How Bitcoin is Reshaping the Renewable Energy Landscape in Texas
Despite a recent cryptocurrency crash, the base of dedicated people who are supporters of Bitcoin and its future are rallying around the asset. In the latest episode of E2B: Energy to Business, host Daniel J. Litwin met ryan duskDirector at Opportune LLP’s Commodity Risk Advisory Groupand Cooper LigonConsultant within the firm Process and technology hands-on, to discuss why Bitcoin is so popular and how its growing demand is driving an increase in renewable energy.
As Ligon describes it, Bitcoin is a “decentralized peer-to-peer version of electronic money that allows online payments to be sent directly from one party to another without going through a financial institution.”
The appeal of acquiring Bitcoin is that it is a valuable currency that does not require the usual processes of normal banking exchanges. Unlike the dollar, bitcoin owners don’t have the same worries about losing value.
READ MORE: Why Renewables Can’t Survive Without Bitcoin
“The bitcoin supply is also pre-programmed, so there will never be more than 21 million bitcoins in circulation,” Ligon says. “Unlike the dollar that we have seen, when there is inflation, they [the Federal Reserve] can just print as much as they want,” Ligon said.
He clarifies: “There is a predetermined trajectory that contains the supply of Bitcoin. So theoretically one guy can’t exploit everything at once and therefore render it worthless.
Ligon further explains that privacy and the ability to transact digitally without third parties has been another big driver behind the rise and interest in Bitcoin.
For him, Dusek says that the true value of Bitcoin lies in the block chain, a distributed database or shared ledger between nodes in a computer network. As a database, a blockchain stores information electronically in a digital format, while maintaining a secure and decentralized record of transactions. The innovation of a blockchain is that it guarantees the fidelity and security of a data record and generates trust without the need for a trusted third party.
Going forward, however, Dusek notes that Bitcoin could be a viable solution. hedge against inflation. Given recent times, Dusek corrects himself and states that he predicted this was a solution to fight inflation much earlier.
“I don’t know of anything else that has a fixed supply, so you know in the long run it’s going to be betting against inflation,” Dusek says. “Honestly, I thought it would happen a lot sooner. Bitcoin seems to still be treated as a tech stock or a financial asset, but I have a feeling there will be a decoupling sooner rather than later.
By nature, however, Bitcoin is inherently very energy intensive and relies on cheap energy to make profits. When it comes to renewable energy, the mining demand for bitcoin is pushing miners to look for cheaper sources of energy to power their complex supercomputers and servers. This in turn fuels greener energy as “about 58.4% of Bitcoin mining is powered by renewable energy,” says Ligon quoting the Bitcoin Mining Council 2022 Report.
Ligon also adds that miners are very “willing to go anywhere for cheap energy.”
READ MORE: Cryptocurrency in Texas: Why Bitcoin Mining is Taking Off in the Lone Star State
One such region is Texas, which is apparently the preferred destination for Bitcoin mining due to the state’s energy infrastructure that provides access to cheap electricity from its deregulated electricity market, its growing mix of renewable energy sources (especially wind energy), its supporting policy and its support by policy makers.
Dusek says that initially one of the biggest draws to the state was hydraulic fracturing in shale basins such as the prolific Permian Basin and the availability of cheap excess natural gas. The shale boom brought more miners to the area who wanted to take advantage of abundant, inexpensive natural gas. As a result, many bitcoin mining companies started popping up in Texas. As long as the state fosters an environment that further encourages oil and gas production alongside renewable energy innovations, Texas will continue to be the ideal location for Bitcoin mining operations.
“There are a lot of problems with trying to be 100% renewable because of this intermittent flow of energy,” Dusek says. “So at some point bitcoin miners would like to do that, but right now I think everyone is going to be tied to fossil fuels until at least until we have a technological breakthrough like the batteries that are upgradable and can act like they’re utility to some degree.