Bitcoin mining: A Profitable New Side Business for Renewable Energy Firms
Crypto has a poor reputation when it comes to the environment. Bitcoin, the world's most popular cryptocurrency, currently uses more electricity per year than Argentina, a country with a population of 45 million people. There is growing dissatisfaction with crypto's energy use. Kosovo has outlawed mining because of its environmental impact. In Europe, the Finansinspektionen, Sweden's financial watchdog, has urged the EU to follow suit. However, one startup believes that cryptocurrency may become more environmentally friendly and that it can also play a significant role in the green energy transition.
Lake Parime is a firm that assists renewable energy providers in mining bitcoin with their extra power. The startup intends to incentivise the construction of more clean power infrastructure by establishing a lucrative side hustle for the renewable energy sector.
It's one of very few companies in the world attempting to power cryptocurrency with renewable energy. Perhaps the most well-known is Jack Dorsey's Block (previously Square), which is launching a solar-powered bitcoin mine in Texas, utilising Tesla solar and storage.
HIVE Blockchain, a Canadian business, is powering its Ethereum mining facility in Sweden with a hydropower plant. In Norway, there's also KryptoVault, which is powered by 95% hydropower and 5% wind.
According to the Cambridge Centre for Alternative Finance, by 2020, 39% of crypto will have been mined using carbon-neutral methods.
Lake Parime was founded in the United Kingdom in 2019 to assist energy businesses in monetising any excess renewable energy they create by constructing data centres on their premises that divert extra power to energy-intensive computing.
That could mean video rendering or machine learning, but the most profitable application — and the one on which Lake Parime is focusing right now — is bitcoin mining.
Sath Ganesarajah, founder and CEO of Lake Parime, said: "We are turning energy companies or people with access to large amounts of clean energy into bitcoin miners and providing them the infrastructure and services around it."
Lake Parime is collaborating with "one of the largest wind operators in the UK and Europe" to mine bitcoin using excess power generated by the wind farm.
When the grid demand is low and the wind power is strong, wind turbines create extra power.
According to Lake Parime, redirecting that power to crypto mining will decarbonise the crypto sector and make renewables a more profitable enterprise, reducing the sector's risk for investors.
Other companies, such as Crusoe Energy in the United States, use excess natural gas to mine cryptocurrency and power data centres. Oil and gas companies would otherwise burn the gas in a practice known as flaring.
Crusoe claims that its approach cuts CO2 emissions by roughly 63 per cent when compared to traditional flaring, but detractors argue it's a lucrative side gig for fossil fuel companies.
Some, however, doubt if crypto can ever be made sustainable, or whether it can play a role in incentivising the use of renewables.
There's a case to be made that when institutional investors flock to bitcoin, it encourages miners to employ renewable energy sources.
According to Peter Howson, a lecturer in internal development, the argument doesn't stand because miners will always use the cheapest power source available to maximise profits — and because it's difficult to figure out where miners' energy comes from, the credit won't be given to those who use renewables anyway.
“It’s really hard to make this process more sustainable because, if you think about what mining is really about, it’s nothing more than running number generators,” de Vries says.
“In the bitcoin network, miners are generating 200 random numbers every second. Every 10 minutes they’ll make a correct guess and that creates the next block for the blockchain. The rest is just thrown away. So we’re just using all that energy to make those random numbers. It’s really hard to turn that into a sustainable story because what you’re making is useless.”