N.D. ‘cleanest crypto’ claim ignores state’s fossil fuel-powered grid

North Dakota officials are marketing the state as a destination for cryptocurrency companies that want to clean up the industry’s image as a wasteful climate polluter, touting the state as a home for the “cleanest crypto on the planet.”

But energy experts say without specific commitments by companies to power data centers with new wind and solar farms, cryptocurrency mining in North Dakota is likely to run on an energy mix that is dirtier than the national average.

“Claiming that you’re cleaner because you are in North Dakota is not really true, because the national electricity mix is actually much cleaner than North Dakota’s electricity mix,” said Ric O’Connell, executive director for GridLab, a nonprofit energy policy consulting group based in Berkeley, California.

At a bitcoin conference last spring in Miami, North Dakota officials promoted the state’s energy mix as a top selling point for building cryptocurrency facilities in the state, along with its low taxes, minimal regulation, and relatively cooler climate, which could lessen the power load required to keep computer hardware from overheating during parts of the year.

Cryptocurrency “mines” are specialized data centers set up to run complex algorithms that mint new digital tokens. The industry has rapidly grown into one of the most energy-intensive in the world — an estimated 150 terawatt-hours of electricity annually, more than the entire country of Argentina, according to a University of Cambridge study.

At least three cryptocurrency companies have cited North Dakota’s energy resources in recent project announcements:

• In January, Atlas Power Data Center CEO Kevin Washington said in a news release that building its largest-ever project near Williston would allow it to “draw on a diversified mix of alternative power sources.”
• Applied Blockchain touted its proximity to “significant wind power capacity” last month in an announcement for a new cryptocurrency mine in Ellendale. In an interview, CEO Wes Cummins said the state’s “excess of power” was a factor that helped draw the Texas company to North Dakota.
• Bitzero Blockchain, which describes itself as a developer of “100% renewable zero carbon displacement” data centers, said in June that it is working with the Mandan, Hidatsa and Arikara Nation to purchase hydropower for several facilities under development in North Dakota.

“Bitzero’s decision to locate its North American headquarters in North Dakota is yet another example of how our state is emerging as the location of choice for clean energy data centers supported by reliable, affordable electricity produced with environmental stewardship,” Gov. Doug Burgum said in an announcement.

North Dakota is among the nation’s largest producers of wind power, with about 4,300 megawatts of installed capacity as of the start of 2022. Wind power accounts for about a third of the generation on the region’s electric grid — almost four times the national average, according to the U.S. EPA.

However, North Dakota and the upper Midwest are also far more reliant on coal-fired power plants than the rest of the country. Just under two-fifths of the region’s electricity still comes from coal, almost twice as much as the U.S. grid overall. As a result, despite its wind advantage, the region’s grid still spews more carbon dioxide per megawatt-hour than the national average.

The North Dakota Department of Commerce did not respond to a request for comment last week.

Mike Jacobs, a senior energy analyst with the Union of Concerned Scientists, noted that being located near a wind farm means nothing unless a cryptocurrency facility has a contract to purchase its power. Without seeing the contract a data center has with its power provider, it is difficult to know how much energy derives from wind or other clean sources, he said.

Applied Blockchain will buy power from utilities in North Dakota and their mix will determine the clean energy mix of the crypto mining. Though the Ellendale data center will operate near large wind farms, those are fully subscribed by corporations such as Google and Xcel Energy. Instead, it will buy power from Montana-Dakota Utilities Co., which generates a third of its electricity from wind power. 

Bitzero is the only cryptocurrency company whose announcement has suggested a clean energy power purchase contract is in the works, and even that arrangement is unlikely to result in new capacity, as large-scale hydropower resources have not been added to the grid in decades.

Contracting new clean energy capacity could take years due to grid congestion and interconnection delays. Much of North Dakota’s existing unused capacity is from coal-fired power plants, which have struggled to compete with gas and renewables and could see more use with rising electricity demand.

“What’s going to happen in North Dakota with crypto is there’s going to be coal generation used, almost inevitably,” said Scott Skokos, executive director of the Dakota Resource Council, a state environmental group.

That’s been the experience in Texas, which has seen a bitcoin boom since China banned cryptocurrency mining this year for wasting resources. Despite talk about the potential to power the data centers with clean energy, experts say most crypto facilities in Texas run on standard grid power, more than 60% of which comes from coal and natural gas. 

Cryptocurrency boosters have pitched the facilities as potential grid resources that can help grid operators manage variable renewable generation. Data centers are typically “interruptible” loads, meaning they can be quickly powered down when the grid is strained. “We’re pretty good at turning up and turning down, but that’s not something you can do with steel plants or food processing plants,” Cummins, of Applied Blockchain, said. 

Rao Konidena, a consultant and former policy advisor for grid operator MISO, said he thinks data centers — cryptocurrency or other types — will likely play a role in balancing the grid because of their flexibility, especially if they are equipped with battery storage.

Demand response isn’t unique to data centers, though, and critics say the cryptocurrency industry and its boosters are exaggerating its potential benefit to the clean energy transition. “They’re not helping the grid,” said O’Connell, of GridLab. “It’s just a new load.”