Moratoriums are being implemented by public power systems grappling with how to respond to energy intensive bitcoin mining so that purveyors of the cryptocurrency do not overload local systems and place a financial hardship on other customers.
The conundrum with bitcoin mining, several officials said, is that it can create instant load growth of as much as 25 megawatts or more, depending on the operation, but at what cost?
The transitory nature of the currency phenomenon makes it difficult, if not all but impossible, to plan for a sustainable distribution system to handle a load that, literally, might be here one day and gone the next.
"It could force us to buy more expensive power," said Bill Treacy, manager of the Municipal Lighting Department in Plattsburgh, New York. The upstate New York city of 20,000 currently is home to two large cryptocurrency miners with a combined 11.2-MW load. That is about 10% of the local public power utility's overall load.
Plattsburgh and other members of the New York Municipal Power Agency recently got some help from the New York Public Service Commission in how to fairly price cryptocurrency companies that require huge amounts of electricity. The PSC on March 15 ruled that upstate municipal power authorities could charge higher electricity rates to cryptocurrency companies.
NYMPA represents customer-owned municipal electric systems that acquire low-cost power, typically hydro, and distribute the power to customers at no profit and the PSC said that the low-cost electricity is a significant reason for high-density load customers to locate in this region.
"We always welcome and encourage companies to build and grow their businesses in New York," said PSC chair John B. Rhodes. "However, we must ensure business customers pay an appropriate price for the electricity they use. This is especially true in small communities with finite amounts of low-cost power available."
Bitcoin miners are also being drawn to the Pacific Northwest states of Oregon and Washington, which feature some of the lowest electricity rates in the country, thanks to available hydropower.
In March, Washington state’s Benton PUD said that in response to growing customer interest in cryptocurrency mining and blockchain operations, coupled with concerns about distribution system safety and reliability, its Commission approved an electricity intensive load policy.
The policy defines electricity intensive load customers as: Customer loads where electricity is the predominant input to the business production; and any load where the load factor or total energy consumption is estimated to be or is appreciably higher than previous consumption at the service location or other customers operating in a similarly-sized and type of facility.
Examples include, but are not limited to: server farms, an aggregation of microprocessor-based computing equipment within a home, garage or business, or special purpose data centers.
Meanwhile, since late last year when bitcoin prices spiked -- one bitcoin currently equals about 8,000 U.S. dollars -- the phone has been ringing a lot at the Northern Wasco County Public Utility District in The Dalles, Oregon. The callers are would-be bitcoin miners.
"We keep getting requests” for power, said Paul Titus, principal engineer and strategic asset planner at the PUD. "It really picked up in November. We were getting one or two calls a week, but now we're getting about one every two weeks."
For these modern-day data miners, the lure is Northern Wasco's average electricity rates of 4 to 4.5 cents/kWh.
"They're fairly attractive," Titus said.
Washington state’s Chelan County PUD offers an even lower all-in rate of about 3.1 cents/kWh for residential customers, while small commercial rates are similar and industrial rates are 1.9 cents/kWh, according to Steve Wright, the PUD's general manager.
Chelan PUD, along with Plattsburgh and the city of Wenatchee, Washington, are among those that recently imposed moratoriums on cryptocurrency mining. In Wenatchee's case, the ban on residential bitcoin mining is in effect for 12 months.
Chelan PUD has stopped taking new applications from bitcoin miners at least until a scheduled May 14 public hearing, although requests already approved with fees and charges paid will be allowed to go forward.
Wright thinks the moratorium will not end in May.
In 2016, the PUD created a new rate class, HDL, for high-density load such as bitcoin mining, for loads less than 5 MW. The rate went into effect in January 2017. But since the surge in bitcoin prices in November of 2017 and the flood of interest into the PUD, it needs more time to study distribution and safety issues, he said.
How to fairly price bitcoin miners is the most difficult challenge the PUD has faced. "The fundamental challenge is these are super high [electricity] users in a relatively small space," he noted.
Indeed, many miners in the Chelan PUD's service area, and elsewhere in the U.S., run their unique business out of their homes. Or in the case of Chelan, "We saw people bringing in big containers" in which to set up shop.
That is not always the case, however.
In Springfield, Missouri, one bitcoin miner located in an old turkey processing plant in the city's downtown "where we had additional capacity," said Ben Jones, manager-economic development for City Utilities of Springfield.
"It was a very clean building and is literally next door to a substation where we have excess capacity" to serve the large banks of computers needed to produce bitcoin.
The miner started with "zero electricity" but has worked his way up to a half-MW load. Conceivably, the miner eventually could need 4 MW or so, making him one of the larger customers in an approximately 800-MW load municipal system.
"The thing has worked well for us," Jones said. The miner was "smart enough to pick a site right next to a substation. I'd take 20 more just like him."
The other officials stressed they are not necessarily opposed to bitcoin mining, assuming the proper safeguards are in place.
Titus said Northern Wasco's attitude toward bitcoin miners is, "We would be glad to serve you, but it might take X to serve your capacity request. If upgrading a substation is needed, then that's what we would do, and improvements would have to be paid upfront."
"We're looking at limiting the impact on other customers,” he said.
Then there is the problem of bitcoin miners secretly running their business without notifying the local utility. No one knows how widespread that is, only that it exists.
Chelan PUD has approved 22 bitcoin mining applications so far, but Wright speculates "there probably are multitudes" attempting to operate out of homes and small buildings without the PUD knowing.
Chelan's moratorium will give local officials time to determine what additional costs they may be looking at to serve bitcoin miners if the phenomenon persists. It makes for a tricky cost/benefit equation.
"We could spend hundreds of millions of dollars on infrastructure," Wright said, "and there could be no one on the other end of the line taking the electricity" because of the mining's transitory nature.
Bitcoin miners generally do not offer the same economic development prospects as do a new General Motors automotive assembly plant or aluminum smelter, which will run for years with high around-the-clock capacity factors.
With bitcoin mining, "There is a lot more concern than a sense of opportunity," Wright observed. "There is a question that has arisen that generally people are quite skeptical of bitcoin, since it is a new ‘currency’ - and is it creating jobs? What are the benefits to the community that has invested in these hydro assets as ratepayers for more than 70 years?"
Answers to those questions and others may come into sharper focus in the coming months as Chelan PUD begins to roll out a series of policies governing bitcoin mining, with the moratorium still in place.