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Crypto Energy Study Shrugged Off by Agencies, Irking Lawmaker

Oct. 3, 2022, 9:30 AM

Federal agencies are balking at—or declining to publicly explain their response to—cryptocurrency mining recommendations from a White House report that raised serious concerns about the rapidly growing industry’s energy consumption and climate footprint.

The situation has irked one House Democrat who has pushed for a closer federal look at cryptocurrency—and who demanded that agencies answer his concerns soon.

U.S. energy and environmental officials have announced no plans to pursue possible efficiency standards, electric grid reliability assessments, or energy use surveys outlined by the study, which was issued four weeks ago. The report found cryptocurrency mining accounts for 0.9% to 1.7% of U.S. electricity use and causes about 0.4% to 0.8% of U.S. greenhouse gas emissions.

Costa Samaras, the Office of Science and Technology Policy’s principal assistant director for energy, told Bloomberg Law his office continues to interact with agencies to chart a path forward.

“Each agency is reviewing the recommendations, and will announce commitments as part of their own process and timeline,” he said.

But officials with the Federal Energy Regulatory Commission and North American Electric Reliability Commission said in interviews they don’t plan to take up a reliability assessment solely for cryptocurrency, arguing that they have safeguards in place to address grid shortfalls.

The Energy Department declined to be interviewed about the White House report—it referred questions to the Justice Department, which has no jurisdiction over energy efficiency standards. Justice spokespeople didn’t return requests for comment.

The Environmental Protection Agency also didn’t respond to multiple requests for comment, nor has it answered inquiries from congressional Democrats.

‘Find Out What’s Going On’

The silence from key agencies dampens the enthusiasm from Rep. Jared Huffman (D-Calif.), who in April demanded the EPA study whether crypto facilities are complying with the Clean Air Act, Clean Water Act, and other environmental statutes. Huffman joined others in hailing the report as an historic roadmap to better understand digital assets.

“This problem is not going away—if anything, it is potentially getting much worse,” Huffman told Bloomberg Law.

The agencies “should be looking at where these proof of work crypto mining operations are located,” he said. “Are they in impacted communities that have already been disproportionately impacted by various industries? Are they having adverse effects on electricity pricing, water pollution, or noise pollution for these communities?”

Huffman said he wants to hear from agencies soon.

“If I don’t hear from them in the next few weeks, I’m certainly going to pick up the phone and find out what’s going on,” he said.

In May, Energy Secretary Jennifer Granholm told Congress she “absolutely” supports further study of crypto mining.

“The projection of the expansion of the capacity of the grid that most modelers use have not taken into full account that huge energy suck that cryptocurrency represents,” Granholm said.

Searching for Data

Huffman’s questions formed the core concerns laid out by the White House Office of Science and Technology Policy.

The push for better energy and emissions data is the biggest recommendation in the report, Samaras said during a Twitter Spaces event held by Bloomberg last week.

“The public needs information and transparency so that we can enable some evidence-based policy,” Samaras said. Data could be gathered from voluntary disclosures from industry, Energy Department surveys of electric utilities, or state energy and environmental agencies, he said.

Mines can consist of thousands of servers stacked in warehouses, deploying raw computing power to solve a series of complex math problems.

“This is an industry that can grow really fast,” Samaras said. “We want to make sure the public is protected.”

Part of the Plan

Officials overseeing electric reliability said cryptocurrency mining doesn’t pose an imminent risk to the grid because they already balance supply with big electricity-guzzling facilities.

Looking ahead several years, the growth of crypto—along with electric vehicles—may require keeping some power plants operational and building new plants in the right places, said John Moura, director of reliability assessment and performance analysis for the North American Electric Reliability Commission. The commission is a not-for-profit international regulator whose mission is to reduce risks to the grid’s reliability and security.

“We’re not too concerned with this risk of demand just showing up very rapidly—we have a process for that,” Moura said. “What we are concerned about is, will we have enough generation capacity to serve that load?”

Crypto mining may not need to be singled out from grid studies, said Allison Clements, a Democratic FERC commissioner, said during a recent editorial meeting with Bloomberg.

“It’s unclear to me that an individual reliability assessment related to cryptocurrency mining, which happens in places, should be separated out from general reliability planning of any particular node, any service territory, any region, any interconnect,” Clements said. “It’s certainly on our radar. I don’t have anything to report, relative to anything coming up soon.”

The Energy Information Administration, which publishes reams of data on energy trends, stands “ready to assist,” if the government begins to move on the issue, Chris Higginbotham, an EIA spokesman, said in an email.

“It will be a long process for us to identify the proper organizations to survey, the right questions to ask, and the best way to present the data,” Higginbotham said.

Short-Term Concerns

Advocates are hopeful the report will spur action.

“Typically, OSTP reports are the sorts of reports that collect dust,” said Scott Faber, senior vice president of government affairs for the Environmental Working Group.

But this time could be different, he said, because “this issue is so much more critical to this White House than practically any other issue that OSTP might produce a report on.”

Others see a window for the industry to act on its own. The report was a “call for transparency” issued to bitcoin, which uses a far more energy-intensive form of mining called proof-of-work, said Jesse Morris, CEO of Energy Web, a technology company that works with utilities and consumers to accelerate decarbonization.

“It appeared as though the administration was hinting that if industry can provide some level of transparency around those things around bitcoin mining, that would be a way to hedge against some heavy handed regulation on proof-of-work mining,” Morris said.

To contact the reporters on this story: Daniel Moore in Washington at dmoore1@bloombergindustry.com; Stephen Lee in Washington at stephenlee@bloombergindustry.com

To contact the editor responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com