Bitcoin’s (BTC) tremendous rally last year prompted many cryptocurrrency miners to set up their kits and get to work. But concerns about the huge amount of electricity needed to mine bitcoin and other cryptocurrencies may be tarnishing the appeal of mining.

Several communities that have experienced skyrocketing demands on their power supply from bitcoin mining, including Plattsburgh, N.Y., and a rural utility district in Washington State, have imposed moratoriums on new coin-mining operations.

Miners in other areas may soon be paying more for the power needed to run their kits. New York State’s Public Service Commission, which regulates utilities, recently allowed local utilities in upstate communities to charge higher rates for electricity used specifically for cryptocurrency mining.

“We want progress and growth as much as anyone else does,” said Plattsburgh Common Council member Mike Kelley. “But we have a few thousand ratepayers complaining that you Bitcoin guys are raising the rates for two months of the year….”

The logical question is whether the challenge of finding cheap power is just a speed bump on bitcoin’s road to greater adoption or a larger threat to it and other cryptocurrencies.

Plattsburgh Moratorium

On March 15, the city of Plattsburgh, N.Y., became the first U.S. community to impose an 18-month moratorium on new applications for cryptocurrency mining. Violators will be fined $1,000 a day.

A number of bitcoin miners had moved to the area because of low-cost hydroelectric power, and city officials said they were using so much electricity the town was forced to buy extra power on the open market at peak usage times, raising prices for local residents and businesses.

At a lively public hearing, a number of bitcoin miners stepped forward to speak against the proposed ban, arguing that cryptocurrencies and blockchain are the technologies of the future and the city should work with the miners, not against them. One miner hinted at relocating if the moratorium was approved.

But the city council members stood firm. “We want progress and growth as much as anyone else does,” Common Council member Mike Kelley said at the hearing. “But we have a few thousand ratepayers complaining that you bitcoin guys are raising the rates for two months of the year….That extra $70 (they) had to pay in January and February really makes a difference.” The council voted unanimously in favor of the moratorium.

N.Y. State Public Service Commission Ruling

Plattsburgh is not alone in being frustrated by bitcoin miners’ high energy usage. The New York State Public Service Commission on March 17 ruled upstate municipal power authorities could charge higher electricity rates to cryptocurrency companies that require huge amounts of electrical power. The decision was sparked by complaints that miners of bitcoin and other crypto coins were using so much electricity they were forcing prices to rise for local residents.

The bitcoin miners in some towns have been accounting for up to 33 percent of the local utility’s total load, the commission said. Miners typically use thousands of times more power than a typical residential user.

“If we hadn’t acted, existing residential and commercial customers in upstate communities served by a municipal power authority would see sharp increases in their utility bills,” Commission Chair John B. Rhodes said in a statement.

The public service commission took the action after the New York Municipal Power Agency, an association of 36 municipal utilities, petitioned for it. Most of the association member utilities operate as nonprofits in small upstate cities and towns and rely on inexpensive hydroelectric power.

The association cited a request from a cryptocurrency mining company for five megawatts of electricity to be added to the village of Akron, N.Y. The village officials said that if Akron were to agree to the request at existing rates, the local power supply costs would rise by 54 percent.

Washington State Moratorium

Similar problems are brewing in Washington state, also known for its inexpensive electric power. The Chelan County Public Utility District, located east of Seattle, announced on March 19 it would no longer take or process applications for electrical power for cryptocurrency mining.

The board said it approved the moratorium to study how the existing bitcoin and cryptocurrency mining operations have affected power supply and demand in recent months, and to develop new policies for miners and other high-energy users.

The utility board’s other goal is to target rogue bitcoin miners who may be creating fire hazards. On April 2, General Manager Steve Wright announced the utility had cut off electrical power to three illegal cryptocurrency mining operations in an apartment, a home and a self-storage unit.

The board said power use at the apartment rose from 500 kilowatt hours in a month to more than 11,000 kilowatt hours, far exceeding what the apartment wiring was designed to carry. Later this month, the board will consider imposing fees of $5,000 to $10,000 for unauthorized cryptocurrency mining operations.

A Temporary Zap or More Serious?

New York and Washington state were both attractive to miners because of their low-cost power, but now such locales are becoming less welcoming.

Even so, some analysts say the impact on bitcoin could be limited. Naeem Aslam, chief market analyst for ThinkMarkets, says the effect of the current moratoriums needs to be viewed “in relative perspective,” noting that bitcoin miners could switch to renewable energy. However, in the short run the moratoriums “bring more hurdles for miners who would look for more attractive places for them to mine bitcoin,” Aslam tells ThirtyK.

Other analysts note that bitcoin’s electricity demands are high and still rising. According to a December 2017 report by Morgan Stanley’s research unit, bitcoin mining consumed as much energy as two million to three million U.S. homes in April 2017. In a follow-up report in January 2018, Morgan Stanley said current global power demand from cryptocurrency mining is around 22 terawatt hours, but it could quadruple quickly, using as much power as Argentina this year.

Even with renewable energy sources, cryptocurrency’s appetite for more energy is likely to keep expanding, the Morgan Stanley report said. “Over time the energy consumption of cryptocurrencies and blockchain technologies will likely become a hot topic for the utility sector,” said Nicholas Ashworth, co-head of European utilities research.

Time will tell whether the current moratoriums and potentially rising energy prices are a temporary blip or the beginning of a broader trend making bitcoin and cryptocurrency mining more expensive to carry out.

Alice Lipowicz
Alice Lipowicz is a highly regarded technology writer, specializing in new technologies, government policy, contracts and regulation. She was named one of the 70 Most Social (media) Federal Technology Pros on Twitter and one of the nine Top Women Global Influencers of Tech Innovation in Cities.