Congressional Research Service Finds Potential Blockchain Uses for Energy Sector

The U.S. Congressional Research Service has released a report detailing the potential uses for blockchain in the national energy sector.

In a report published August 9, the legislators detailed the current state of energy consumption related to cryptocurrency mining, both nationally and internationally. They also explored possible ways to regulate the energy-intensive mining process and to integrate blockchain technology in current energy systems.

Some of the opportunities for blockchain include placing utility bill transactions on a smart grid, supporting electric vehicle charging infrastructure, and distributing energy resources.

“Traditionally electric utilities are vertically integrated. Blockchain could disrupt this convention by unbundling energy services along a distributed energy system,” according to the report. This could lead to greater industry transparency, efficiency, and competition among energy producers.

Additionally, blockchain could increase consumer choice in the energy market. For instance, the researchers cite the ability to purchase excess energy “produced by their neighbor’s solar panels.”

In April, the U.S. Department of Energy announced a $4.8 million funding grant for universities to research and develop blockchain use cases for the energy sector.

Costs of crypto mining

The agency calculated that nearly 1 percent of the country’s electricity generating capacity goes towards mining cryptocurrencies, a rate they observed increasing year over year. The researchers noted that crypto mining can burden a municipality’s power structure and increase consumer rates.

For instance, in Plattsburgh, New York, it was found that crypto mining “contributed to an increase of nearly $10 to monthly electricity bills in January 2018 for residential customers.” This surge in energy use contributed to an 18-month moratorium on any new cryptocurrency mining operations in the city.

Additionally, citing a study published in "Nature Climate Change, vol. 8," the researchers claimed that “the associated energy consumption of Bitcoin usage could potentially produce enough CO2 emissions to lead to a 2 degree celsius increase in global mean average within 30 years.”

However, the researchers provided counter arguments that crypto mining will continue to increase at an unsustainable rate, and suggested crypto’s energy consumption may be a “temporary issue.”

According to the report:

“Some argue that sustainability concerns due to energy consumption are misplaced, and that the competitiveness of Bitcoin mining means that only miners with the most competitive mining hardware and the lowest electricity costs will persist over time,” the agency writes. Additionally, “Some anticipate that energy demands will diminish as the reward incentive shifts from discovering new Bitcoin to earning revenue through transaction fees.”

The researchers also argue that mining often occurs in locations with access to renewable sources of energy. Specifically, the state of Washington, provided between 15 and 30 percent of all Bitcoin mining operations globally in 2018 using hydroelectric sources of power. They also cite Mongolia, which gets 63 percent of its electric capacity from thermal power.

Conversely, 58 percent of mining pools are located in China, where many of the active sites are powered by coal. The researchers cite the China’s National Development and Reform Commission, which called mining a “wasteful and hazardous” activity.

Potential regulation

To combat rising energy usage, the researchers option the viability of policies like “minimum energy conservation standards, voluntary energy efficiency standards, and data center energy efficiency standards,” for the crypto industry.

While the country is currently a patchwork of different energy systems with equally varying regulations, Congress may pass unified legislation “to curb the energy intensity of the technology.” Some of the minimum standards considered may regulate ASIC chips or computer power usage generally.

Also floated was extending the voluntary ENERGY STAR specifications to mining gear, or submitting mining farms to the standards put forward by the Data Center Optimization Initiative (DCOI) that oversees energy usage of data centers.

Additionally, the federal government may look to standards enacted at the state level, like those passed in March 2018, by the New York Public Service Commission, that ruled “municipal power authorities could issue a tariff on high-density-load customers—including cryptocurrency companies.”

Though bitcoin mining represents an energy intensive process, the researchers found that "less energy intensive, alternative algorithms exist, such as proof of stake and proof of authority."

In August 2018, the U.S. Senate held a hearing to consider the energy efficiency of blockchain.

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