Crypto mining may cost NY residents $79m in increased electricity bills

By Raffaele Redi

Lawmakers are challenging the six largest miners over their high energy usage

Massachusetts Senator Elizabeth Warren speaks to the crowd at a forum for presidential candidates, Sioux City, Iowa, in July 2019                                 
US Senator Elizabeth Warren sent a letter to six large US crypto miners – Photo: Shutterstock
                                

The largest crypto miners in the United States will come under public scrutiny next month as lawmakers question the impact of their operations on the environment and energy prices. 

A recent study estimated that crypto-mining in upstate New York raised annual electric bills by about $165m for small businesses and $79m for consumers, while contributing little or no local economic benefit.

The study was reported in a letter sent to six crypto-mining companies by US Senator Elizabeth Warren and a group of lawmakers, in which they raised concerns over miners’ “extraordinarily high energy usage”.

In light of their energy usage and environmental concerns, the group has asked the crypto miners to release their energy plans and consumption figures by 10 February.

According to the letter, the volume of power used in Bitcoin mining more than tripled between 2019 and 2021, rivalling the energy consumption of Washington state and of entire countries like Denmark, Chile and Argentina.

The letter

The letter was sent to Riot Blockchain, Marathon Digital Holdings, Stronghold Digital Mining, Bitdeer, Bitfury Group and Bit Digital, while a similar request was sent to Greenidge Generation Holdings in December 2021.

In particular, Senator Warren and her colleagues asked each company to “detail their electricity consumption, scaling plans, agreements with electricity companies, and impact on energy costs for consumers and small businesses”.

“The extraordinarily high energy usage and carbon emissions associated with Bitcoin mining could undermine our hard work to tackle the climate crisis – not to mention the harmful impacts cryptomining has on local environments and electricity prices,” said Senator Warren.

Crypto-mining activity in the US has been growing while in China there has been a crackdown on cryptos; a ban has left 500,000 mining operations in need of a new location.

The migration of miners away from China and other locations is thought to have contributed to North America having the biggest hash rate for Bitcoin mining globally – essentially more than 40% of the total dedicated global computing power.

A new trend: Cloud mining

Another new trend that has fed into environmental concerns about cryptos is so-called cloud mining.

This is where large miners are able to give over some of the equipment and space in their possession for subleasing to third-party clients, combining computational power to outpace smaller bitcoin mining operations. This includes Graystone Company, which announced plans to be running 300 machines by the end of 2022.

“This business model is attractive due to extremely high demand and profitability, and we see it as a great opportunity that can’t be missed, because it will provide supplemental revenue in addition to mining BTC,” the company said.

The potential for gain in this sector is seemingly attractive: the largest US cloud-mining company, BitFuFu, recently reported its provisions for fiscal year 2022 to the US Securities and Exchange Commission. Its estimate amounted to $330m, compared with $100m actual revenue in 2021.

Even so, large miners like Marathon Digital Holding and Riot Blockchain were all trading lower after the opening bell of the last US trading session of the week.

At the time of writing (15:00 GMT), Riot shares were trading at around $13.38 after a 0.5% loss, while Marathon was trading lower by 0.7% at $19.66, finally Greenidge Generation Holdings was down 3.1% at $10.40.

Further reading

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