that end, EIA has worked to identify as many U.S. cryptocurrency mining facilities as possible. It has identified a total of 137 facilities to date.
Of the 137 facilities, EIA has identified maximum electricity use at 101 of those facilities, which it estimates to be 10,275 MW. This amount compares with an average annual power demand of about 450,000 MW in the United States, representing a share of 2.3%.
“In practice, cryptocurrency mining facilities frequently run at less than their maximum designed capability. Although cryptocurrency mining units tend to run at a high utilization rate, we lack the data to provide a well-sourced estimate,” EIA said.
“If we suppose that they operate at 80% utilization, an approximate estimate based on information we have received from a few mining facilities, of the 10,275 MW of capacity that support them, their electricity usage would be about 70 TWh per year, or close to the high end of the range in our top-down estimate.”
EIA Says Data Will Provide “Critical Insight”
EIA said that other government and industry efforts to determine the effects of cryptocurrency mining on the energy system have generally taken the form of studies, “which lack the comprehensive, standardized, timely, and consistent nature of a formal data collection. Data gathered during the emergency clearance will provide critical insight that informs our approach moving forward.”
In addition, EIA plans to continue to refine its estimates of electricity consumption associated with cryptocurrency activities in the United States as new information and data become available.
“In addition to data collected during the emergency clearance, we will continue to track CBECI estimates, refine our list of identified facilities, and review estimates made by third parties,” EIA said.
APPA Report
A report issued by the American Public Power Association in 2023 details strategies that public power utilities can utilize in response to cryptocurrency mining operations.
