The Pacific Northwest, and particularly Washington state, has attracted the attention of digital currency mining operations, which are interested in locating here because of the region’s inexpensive electricity, easy access to telecommunication networks, and temperate climate that moderates the cost of cooling hundreds or thousands of computers. Facebook, Apple, and others built data centers here for the same reasons.
Creating and trading digital currencies needs verification through a process called mining. These mining operations use anywhere from dozens to thousands of computers running a variety of hardware operating systems and can consume millions of watts of power. The Northwest Power and Conservation Council staff has looked into the current and potential power impacts of these operations and has concluded utilities need to be careful about offering electricity service.
Although the full magnitude of the impact of mining operations on the power grid is not known, it is well known that a single mining operation could put multiple megawatts of load on a utility system (a megawatt is 1 million watts). A number of Northwest utilities including, for example, the Chelan County Public Utility District in Wenatchee, Washington, and the City of Cheney, Washington, municipal utility, have been approached by digital currency mining operators and have adopted different postures toward the requests. Chelan recently imposed a moratorium on new service to digital miners, having already served some digital mining load. Cheney is going ahead, but also is requiring the companies to pay a fee for connection to ensure that other ratepayers aren’t left paying for the electricity service if a digital mining operation closes.
The Council’s analysis suggests that the present electricity load of digital currency mining operations is between 20 and 30 average megawatts – significant, but not huge. Based on what is known now about future potential load, the region should be able to handle the influx of new demand. A big part of the reason for this is that the Northwest has done such a good job maintaining load growth near zero over the recent decades, while the economy has been robust, because of the large investments in energy efficiency. However for small public utilities, adding a mining operation can increase their load significantly.
The Council staff suggests it would good if utilities insist when considering requests for service that digital currency mining operations use energy-efficient computer equipment and cooling technologies, and also consider connection requests from mining operations carefully. As this market matures, it is important for utilities to keep track of factors that impact growth in mining operations and their energy consumption, such as the market value of the currencies, processing fees, and the degree of difficulty of validating currency as the size of blocks of currencies increases. Right now inexpensive, clean electricity and a moderate climate that reduces cooling costs are attracting mining operations to the Northwest. But as the digital currency market becomes saturated – BitCoin, dating to 2009, was the first but now there are more than 1,400 by some counts -- the value of individual currencies could drop, and so would the interest in mining.
The flood of interest in digital currency mining could be just a fad, or it may develop into a new source of large demand for utilities. The regional power grid may be able to absorb a few hundred megawatts of load from mining operations, and this new load may be a welcomed development for some utilities with declining loads. But it is important for utilities to hedge the potential risk with special contracts for mining operations to protect other ratepayers if wires and equipment the utility may construct for miners end up stranded. Contracts for rates offered to digital currency mining operations should hold other ratepayers harmless.
We discuss digital currency mining and its distributed accounting format, known as blockchain, in the first part of this blog.