15 February 2022 |

Bitcoin + energy: more than meets the eye?



I’m going to do two dangerous things today.

  1. Write about bitcoin (again) in a climate tech newsletter
  2. Lead with a quote from a controversial politician 

You’ve been warned.

Why does Ted Cruz think bitcoin can “strengthen [Texas’] energy infrastructure”? Is he full of shit? 

Without speaking to where I land on the rest of his policy positions or personal beliefs, on this one, I’m moderately well aligned with the Texas Senator. Bitcoin (the blockchain) and bitcoin (the cryptocurrency) are technologies that might play an important role in the climate tech stack.

Isn’t Bitcoin itself emission intensive though? What does a technology that has a large footprint of its own have to offer in the way of climate positivity?

Give me the benefit of the doubt for five minutes 👇


Bitcoin is often positioned as a bogeyman in environmental and climate circles. Estimates of the emissions from the electricity needed to power ‘miners’ who validate transactions and secure the Bitcoin blockchain range as high as ~100M+ tons of CO2 by 2024. This could amount to roughly ~2% of total global greenhouse gas emissions. Nothing to sneeze at 🤧.

Bitcoin's energy consumption

Investment Monitor

There’s nothing inherent to Bitcoin that stipulates how the energy needed to power the network has to be produced. If the global electricity grid mix looked different than it does, i.e. if it featured a lot more renewables, Bitcoin’s footprint would be a lot lower. Of course, that’s not where we’re at. 

Still, even given its emissions-intensity, Bitcoin has interesting applications in energy. To understand why, let’s first address why anyone would choose to divert electricity to support the Bitcoin blockchain. The answer is to earn bitcoin! 

At ~$43,000 per bitcoin (at the time of this writing), network participants with the right equipment can earn more bitcoin in dollar terms than the electricity needed to ‘produce’ it costs them (in many places across the world at least) 📈.

The cost arbitrage varies over time and from place to place, depending on factors like the cost of electricity and the amount of energy needed to compete for rewards with other Bitcoin network participants at any point in time (hashrate).

Back in May, 2021, average estimates for the cost of electricity required to mine one bitcoin came out to about $11k. At current prices, that’s a 300% ROI if you just look at the energy costs. Of course, equipment and cooling cost money, too. But there’s money to be made here, which is why people do it in the first place.


A principal challenge that developers of and investors in energy projects face is optimizing the amount of installed capacity to onboard. 

If you onboard too little capacity? You’re leaving money on the table, and you might not be able to meet projects’ or customers’ peak energy needs. That’s why ‘peaking’ coal power plants exist; during peak times where demand on the grid is heavy, grid operators rely on back-up energy from coal, which can be fired up quickly relative to other energy sources.

Onboard too much capacity? You’ll have more energy than you can sell. You probably also won’t have enough storage for it. Some of it is going to go to waste.

Practically, this challenge prevents energy asset developers from onboarding more renewables more quickly. Absent ways to store it (more, better batteries), it doesn’t make sense to have installed capacity that even meets peak grid demand. A lot of that capacity is going to sit idle, a lot of the time.

Enter Bitcoin. While not a form of outright energy storage, at current prices, bitcoin is a flexible way to monetize energy for anyone with the right equipment. In lieu of storage, this offers energy asset operators another way to make use of installed capacity, even if there’s no immediate demand for energy.

Why is this important? Historically it’s been hard to monetize energy by any means other than, well, powering something, whether that be tea kettles or data centers. And most useful applications can’t easily be co-located on site with energy production.

This inability to monetize more capacity is a constraint that leads a lot of energy worldwide to go to waste in the first place and prevents more aggressively proliferation of renewables, even as the costs associated with them drops.

A 2019 study on the benefits of adding bitcoin mining to renewables operations that focused on California Independent System Operator (“CAISO”) found scenarios ranging from 50-80%+ reductions in curtailment (at 2019 BTC prices no less)

Don’t take it from me alone though. Bitcoin as an additional lever to monetize and expand energy assets is gaining traction: 


The trillion dollar question here is whether the benefit of the renewable energy expansion that bitcoin mining could help catalyze outweighs the emissions from other mining operations who use fossil fuels. To the extent that the price of renewables continues to fall below that of fossil fuels, I’m cautiously optimistic on that front. Still, if fossil fuels themselves become stranded assets in coming decades, that script could flip.

There’s also no telling what happens if bitcoin goes through a prolonged bear market in terms of price or becomes irrelevant (e.g. if a network vulnerability gets exposed). Suddenly you could have renewable energy operations that monetize 10-20% of their energy output with an asset that no longer offers any ROI. 

Peeling back another layer of the onion, from a financial perspective, one has to wonder what happens if a growing percentage of bitcoin mining is conducted by energy operators with minimal interest in having exposure to bitcoin on their balance sheet. If they’re relentlessly selling every bit of bitcoin they mine, that means a lot of supply, which could precipitates lower prices. 

Finally, mining of new bitcoin is also forecast to end around 2040. At that point, the only earnings for miners will stem from transaction fees on the network itself. Whether there’s enough transaction volume at that stage to make that valuable is hard to say. Similarly, the amount of rewards available to miners will continue to iteratively halve until then, which reduces the ROI on mining unless the price of bitcoin increases commensurately.


To be honest, after writing the challenges section above, I can appreciate why people are skeptical of how impactful bitcoin can really be to the energy sector. Still, what’s most interesting to me is bitcoin currently occupies a pivotal role as one of the most flexible way to monetize energy. It doesn’t matter to me if it’s bitcoin or not.

Instead of bitcoin, you could image other financial instruments, perhaps even a form of energy credit for governments to act as a buyer of last resort for excess energy, playing a similar role. Whatever the lever, getting renewable developers ‘over’ the hump is critical. Grid demand alone + current storage options clearly aren’t enough.


🤘 What I’m listening to: Inspired by the bar I was hanging out in on Saturday afternoon, I’m rehashing my high school love for metal with some Black Sabbath. Great writing music honestly.

🥵 Steaming > Streaming: Looking to unwind? Live in Brooklyn or proximate? Can’t recommend Bathhouse in Williamsburg enough. If you’re a sucker for steam rooms and saunas like I am, this is an experience worth indulging in.

📺 What I’m watching: Jk to the above, still streaming. Recently I’ve been diving headlong into The Wire. Never watched – can’t believe what I was missing out on. Top 5 all-time show for sure.