Coal to cryptocurrency: An answer to grid volatility?

A Midwest utility is trying out a new tool to manage variability on the grid: mining bitcoins.

St. Louis-based Ameren Missouri, the state’s largest utility, with 1.2 million customers, began mining cryptocurrency in April. When demand is low and electricity is cheap, computers inside a 20-foot metal container on site at Ameren’s Portage Des Sioux coal-fired plant race to “mint” a digital coin by grinding through complex mathematical calculations.

Ameren Missouri executives see the initiative as research and development, not a speculative bet on Bitcoin, whose price has swung wildly this year. It’s seen as a pilot project aimed at helping match electricity demand with intermittent energy supply as more wind and solar projects come online.

Electricity suppliers across the globe have increasingly become tied to the energy-hungry cryptocurrency industry. But in the U.S., Ameren is unique among investor-owned utilities because it’s directly engaged in mining bitcoins.

Critics contend the industry is providing a lifeline to aging fossil fuel plants at a moment when the worsening climate crisis requires a rapid switch to non-carbon energy sources (Energywire, June 24). The fact that Ameren is mining bitcoins on-site at a hulking coal plant — one of four that ring the St. Louis metropolitan area — is almost sure to draw scrutiny.


St. Louis-based Ameren Missouri says the effort could help reduce its carbon footprint. The utility is having to respond to more variable wind and solar on the regional grid and is looking for ways to avoid ramping its power plants up and down to match demand because doing so is inefficient and can increase emissions.

Warren Wood, the utility’s vice president of regulatory and legislative affairs, compares it to using cruise control on the highway versus driving in stop-and-go traffic in the city.

“We have pretty dramatic changes in load minute by minute, second by second at times,” Wood said in an interview. “We need something that’s really got quick, ramping up and down capability to be a really effective tool for grid balancing.”

He’s quick to point out that, for now, the pilot project is being funded by utility shareholders and at no cost to Missouri ratepayers.

Ameren initially sought to include $8,000 in electricity costs for 309,000 kilowatt-hours of energy usage related to bitcoin mining into its fuel costs recovery formula but withdrew the request at the Public Service Commission after the state’s consumer advocate questioned it earlier this year.

“If Ameren Missouri wants to enter into speculative commodities, like virtual currencies, then it should do so as a non-regulated service where ratepayers are unexposed to the economics of them,” Geoff Marke, chief economist for the Missouri Office of the Public Counsel, said in a filing. “This endeavor is beyond the scope of intended electric utility regulation, and, if allowed, creates a slippery slope where ratepayers could be asked to put up capital for virtually anything.”

Executives, however, said the initiative could benefit customers if the concept proves itself. And they’re encouraged after the first four months.

The pilot has also piqued the interest of Missouri’s top energy regulator, the chair of the Public Service Commission, Ryan Silvey, who said he was interested in convening a technical workshop on the topic even before learning of the Ameren project.

A former Republican state senator, Silvey told E&E News he is personally interested in digital currency. And a recent news story about an aging upstate New York hydropower dam being used to mine bitcoins further got him thinking about cryptocurrency’s potential as a grid asset.

Silvey said it’s appropriate for Ameren to shoulder any risk of the project at this stage because it hasn’t been vetted before the PSC and other parties. But Missouri law allows utilities to run pilot programs and look at alternate sources of revenue that could be used to lower rates.

“When a company brings us a program that is very little or no risk to the consumer that will benefit them, I think it’s exciting,” Silvey said.

But can bitcoin mining bring value to the grid?

Joshua Rhodes, a research associate at Webber Energy Group at the University of Texas at Austin, has done research on the impact of bitcoin mining in Texas and it changed his mind about the potential benefit. Texas has emerged as a global hub for mining cryptocurrency after China announced a raft of restrictions on digital currencies in May aimed in part at curbing carbon emissions.

“I think that [miners] can add a lot of value, particularly how fast they can move up and down,” Rhodes said. “They can move up and down faster than some traditional generators can move, which is value … particularly if they’re able to monetize on the crypto assets.”

According to Ameren, mining operations at the Sioux plant consume just a half-megawatt for now and can ramp up within a minute and back down within 20 seconds depending on grid conditions.

“We’re talking a minute or less to be on or off,” Wood said. “You really have a good mechanism for trying to seek that better balance of the grid between your generation resources and load.”

Coal questions

Bitcoin mining has been widely criticized for the massive amount of power it consumes — globally, more than 121 terawatt-hours — an amount that exceeds the electricity use of countries including the Netherlands and Argentina, according to the Cambridge Centre for Alternative Finance.

But the industry’s defenders, including Twitter co-founder Jack Dorsey, contend that mining bitcoin can further the energy transition and enable renewable and energy storage development by helping overcome barriers associated with their intermittency and lack of transmission.

“Bitcoin miners as a flexible load option could potentially help solve much of these intermittency and congestion problems, allowing grids to deploy substantially more renewable energy,” Dorsey’s other company, Square, and shareholder Ark Invest said in an April white paper.

Among the skeptics is Andy Knott, deputy regional director of the Sierra Club’s Beyond Coal campaign.

The Sierra Club recently began researching bitcoin mining and its effects on the power grid after news stories about bitcoin mining operations being powered by coal waste, natural gas and nuclear plants, Knott said.

Those projects include a northwest Pennsylvania cryptocurrency miner that plans to power its operations with waste coal.

“It’s clearly creating demand for electricity, and what’s going to fill it except the existing generation on the grid?” Knott said.

Ameren officials, however, said just because the pilot is physically housed at the Sioux plant doesn’t mean bitcoin mining is tethered to coal. For now, the objective of the project is to validate the concept.

Alex Rojas, director of distributed technologies at Ameren, said the mining operation, because it’s modular, can be moved to other sites on the utility’s network, whether that’s an underused electrical substation, or a wind or solar farm.

“Nondispatchable renewables like wind and solar, badly need this capability,” he said. “Co-locating this technology would be a great help.”

Rhodes didn’t dismiss the idea that mining bitcoins for the benefit of balancing electricity supply and demand can be a net benefit in terms of carbon emissions. But he said it depends on how it affects the dispatch of various power plants.

“It can have a positive emissions impact if it’s run the right way,” he said. “It can also increase emissions if it’s not.”

Ameren executives didn’t specify how long the pilot project would last or how its success would be defined.

But Rojas, who heads Ameren’s research and development work, said results so far have been promising, and he sees potential to deploy bitcoin mining modules for grid balancing on the same scale as energy storage deployments in California, at 20 to 80 megawatts per site.

“Something similar could be happening with this,” he said. “That’s how scalable it is.”

For now, the utility is content to keep the project running as is.

So far, Ameren has mined about 20 “coins” and it produces a new one about every 15 days.

The utility said it’s not concerned with the volatility of Bitcoin, which hit a high of more than $63,000 in April and has been hovering in recent weeks around $44,000. That’s still up more than 300% over the last year.

Rather, it sees the mining process itself as the primary value being created and bitcoins as a byproduct.

“The objective isn’t mining crypto,” said Wood. “It’s really operation of a data center that happens to create crypto.”