According to Sen. Steve Daines (R-Mont.), the state is currently a net exporter of energy but the arrival of cryptocurrency mining companies could force it to begin importing electricity as coal-fired plants go offline.
“This could pose a threat to the expansion of bitcoin () operations and an even greater threat to energy supply and prices for Montana as a whole,” Daines said, citing the example of an Australian utility that brought a coal plant back online to accommodate miners.
Unlike on Capitol Hill in July, no lawmakers at the Tuesday hearing were openly skeptical of blockchain or the cryptocurrency mined using it, perhaps because at least two of them, Sen. Maria Cantwell of Washington, the committee’s ranking Democrat, and Daines, come from technology backgrounds. But senators did voice concerns about the energy consumed by mining and security concerns if blockchain becomes a significant part of the nation’s electric grid.
Cantwell’s opening comments were similar to those of other lawmakers on the committee. While she recognized blockchain’s potential in modernizing the energy market and adjacent industries such as electric cars, Cantwell also cited the impacts of cryptocurrency mining on utilities in her home state of Washington. “Let’s just say it’s very popular right now,” she said.
The industry experts and researchers who made up the hearing’s witness panel disagreed on the extent of energy mining consumes today, with global estimates ranging as high as 5 gigawatts annually, or about 0.1 percent of global energy demand. Even so, they argued, the issue is most critical in places where mining companies have gravitated due to low energy costs and cooler climates.
Energy consumption “can be thought of as somewhat small in a global context but can seem very large in concentrated areas that are experiencing bitcoin boomtowns,” said Thomas Golden, program manager for technology innovation at the Electric Power Research Institute (EPRI).
But energy demand could be mitigated by as many blockchains move to models such as and proof of authority, argued Claire Henly, managing director of the Energy Web Foundation. Those models would reduce power consumption to that of “a small office building, not a small country,” she said, noting that she expects those models to drive future energy-sector blockchains.
However, Arvind Narayanan, associate professor at Princeton University, added that it’s unlikely that cryptocurrencies would switch to “mining–free” models.
A Blockchain-Powered Grid
Both lawmakers and panelists pointed to the longer-term potential of blockchain technology to modernize the nation’s electrical grid. That’s particularly important as energy deregulation has allowed customers to buy energy from different providers, and at times, sell their own solar-generated energy into an open marketplace. With millions of potential buyers and sellers, blockchain could help “manage all that chaos,” said Golden.
At least two industry organizations, the Energy Web Foundation and EPRI, are currently experimenting with blockchain applications linking buyers and sellers, which could be rolled out as early as next year. However, Golden said that real-world solutions are still “five to seven years” away.
Henly cautioned the U.S. has fallen behind the rest of the world in creating these solutions, with both developers and innovative utilities concentrated in Europe and elsewhere. Panelists urged the committee to consider concentrated investments in both energy-specific applications and, more broadly, the underlying blockchain technology.
Ultimately, adoption will require identifying areas “which require a novel approach” without requiring utilities to make “substantial changes to their existing technology,” said Robert Kahn, president and CEO of the Corporation for National Research Initiatives.
In the face of often-repeated warnings by researchers that the U.S. power grid is vulnerable to hacking, senators returned several times to questions about security. Panel experts reiterated two points: that blockchain can be “as open to vulnerability as any other software” and that it is “one of a broad set of tools we must develop as we work to secure our power grid,” said Paul Skare, chief cybersecurity and technical group manager of the Pacific Northwest National Laboratory.
“You need to understand there’s a broader universe of applications, of which blockchain is exactly one option,” Kahn told lawmakers.