But much of that electricity won’t turn on lights in living rooms. It will instead stay on site at the plant in Dresden, powering up to 27,000 computers that will run 24 hours a day to snag increasingly rare virtual currency called bitcoin.
The plant worries climate change activists, who say the extraordinary amount of energy consumed in what’s known as bitcoin mining will make it hard for New York to meet its aggressive climate change goals.
“We’re talking about burning more fossil fuels to make fake money in the middle of climate change, which we view as insane,” said Yvonne Taylor, vice president of the environmental group Seneca Lake Guardian.
The Greenidge Generation Holdings plant is part of a growing trend. Lucrative cryptocurrency centers gobble up huge amounts of energy, so much so that they take over power plants or old factories to use for themselves. Several have already set up shop in Upstate New York, where energy is cheap and cold weather reduces the cost of cooling thousands of computer processors, each of which emits as much heat as a 1,400-watt hair dryer.
New York will have to grapple with the surging demand of bitcoin mining if the state expects to slash greenhouse gas emissions, said Tristan Brown, a professor of sustainable resources management at SUNY College of Environmental Science and Forestry.
“Bitcoin does raise some interesting questions,” Brown said. “Is this something we necessarily want to have contributing to our (electrical) demand? What type of value does it bring the state economically? That’s ultimately what state policy will have to determine.”
While those questions are being debated, legislators in both houses are introducing bills that would impose a three-year moratorium on cryptocurrency mining.
“The continued and expanded operation of cryptocurrency mining centers will greatly increase the amount of energy usage,” reads the Senate bill, sponsored by Assemblyman Kevin Parker, D-Brooklyn. “It is reasonable to believe the associated greenhouse gas emissions will irreparably harm compliance with the Climate Leadership and Community Protection Act.”
Assemblywoman Anna Kelles, D- Ithaca, plans to introduce the Assembly version of the bill this week.
The largest cryptocurrency mining operation in the world is in the former Alcoa Aluminum smelter in Massena, according to its owner, Coinmint. A British Columbian company filed an application in April to buy a 55-megawatt gas power plant just north of Buffalo and turn it into a bitcoin mining operation.
This is just the beginning, environmental groups Earthjustice and the Sierra Club wrote to New York regulators in early April.
“The Greenidge power plant is one of nearly 30 power plants in upstate New York with the potential to be converted to full-time operation for bitcoin mining and other high-energy data tasks,” the letter said.
The groups are urging the state to enforce strict environmental standards when the Greenidge plant seeks to renew its air permit, which expires in September. If the plant meets its capacity of 106 megawatts, the groups said, Greenidge would pump more than 1 million tons of climate-warming carbon dioxide into the atmosphere, exceeding the limits of the permit, the letter said.
Without a thorough review and strong regulations of power-plants-turned-bitcoin-mining centers, the groups said, New York would “face grave challenges” to reduce carbon emissions by 40 percent by 2030 and 85 percent by 2050, as called for in the Climate Leadership and Community Protection Act.
“The state has established a commitment to its residents, to the country, to the planet that we have very aggressive goals,” Kelles said. “The question with (Greenidge) is will the way they are going to make money be completely counter to the state’s goal.”
A spokesman for Greenidge, Michael McKeon, said the company meets and will continue to meet all the requirements of its permit from the state Department of Environmental Conservation.
Greenidge has revived a mothballed power plant and helped the local economy, Chief Executive Officer Dale Irwin said in a statement.
“We employ dozens of workers, compared to two just a few years ago, and anticipate creating an additional dozen or more new, high-tech jobs in just the next several months,” he said. “We are a business that fully supports our community partners, protects our environment and Seneca Lake, and operates in full compliance with all laws, environmental permits and ordinances.”
McKeon said that 60% of the plant’s power is distributed to the grid, where it is used to heat and light homes and businesses. The company “regularly provides power to the grid and would provide 100 percent of our capacity to the grid if requested,” he said.
In documents announcing its intent to go public by merging with a technical support company, Greenidge said it “currently operates 19 MW of mining” at the Dresden plant and would be up to 85 MW by the end of 2022. Any excess power produced above that would be sold to the grid at a profit. During a cold snap in February, Chief Executive Officer Jeff Kirt told would-be investors that Greenidge made so much money selling power that its cost to mine a bitcoin was minus $371.
Greenidge said it plans to expand its business model and be operating 500 MW of mining capacity by 2025, although no additional projects are planned for New York, McKeon said.
A megawatt is enough to power about 1,000 homes in New York.
Bitcoin mining centers like the one in Dresden consume vast amounts of electricity. Worldwide, bitcoin mining consumes as much electricity as the entire country of Argentina, population 45 million, said Lee McKnight, an information studies professor at Syracuse University. A Princeton University professor told Congress in 2018 that bitcoin mining accounted for about 1% of the entire globe’s electrical consumption, or about the same as all of New York state.
To earn bitcoins (more on that later), you need as much computer processing power as possible, and that means you need lots of electricity to run those processers. The cheaper the power, the more computers you can run and the better your odds of getting a bitcoin, now valued at about $58,000.
The co-founder of Coinmint, which runs the mining center in Massena in the former Alcoa Aluminum, said in a 2019 video that the company was paying about $27 per megawatt-hour for electricity. The cost on the retail market would be $200 per megawatt, he said.
Greenidge plans to go one better. The company “expects to become the first publicly traded bitcoin mining company with a wholly owned power plant,” according to documents filed with the federal Securities and Exchange Commission to go public this year.
The electricity produced and used on site is called “behind the meter,” because it doesn’t get distributed into the overall power grid.
Greenidge touts Upstate New York’s “northern, dust free climate (that) ensures no need for expensive air conditioning,” and Greenidge’s access to “some of the lowest cost natural gas in North America.”
McKeon declined to say how much Greenidge paid for gas.
Environmentalists point out that some of that gas likely comes from hydraulic fracturing, another controversial, energy-intensive process that extracts natural gas from rock a mile or more below the earth’s surface. They note that Greenidge in 2015 received $2 million for a gas pipeline project through Gov. Andrew Cuomo’s competitive regional awards. The state said the project “would not have a significant effect on the environment” and “will provide a needed source of energy.”
“They got a $2 million economic development grant to put a pipeline to a fracked-gas-burning facility,” said Joseph Campbell, president of Seneca Lake Guardian.
Greenidge said in its merger announcement that it captured 1,186 bitcoins in the year ending Feb. 28. A bitcoin’s value can fluctuate, but on Monday was worth about $58,000. That means Greenidge’s 12-month bitcoin take is worth somewhere about $69 million. The company said it had spent just $3.4 million to mine those bitcoins.
Bitcoin, or any other cryptocurrency, is virtual money stored as an investment or used to pay online transactions. It’s sort of like PayPal without the bank. It’s also akin to Wikipedia: Anyone can participate and see what everyone else has done because all of the transactions are public and online.
To snag a bitcoin, your computer has to be the one that solves a complicated algorithm that helps to validate a long string of transactions. Every bitcoin-mining computer in the world, from Brazil to China to Dresden, is competing at the same time for a single bitcoin, which is why the process sucks up so much power. A new bitcoin is awarded every 10 minutes.
“In true Darwinian fashion, the most powerful miners (specialized computers), consuming the most power, win the most Bitcoin,” according to Seeking Alpha, a website that gives investing advice.
There are a finite number of bitcoins – 21 million, and nearly 19 million of them have already been claimed. Each bitcoin gets progressively harder to get because the algorithms become increasingly complex. That uses even more computing power.
The Seneca Lake power plant was built in 1937, and it burned coal until it shut down in 2009. The company that owns Greenidge invested $65 million to get the plant running again, switching it to natural gas. The plant reopened in 2017 and began bitcoin mining in 2018.
Greenidge recently won approval from the town of Torrey to add four buildings to the site, which will house another 10,000 mining machines.
Residents and environmental groups, including the Sierra Club, have filed a lawsuit in state court, saying the proposed expansion of the plant in Yates County will require enormous amounts of cooling water to be drawn from the lake, which will then be piped back into the lake at higher temperatures.
“Given the amount of power that will be used, there are significant issues of air pollution and the discharge of heated water that will wind up in the lake,” said Richard Lippes, the Buffalo lawyer representing the homeowners.
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