West Virginia approval sought for multi-state power line

Summer Heatwave Electricity Shut-offs strain power grids as peak demand surges, prompting load shedding, customer alerts, and energy conservation. Vulnerable populations face higher risks, while cooling centers, efficiency upgrades, and renewables bolster resilience.

Key Points

Episodic power cuts during extreme heat to balance grid load, protect infrastructure, and manage peak demand.

✅ Causes: peak demand, heatwaves, aging grid, AC load spikes.

✅ Impacts: vulnerable households, health risks, economic losses.

✅ Solutions: load shedding, cooling centers, efficiency, renewables.

As temperatures soar across various regions, millions of households are facing the threat of U.S. blackouts due to strain on power grids and heightened demand for cooling during summer heatwaves. This article delves into the causes behind these potential shut-offs, the impact on affected communities, and strategies to mitigate such risks in the future.

Summer Heatwave Challenges

Summer heatwaves bring not only discomfort but also significant challenges to electrical grids, particularly in densely populated urban areas where air conditioning units and cooling systems, along with the data center demand boom, strain the capacity of infrastructure designed to meet peak demand. As temperatures rise, the demand for electricity peaks, pushing power grids to their limits and increasing the likelihood of disruptions.

Vulnerable Populations

The risk of electricity shut-offs disproportionately affects vulnerable populations, including low-income households, seniors, and individuals with medical conditions that require continuous access to electricity for cooling or medical devices. These groups are particularly susceptible to heat-related illnesses and discomfort when faced with more frequent outages during extreme heat events.

Utility Response and Management

Utility companies play a critical role in managing electricity demand and mitigating the risk of shut-offs during summer heatwaves. Strategies such as load shedding, where electricity is temporarily reduced in specific areas to balance supply and demand, and deploying AI for demand forecasting are often employed to prevent widespread outages. Additionally, utilities communicate with customers to provide updates on potential shut-offs and offer advice on energy conservation measures.

Community Resilience

Community resilience efforts are crucial in addressing the challenges posed by summer heatwaves and electricity shut-offs, especially as Canadian grids face harsher weather that heightens outage risks. Local governments, non-profit organizations, and community groups collaborate to establish cooling centers, distribute fans, and provide support services for vulnerable populations during heat emergencies. These initiatives help mitigate the health impacts of extreme heat and ensure that all residents have access to relief from oppressive temperatures.

Long-term Solutions

Investing in resilient infrastructure, enhancing energy efficiency, and promoting renewable energy sources are long-term solutions to reduce the risk of electricity shut-offs during summer heatwaves by addressing grid vulnerabilities that persist. By modernizing electrical grids, integrating smart technologies, and diversifying energy sources, communities can enhance their capacity to withstand extreme weather events and ensure reliable electricity supply year-round.

Public Awareness and Preparedness

Public awareness and preparedness are essential components of mitigating the impact of electricity shut-offs during summer heatwaves. Educating residents about energy conservation practices, encouraging the use of programmable thermostats, and promoting the importance of emergency preparedness plans empower individuals and families to navigate heat emergencies safely and effectively.

Conclusion

As summer heatwaves become more frequent and intense due to climate change impacts on the grid, the risk of electricity shut-offs poses significant challenges to communities across the globe. By implementing proactive measures, enhancing infrastructure resilience, and fostering community collaboration, stakeholders can mitigate the impact of extreme heat events and ensure that all residents have access to safe and reliable electricity during the hottest months of the year.

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Sudbury Microburst Power Outage strains hydro crews after straight-line winds; New Sudbury faces downed power lines, tree damage, and hazardous access as restoration efforts, mutual aid, and safety protocols aim to reconnect customers by weekend.

Key Points

A microburst downed lines in New Sudbury, cutting power as crews tackle hazardous access and complex repairs.

✅ Straight-line winds downed poles, trees, and service lines

✅ Crews face backyard access hazards, complex reconnections

✅ Mutual aid linemen, arborists, and crane work speed restoration

About 300 Sudbury Hydro customers are still without power Thursday after Monday's powerful microburst storm, part of a series of damaging storms in Ontario seen across the province.

The utility's spokesperson, Wendy Watson, says the power in the affected New Sudbury neighbourhoods should be back on by the weekend, even as Toronto power outages persisted in a recent storm.

The storm, which Environment Canada said was classified as a microburst or straight line wind damage, similar to a severe windstorm in Quebec, downed a number of power lines in the city.

Now crews are struggling with access to the lines, a challenge that BC Hydro's atypical storm response also highlighted, as they work to reconnect service in the area.

"In some cases, you can't get to someone's back yard, or you have to go through the neighbour's yard," Watson said.

"We have one case where [we had] equipment working over a swimming pool. It's dicey, it's really dirty and it's dangerous."

Monday's storm caused massive property damage across the city, particularly in New Sudbury. (Benjamin Aubé/CBC)

Veteran arborist Jim Allsop told CBC News he hasn't seen damage like this in his 30-plus years in the business.

"I don't know how many we've done up to date, but I have another 35 trees on houses," Allsop said. "We'll be probably another week."

"We've rented a crane to help speed up the process, and increase safety, and we're getting five or six done in our 12-hour days."

Scott Aultman, a lineman with North Bay Hydro, said he has seen a few storms in his career, and isn't usually surprised by extensive damage a storm can cause.

"When you see a trailer on its side, you know, you don't see that every day," Aultman said.

But during the clean up, Aultman said the spirit of camaraderie runs high with crews from different areas, as seen when Canadian crews helped Florida during Hurricane Irma.

"We were pumped. It's part of the trade, everybody gets together," Aultman said. "We had a big storm in 2006 and the Sudbury guys were up helping us, so it's great, it's nice to be able to return the favour and help them out."

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EPA Power Plant Emissions Rule proposes strict greenhouse gas limits for coal and gas units, leveraging carbon capture (CCS) under the Clean Air Act to cut CO2 and accelerate decarbonization of the U.S. grid.

Key Points

A proposed EPA rule setting CO2 limits for coal and gas plants, using CCS to cut power-sector greenhouse gases.

✅ Applies to existing and new coal and large gas units

✅ Targets near-zero CO2 by 2038 via CCS or retirement

✅ Cites grid, health, and climate benefits; faces legal challenges

The Biden administration has proposed new limits on greenhouse gas emissions from coal- and gas-fired power plants, its most ambitious effort yet to roll back planet-warming pollution from the nation’s second-largest contributor to climate change.

A rule announced by the Environmental Protection Agency could force power plants to capture smokestack emissions using a technology that has long been promised but is not used widely in the United States, and arrives amid changes stemming from the NEPA rewrite that affect project reviews.

“This administration is committed to meeting the urgency of the climate crisis and taking the necessary actions required,″ said EPA Administrator Michael Regan.

The plan would not only “improve air quality nationwide, but it will bring substantial health benefits to communities all across the country, especially our front-line communities ... that have unjustly borne the burden of pollution for decades,” Regan said in a speech at the University of Maryland.

President Joe Biden, whose climate agenda includes a clean electricity standard as a key pillar, called the plan “a major step forward in the climate crisis and protecting public health.”

If finalized, the proposed regulation would mark the first time the federal government has restricted carbon dioxide emissions from existing power plants, following a Trump-era replacement of Obama’s power plant overhaul, which generate about 25% of U.S. greenhouse gas pollution, second only to the transportation sector. The rule also would apply to future electric plants and would avoid up to 617 million metric tons of carbon dioxide through 2042, equivalent to annual emissions of 137 million passenger vehicles, the EPA said.

Almost all coal plants — along with large, frequently used gas-fired plants — would have to cut or capture nearly all their carbon dioxide emissions by 2038, the EPA said, a timeline that echoed concerns raised during proposed electricity pricing changes in the prior administration. Plants that cannot meet the new standards would be forced to retire.

The plan is likely to be challenged by industry groups and Republican-leaning states, much like litigation over the Affordable Clean Energy rule unfolded in recent years. They have accused the Democratic administration of overreach on environmental regulations and warn of a pending reliability crisis for the electric grid. The power plant rule is one of at least a half-dozen EPA rules limiting power plant emissions and wastewater treatment rules.

“It’s truly an onslaught” of government regulation “designed to shut down the coal fleet prematurely,″ said Rich Nolan, president and CEO of the National Mining Association.

Regan denied that the power plant rule was aimed at shutting down the coal sector, but acknowledged — even after the end to the 'war on coal' rhetoric — “We will see some coal retirements.”

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Yukon SMR Feasibility Study examines small modular reactors as low-emissions nuclear power for Yukon's grid and remote communities, comparing costs, safety, waste, and reliability with diesel generation, renewables, and energy efficiency.

Key Points

An official assessment of small modular reactors as low-emission power options for Yukon's grid and remote sites.

✅ Compares SMR costs vs diesel, hydro, wind, and solar

✅ Evaluates safety, waste, fuel logistics, decommissioning

✅ Considers remote community loads and grid integration

The Yukon government is looking for ways to reduce the territory's emissions, and wondering if nuclear power is one way to go.

The territory is undertaking a feasibility study, and, as some developers note, combining multiple energy sources can make better projects, to determine whether there's a future for SMRs — small modular reactors — as a low-emissions alternative to things such as diesel power.

The idea, said John Streicker, Yukon's minister of energy, mines and resources, is to bring the SMRs into the Yukon to generate electricity.

"Even the micro ones, you could consider in our remote communities or wherever you've got a point load of energy demand," Streicker said. "Especially electricity demand."

For remote coastal communities elsewhere in Canada, tidal energy is being explored as a low-emissions option as well.

SMRs are nuclear reactors that use fission to produce energy, similar to existing large reactors, but with a smaller power capacity. The International Atomic Energy Agency (IAEA) defines reactors as "small" if their output is under 300 MW. A traditional nuclear power plant produces about three times as much power or more.

They're "modular" because they're designed to be factory-assembled, and then installed where needed. 

Several provinces have already signed an agreement supporting the development of SMRs, and in Alberta's energy mix that conversation spans both green and fossil power, and Canada's first grid-scale SMRs could be in place in Ontario by 2028 and Saskatchewan by 2032.

A year ago, the government of Yukon endorsed Canada's SMR action plan, at a time when analysts argue that zero-emission electricity by 2035 is practical and profitable, agreeing to "monitor the progress of SMR technologies throughout Canada with the goal of identifying potential for applicability in our northern jurisdiction."

The territory is now following through by hiring someone to look at whether SMRs could make sense as a cleaner-energy alternative in Yukon. 

The territorial government has set a goal of reducing emissions by 45 per cent by 2030, excluding mining emissions, even as some analyses argue that zero-emissions electricity by 2035 is possible, and "future emissions actions for post-2030 have not yet been identified," reads the government's request for proposals to do the SMR study. 

Streicker acknowledges the potential for nuclear power in Yukon is a bit of "long shot" — but says it's one that can't be ignored.

"We need to look at all possible solutions," he said, as countries such as New Zealand's electricity sector debate their future pathways.

"I don't want to give the sense like we're putting all of our emphasis and energy towards nuclear power. We're not."

According to Streicker, it's nothing more than a study at this point.

Don't bother, researcher says
Still, M.V. Ramana, a professor at the School of Public Policy and Global Affairs at the University of British Columbia, said it's a study that's likely a waste of time and money. He says there's been plenty of research already, and to him, SMRs are just not a realistic option for Yukon or anywhere in Canada.

"I would say that, you know, that study can be done in two weeks by a graduate student, essentially, all right? They just have to go look at the literature on SMRs and look at the critical literature on this," Ramana said.

Ramana co-authored a research paper last year, looking at the potential for SMRs in remote communities or mine sites. The conclusion was that SMRs will be too expensive and there won't be enough demand to justify investing in them.

He said nuclear reactors are expensive, which is why their construction has "dried up" in much of the world.

"They generate electricity at very high prices," he said.

'They just have to go look at the literature,' said M.V. Ramana, a professor at the School of Public Policy and Global Affairs at the University of British Columbia. (Paul Joseph)
"[For] smaller reactors, the overall costs go down. But the amount of electricity that they will generate goes down even further."

The environmental case is also shaky, according to a statement signed last year by dozens of Canadian environmental and community groups, including the Sierra Club, Greenpeace, the Council of Canadians and the Canadian Environmental Law Associaton (CELA). The statement calls SMRs a "dirty, dangerous distraction" from tackling climate change and criticized the federal government for investing in the technology.

"We have to remember that the majority of the rhetoric we hear is from nuclear advocates. And so they are promoting what I would call, and other legal scholars and academics have called, a nuclear fantasy," said Kerrie Blaise of CELA.

Blaise describes the nuclear industry as facing an unknown future, with some of North America's larger reactors set to be decommissioned in the coming years. SMRs are therefore touted as the future.

"They're looking for a solution. And so that I would say climate change presents that timely solution for them."

Blaise argues the same safety and environmental questions exist for SMRs as for any nuclear reactors — such as how to produce and transport fuel safely, what to do with waste, and how to decommission them — and those can't be glossed over in a single-minded pursuit of lower carbon emissions.  

Main focus is still renewables, minister says
Yukon's energy minister agrees, and he's eager to emphasize that the territory is not committed to anything right now beyond a study.

"Every government has a responsibility to do diligence around this," Streicker said.

A solar farm in Old Crow, Yukon. The territory's energy minister says Yukon is still primarily focussed on renewables, and energy efficiency. (Caleb Charlie)
He also dismisses the idea that studying nuclear power is any sort of distraction from his government's response to climate change right now. Yukon's main focus is still renewable energy such as solar and wind power, though Canada's solar progress is often criticized as lagging, increasing efficiency, and connecting Yukon's grid to the hydro project in Atlin, B.C., he said.

Streicker has been open to nuclear energy in the past. As a federal Green Party candidate in 2008, Streicker broke with the party line to suggest that nuclear could be a viable energy alternative. 

He acknowledges that nuclear power is always a hot-button issue, and Yukoners will have strong feelings about it. A lot will depend on how any future regulatory process works, he says.

In taking action on climate, this Arctic community wants to be a beacon to the world
Cameco signs agreement with nuclear reactor company
"There's some people that think it's the 'Hail Mary,' and some people that think it's evil incarnate," he said. 

"Buried deep within Our Clean Future [Yukon's climate change strategy], there's a line in there that says we should keep an eye on other technologies, for example, nuclear. That's what this [study] is — it's to keep an eye on it."

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BC Hydro Grid Modernization accelerates clean energy and electrification, upgrading transmission lines, substations, and hydro dams to deliver renewable power for EVs and heat pumps, strengthen grid reliability, and enable industrial decarbonization in British Columbia.

Key Points

A $36B, 10-year plan to expand and upgrade B.C.'s clean grid for electrification, reliability, and industrial growth.

✅ $36B for lines, substations, and hydro dam upgrades

✅ Enables EV charging, heat pumps, and smart demand response

✅ Prioritizes industrial electrification and Indigenous partnerships

In a significant move towards a clean energy transition, British Columbia has announced a substantial $36-billion investment to enlarge and upgrade its electricity grid over the next ten years. The announcement last Tuesday from BC Hydro indicates a substantial 50 percent increase from its prior capital plan. A major portion of this investment is directed towards new consumer connections and improving current infrastructure, including substations, transmission lines, and hydro dams for more efficient power generation.

The catalyst behind this major investment is the escalating demand for clean energy across residential, commercial, and industrial sectors in British Columbia. Projections show a 15 percent rise in electricity demand by 2030. According to the Canadian Climate Institute's models, achieving Canada’s climate goals will require extensive electrification across various sectors, raising questions about a net-zero grid by 2050 nationwide.

BC Hydro is planning substantial upgrades to the electrical grid to meet the needs of a growing population, decreasing industry carbon emissions, and the shift towards clean technology. This is vital, especially as the province works towards improving housing affordability and as households face escalating costs from the impacts of climate change and increasing exposure to harsh weather events. Affordable, reliable power and access to clean technologies such as electric vehicles and heat pumps are becoming increasingly important for households.

British Columbia is witnessing a significant shift from fossil fuels to clean electricity in powering homes, vehicles, and workplaces. Electric vehicle usage in B.C. has increased twentyfold in the past six years. Last year, one in every five new light-duty passenger vehicles sold in B.C. was electric – the highest rate in Canada. Additionally, over 200,000 B.C. homes are now equipped with heat pumps, indicating a growing preference for the province’s 98 percent renewable electricity.

The investment also targets reducing industrial emissions and attracting industrial investment. For instance, the demand for transmission along the North Coastline, from Prince George to Terrace, is expected to double this decade, especially from sectors like mining. Mining companies are increasingly looking for locations with access to clean power to reduce their carbon footprint.

This grid enhancement plan in B.C. is reflective of similar initiatives in provinces like Quebec and the legacy of Manitoba hydro history in building provincial systems. Hydro-Québec announced a substantial $155 to $185 billion investment in its 2035 Action Plan last year, aimed at supporting decarbonization and economic growth. By 2050, Hydro-Québec predicts a doubling of electricity demand in the province.

Both utilities’ strategies focus on constructing new facilities and enhancing existing assets, like upgrading dams and transmission lines. Hydro-Québec, for instance, includes energy efficiency goals in its plan to double customer savings and potentially save over 3,500 megawatts of power.

However, with this level of investment, provinces need to engage in dialogue about priorities and the optimal use of clean electricity resources, with concepts like macrogrids offering potential benefits. Quebec, for instance, has shifted from a first-come, first-served basis to a strategic review process for significant new industrial power requests.

B.C. is also moving towards strategic prioritization in its energy strategy, evident in its recent moratorium on new connections for virtual currency mining due to their high energy consumption.

Indigenous partnership and leadership are also key in this massive grid expansion. B.C.’s forthcoming Call for Power and Quebec’s financial partnerships with Indigenous communities indicate a commitment to collaborative approaches. British Columbia has also allocated $140 million to support Indigenous-led power projects.

Regarding the rest of Canada, electricity planning varies in provinces with deregulated markets like Ontario and Alberta. However, these provinces are adapting too, and the federal government has funded an Atlantic grid study to improve regional planning efforts. Ontario, for example, has provided clear guidance to its system operator, mirroring the ambition in B.C. and Quebec.

Utilities are rapidly working to not only expand and modernize energy grids but also to make them more resilient, affordable, and smarter, as demonstrated by recent California grid upgrades funding announcements across the sector. Hydro-Québec focuses on grid reliability and affordability, while B.C. experiments with smart-grid technologies.

Both Ontario and B.C. have programs encouraging consumers to reduce consumption in real-time, demonstrating the potential of demand-side management. A recent instance in Alberta showed how customer participation could prevent rolling blackouts by reducing demand by 150 megawatts.

This is a crucial time for all Canadian provinces to develop larger, smarter energy grids, including a coordinated western Canadian electricity grid approach for a sustainable future. Utilities are making significant strides towards this goal.
 

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Bitcoin Energy Debate examines electricity usage, mining costs, environmental impact, and blockchain efficiency, weighing renewable power, carbon footprint, scalability, and transaction throughput to clarify stakeholder claims from Tesla, Square, academics, and policymakers.

Key Points

Debate on Bitcoin mining's power use, environmental impact, efficiency, and scalability versus alternative blockchains.

✅ Compares energy intensity with transaction throughput and system outputs.

✅ Weighs renewables, stranded power, and carbon footprint in mining.

✅ Assesses PoS blockchains, stablecoins, and scalability tradeoffs.

There is a great debate underway about the electricity required to process Bitcoin transactions. The debate is significant, the stakes are high, the views are diverse, and there are smart people on both sides. Bitcoin generates a lot of emotion, thereby producing too much heat and not enough light. In this post, I explain the importance of identifying the key issues in the debate, and of understanding the nature and extent of disagreement about how much electrical energy Bitcoin consumes.

Consider the background against which the debate is taking place. Because of its unstable price, Bitcoin cannot serve as a global mainstream medium of exchange. The instability is apparent. On January 1, 2021, Bitcoin’s dollar price was just over $29,000. Its price rose above $63,000 in mid-April, and then fell below $35,000, where it has traded recently. Now the financial media is asking whether we are about to experience another “cyber winter” as the prices of cryptocurrencies continue their dramatic declines.

Central banks warns of bubble on bitcoins as it skyrockets
As bitcoins skyrocket to more than $12 000 for one BTC, many central banks as ECB or US Federal ... [+] NURPHOTO VIA GETTY IMAGES
Bitcoin is a high sentiment beta asset, and unless that changes, Bitcoin cannot serve as a global mainstream medium of exchange. Being a high sentiment beta asset means that Bitcoin’s market price is driven much more by investor psychology than by underlying fundamentals.

As a general matter, high sentiment beta assets are difficult to value and difficult to arbitrage. Bitcoin qualifies in this regard. As a general matter, there is great disagreement among investors about the fair values of high sentiment beta assets. Bitcoin qualifies in this regard.

One major disagreement about Bitcoin involves the very high demand for electrical power associated with Bitcoin transaction processing, an issue that came to light several years ago. In recent months, the issue has surfaced again, in a drama featuring disagreement between two prominent industry leaders, Elon Musk (from Tesla and SpaceX) and Jack Dorsey (from Square).

On one side of the argument, Musk contends that Bitcoin’s great need for electrical power is detrimental to the environment, especially amid disruptions in U.S. coal and nuclear power that increase supply strain.  On the other side, Dorsey argues that Bitcoin’s electricity profile is a benefit to the environment, in part because it provides a reliable customer base for clean electric power. This might make sense, in the absence of other motives for generating clean power; however, it seems to me that there has been a surge in investment in alternative technologies for producing electricity that has nothing to do with cryptocurrency. So I am not sure that the argument is especially strong, but will leave it there. In any event, this is a demand side argument.

A supply side argument favoring Bitcoin is that the processing of Bitcoin transactions, known as “Bitcoin mining,” already uses clean electrical power, power which has already been produced, as in hydroelectric plants at night, but not otherwise consumed in an era of flat electricity demand across mature markets.

Both Musk and Dorsey are serious Bitcoin investors. Earlier this year, Tesla purchased $1.5 billion of Bitcoin, agreed to accept Bitcoin as payment for automobile sales, and then reversed itself. This reversal appears to have pricked an expanding Bitcoin bubble. Square is a digital transaction processing firm, and Bitcoin is part of its long-term strategy.

Consider two big questions at the heart of the digital revolution in finance. First, to what degree will blockchain replace conventional transaction technologies? Second, to what degree will competing blockchain based digital assets, which are more efficient than Bitcoin, overcome Bitcoin’s first mover advantage as the first cryptocurrency?

To gain some insight about possible answers to these questions, and the nature of the issues related to the disagreement between Dorsey and Musk, I emailed a series of academics and/or authors who have expertise in blockchain technology.

David Yermack, a financial economist at New York University, has written and lectured extensively on blockchains. In 2019, Yermack wrote the following: “While Bitcoin and successor cryptocurrencies have grown remarkably, data indicates that many of their users have not tried to participate in the mainstream financial system. Instead they have deliberately avoided it in order to transact in black markets for drugs and other contraband … or evade capital controls in countries such as China.” In this regard, cyber-criminals demanding ransom for locking up their targets information systems often require payment in Bitcoin. Recent examples of cyber-criminal activity are not difficult to find, such as incidents involving Kaseya and Colonial Pipeline.

David Yermack continues: “However, the potential benefits of blockchain for improving data security and solving moral hazard problems throughout the financial system have become widely apparent as cryptocurrencies have grown.” In his recent correspondence with me, he argues that the electrical power issue associated with Bitcoin “mining,” is relatively minor because Bitcoin miners are incentivized to seek out cheap electric power, and patterns shifted as COVID-19 changed U.S. electricity consumption across sectors.

Thomas Philippon, also a financial economist at NYU, has done important work characterizing the impact of technology on the resource requirements of the financial sector. He has argued that historically, the financial sector has comprised about 6-to-7% of the economy on average, with variability over time. Unit costs, as a percentage of assets, have consistently been about 2%, even with technological advances. In respect to Bitcoin, he writes in his correspondence with me that Bitcoin is too energy inefficient to generate net positive social benefits, and that energy crisis pressures on U.S. electricity and fuels complicate the picture, but acknowledges that over time positive benefits might be possible.

Emin Gün Sirer is a computer scientist at Cornell University, whose venture AVA Labs has been developing alternative blockchain technology for the financial sector. In his correspondence with me, he writes that he rejects the argument that Bitcoin will spur investment in renewable energy relative to other stimuli. He also questions the social value of maintaining a fairly centralized ledger largely created by miners that had been in China and are now migrating to other locations such as El Salvador.

Bob Seeman is an engineer, lawyer, and businessman, who has written a book entitled Bitcoin: The Mother of All Scams. In his correspondence with me, he writes that his professional experience with Bitcoin led him to conclude that Bitcoin is nothing more than unlicensed gambling, a point he makes in his book.

David Gautschi is an academic at Fordham University with expertise in global energy. I asked him about studies that compare Bitcoin’s use of energy with that of the U.S. financial sector. In correspondence with me, he cautioned that the issues are complex, and noted that online technology generally consumes a lot of power, with electricity demand during COVID-19 highlighting shifting load profiles.

My question to David Gautschi was prompted by a study undertaken by the cryptocurrency firm Galaxy Digital. This study found that the financial sector together with the gold industry consumes twice as much electrical power as Bitcoin transaction processing. The claim by Galaxy is that Bitcoin’s electrical power needs are “at least two times lower than the total energy consumed by the banking system as well as the gold industry on an annual basis.”

Galaxy’s analysis is detailed and bottom up based. In order to assess the plausibility of its claims, I did a rough top down analysis whose results were roughly consistent with the claims in the Galaxy study. For sake of disclosure, I placed the heuristic calculations I ran in a footnote.1 If we accept the Galaxy numbers, there remains the question of understanding the outputs produced by the electrical consumption associated with both Bitcoin mining and U.S. banks’ production of financial services. I did not see that the Galaxy study addresses the output issue, and it is important.

Consider some quick statistics which relate to the issue of outputs. The total market for global financial services was about $20 trillion in 2020. The number of Bitcoin transactions processed per day was about 330,000 in December 2020, and about 400,000 in January 2021. The corresponding number for Bitcoin’s digital rival Ethereum during this time was about 1.1 million transactions per day. In contrast, the global number of credit card transactions per day in 2018 was about 1 billion.2

Bitcoin Value Falls
LONDON, ENGLAND - NOVEMBER 20: A visual representation of the cryptocurrencies Bitcoin and Ethereum ... [+] GETTY IMAGES
These numbers tell us that Bitcoin transactions comprise a small share, on the order of 0.04%, of global transactions, but use something like a third of the electricity needed for these transactions. That said, the associated costs of processing Bitcoin transactions relate to tying blocks of transactions together in a blockchain, not to the number of transactions. Nevertheless, even if the financial sector does indeed consume twice as much electrical power as Bitcoin, the disparity between Bitcoin and traditional financial technology is striking, and the experience of Texas grid reliability underscores system constraints when it comes to output relative to input.  This, I suggest, weakens the argument that Bitcoin’s electricity demand profile is inconsequential because Bitcoin mining uses slack electricity.

A big question is how much electrical power Bitcoin mining would require, if Bitcoin were to capture a major share of the transactions involved in world commerce. Certainly much more than it does today; but how much more?

Given that Bitcoin is a high sentiment beta asset, there will be a lot of disagreement about the answers to these two questions. Eventually we might get answers.

At the same time, a high sentiment beta asset is ill suited to being a medium of exchange and a store of value. This is why stablecoins have emerged, such as Diem, Tether, USD Coin, and Dai. Increased use of these stable alternatives might prevent Bitcoin from ever achieving a major share of the transactions involved in world commerce.

We shall see what the future brings. Certainly El Salvador’s recent decision to make Bitcoin its legal tender, and to become a leader in Bitcoin mining, is something to watch carefully. Just keep in mind that there is significant downside to experiencing foreign exchange rate volatility. This is why global financial institutions such as the World Bank and IMF do not support El Salvador’s decision; and as I keep saying, Bitcoin is a very high sentiment beta asset.

In the past I suggested that Bitcoin bubble would burst when Bitcoin investors conclude that its associated processing is too energy inefficient. Of course, many Bitcoin investors are passionate devotees, who are vulnerable to the psychological bias known as motivated reasoning. Motivated reasoning-based sentiment, featuring denial,3 can keep a bubble from bursting, or generate a series of bubbles, a pattern we can see from Bitcoin’s history.

I find the argument that Bitcoin is necessary to provide the right incentives for the development of clean alternatives for generating electricity to be interesting, but less than compelling. Are there no other incentives, such as evolving utility trends, or more efficient blockchain technologies? Bitcoin does have a first mover advantage relative to other cryptocurrencies. I just think we need to be concerned about getting locked into an technologically inferior solution because of switching costs.

There is an argument to made that decisions, such as how to use electric power, are made in markets with self-interested agents properly evaluating the tradeoffs. That said, think about why most of the world adopted the Windows operating system in the 1980s over the superior Mac operating system offered by Apple. Yes, we left it to markets to determine the outcome. People did make choices; and it took years for Windows to catch up with the Mac’s operating system.

My experience as a behavioral economist has taught me that the world is far from perfect, to expect to be surprised, and to expect people to make mistakes. We shall see what happens with Bitcoin going forward.

As things stand now, Bitcoin is well suited as an asset for fulfilling some people’s urge to engage in high stakes gambling. Indeed, many people have a strong need to engage in gambling. Last year, per capita expenditure on lottery tickets in Massachusetts was the highest in the U.S. at over $930.

High sentiment beta assets offer lottery-like payoffs. While Bitcoin certainly does a good job of that, it cannot simultaneously serve as an effective medium of exchange and reliable store of value, even setting aside the issue at the heart of the electricity debate.

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