Electrification 2018

Long Beach, CA
21 August 2018 - 23 August 2018
Hosted By: Electric Power Research Institute

NERA Consultant Max Luke will speak at Electrification 2018, hosted by the Electric Power Research Institute (EPRI) on 21–23 August in Long Beach, CA, in the session “System Integration of New Electric Technologies.” Mr. Luke and other panelists in the session on Wednesday, 22 August, will focus on the integration of new technologies in the electric power sector. Specifically, Mr. Luke will discuss the historical and forecasted impacts of bitcoin and blockchain mining on electric utility power demand. Further details about the talk are provided below.

Bitcoins and Blockchains: What Impact on Electric Utility Power Demand?

Bitcoin, the most widely traded cryptocurrency and most popular blockchain application, is infamous for its large electricity footprint. In the past year, Bitcoin consumed at least 19 terawatt-hours (TWh) of electricity, on par with the annual electricity demand of Hungary. The rate of electricity use skyrocketed from about 0.7 gigawatts (GW) a year ago to at least 4.3 GW today. If this average rate holds or increases, Bitcoin will consume at least 40 TWh over the next year, double the amount of the past year. Today, a single bitcoin trade consumes about as much electricity as an average US household uses in a month. In China, where most bitcoins are mined, processing a single bitcoin transaction emits about 900 pounds of CO2. For the same amount of energy, VISA processes more than 300,000 transactions.

Bitcoin’s electricity footprint is proportional to the amount of computing power used for “blockchain mining,” a process that verifies transactions and permanently adds them to a distributed digital ledger (blockchain). Successful miners are rewarded with fixed amounts of cryptocurrency (currently 12.5 bitcoins). Rewards are given in fixed time intervals (about every 10 minutes) to avoid bitcoin hyperinflation. In 2017, bitcoin prices increased drastically relative to national currencies, while competition and power demand intensified as miners scaled operations to increase their odds of winning bitcoins. Nonetheless, continued growth in bitcoin power demand is not preordained. Bitcoin prices declined steadily in the first half of 2018, and several jurisdictions imposed restrictions on mining operations.

Bitcoin is not the only game in town, and other blockchain applications raise similar concerns about power demand. In the electricity industry, over 150 organizations are involved in blockchain projects meant to enable or enhance peer-to-peer transactions in retail and wholesale electricity markets, and markets for carbon and renewable energy certificates. If these projects scale in a Bitcoin-like fashion, they too could leave large electricity footprints. However, many of these applications don’t rely on energy-hungry protocols. In Bitcoin and other cryptocurrencies, transaction verification becomes more energy intensive as more miners compete for a fixed supply of currency (in Bitcoin, 12.5 bitcoins about every 10 minutes). In applications where currency hyperinflation isn’t a concern, this problem goes away. The computational difficulty (and power demand) of mining can be fixed at levels that don’t scale in proportion to the number of miners competing for rewards.

The success of electricity industry-specific blockchain applications depends on whether they add value to electricity markets, above and beyond centralized transaction databases that accomplish the same functions as blockchains. If blockchains find application in the power sector, they will be deployed alongside myriad new digital and decentralized energy technologies as part of broader industry trends.

For more information about the conference, visit the Electification 2018 website here.

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