German renewables law under scrutiny

Iran Electricity Exports to Iraq address power shortages and blackouts, supplying 1,200-1,500 MW and gas for 2,500 MW, amid sanctions, aging grid losses, rising peak demand, and TAVANIR plans to expand cross-border energy capacity.

Key Points

Energy flows from Iran supply Iraq with 1,200-1,500 MW plus gas yielding 2,500 MW, easing shortages and blackouts.

✅ 1,200-1,500 MW direct power; gas adds 2,500 MW generation

✅ Iraq exempt on Iranian gas, but faces US pressure

✅ Aging grid loses 25%; $30B upgrades needed

“Iran exports 1,200 megawatts to 1,500 megawatts of electricity to Iraq per day, reflecting broader regional power trade dynamics, as Iraq is dealing with severe power shortages and frequent blackouts,” Hamid Hosseini said.

As he added, Iran also exports 37 million to 38 million cubic meters of gas to the country, much of it used in combined-cycle power plants to save energy and boost generation.

On September 11, Iraq’s electricity minister, Luay al Khateeb, said the country needs Iranian gas to generate electricity for the next three or four years, as energy cooperation discussions continue between Baghdad and Tehran.

Iraq was exempted from sanctions concerning Iranian gas imports; however, the U.S. has been pressing all countries to stop trading with Tehran.

Iraq's population has been protesting to authorities over power cuts. Iran exports 1,200 megawatts of direct power supplies and its gas is converted into 2,500 MW of electricity. According to al Khateeb, the current capacity is 18,000 MW, with peak demand of 25,000 MW possible during the hot summer months when consumption surges, a figure that rises every year.

Any upgrades would need investment of at least $30 billion, with grid rehabilitation efforts underway to modernize infrastructure, as the grid is 50 years old and loses 25 percent of its capacity due to Isis attacks.

In late July, Managing Director of Gharb (West) Regional Electricity Company Ali Asadi said Iran has high capacity and potential to export electricity up to twofold of the current capacity to neighboring Iraq, as it eyes transmitting electricity to Europe to serve as a regional hub as well.

He pointed to the new strategy of Iran Power Generation, Transmission & Distribution Management Company (TAVANIR) for increasing electricity export to neighboring Iraq and reiterated, “the country enjoys high potential to export 1,200 megawatts electricity to neighboring Iraq,” while Iraq is also exploring nuclear power plants to tackle electricity shortages.

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New York faces soaring energy bills as utilities seek record rate hikes, aging grid infrastructure demands upgrades, and federal renewable policies shift. Consumers struggle with affordability, late payments, and rising costs of delivery and energy supply across the state.

Why is New York Facing Soaring Energy Bills?

New York faces soaring energy bills because utilities are raising rates to cover the costs of grid upgrades, inflation, and policy-driven changes in energy supply.

✅ Utilities seek double-digit rate hikes across the state

✅ Aging infrastructure and storm repairs increase delivery costs

✅ Federal policies and gas dependence push energy prices higher

New Yorkers are bracing for another wave of energy bill increases as utilities seek record-high rate hikes and policy changes ripple through the state’s power system. Electric bills in New York are the highest they’ve been in over a decade, and more than a million households are now at least two months behind on payments, a sign of pandemic energy insecurity that continues to strain budgets, owing utilities nearly $2 billion.

Record numbers of households have had their electricity or gas shut off this year — more than 61,000 in May alone — despite pandemic shut-off suspensions that had offered temporary relief, the highest the Public Utility Law Project (PULP) has ever recorded. “This August was the group’s busiest month ever,” said Laurie Wheelock, PULP’s executive director, citing a surge in calls to its hotline. “The top concern on people’s minds: rate hikes.”

Utilities across the state are pushing for significant price increases, citing aging infrastructure, the need for climate adaptation, and higher operating costs, as California regulators face calls for action amid rising bills. “We used to see single-digit rate hikes and now we see double-digit rate hikes,” said Jessica Azulay, executive director of the Alliance for a Green Economy. “That’s a new normal that is unacceptable.”

Several utilities have requested delivery rate increases of 25 percent or more, with some proposals as high as 39 percent. Upstate utilities NYSEG and RG&E are seeking to raise electric and gas bills by about $33 a month, although regulators are unlikely to approve the full amount.

The companies argue the hikes are needed “to pay for rebuilding an aging grid and expanding its capacity to meet residents’ and businesses’ service demands,” including storm repairs. They also claim the plan would create more than 1,000 jobs.

James Denn, a spokesperson for the Public Service Commission (PSC), said much of the cost pressure stems from “inflation, higher interest rates, supply chain disruptions, the global push to upgrade electrical infrastructure, and, most recently, the rising risk and uncertainty from tariffs,” trends reflected in U.S. electricity price data over the past two years.

While some have blamed New York’s clean-energy transition, a PSC report found that state climate policies account for only 5 to 9.5 percent of the average household’s electric bill, or approximately $10 to $12 per month. The bulk of the increases still come from traditional spending on infrastructure, storm resilience, and system expansion.

On the supply side, costs are rising too. President Donald Trump’s recent policies have threatened renewable-energy investment nationwide, even as states’ renewable ambitions carry significant costs, potentially adding to New York’s woes. His July “megabill” phases out a 30 percent federal tax credit for solar and wind unless projects begin construction by mid-2026. Industry experts warn that the changes could make renewables “more expensive to build” and “increase reliance on gas.”

“It just means more expensive power,” said Marguerite Wells of the Alliance for Clean Energy New York.

The state estimates Trump’s policy shifts could cost New York $60 billion in lost renewable investment. With fewer clean-energy projects moving forward, gas — which already supplies roughly half of the state’s electricity — will remain the dominant source, tying energy prices to volatile global markets and the kinds of price drivers seen in California in recent years.

Governor Kathy Hochul has called affordability “our greatest short-term challenge,” while consumer advocates are demanding reforms to reduce utility profits and overhaul “rate design,” and to strengthen protections such as the emergency disconnection moratorium that applies during declared emergencies.

“There is definitely a groundswell of concern,” Wheelock said. “We go to meetings and we’re getting questions about rate design, like, ‘What is the revenue decoupling mechanism?’ Never had that question before.”

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Calgary EV Charging for Apartments and Condos streamlines permitting for multi-unit dwellings, guiding condo boards and property managers to install EV charging stations, expand infrastructure, and advance sustainability with cleaner air and lower emissions.

Key Points

A Calgary program simplifying permits and guidance to add EV charging stations in multi-unit residential buildings.

✅ Streamlined permitting for condo boards and property managers

✅ Technical assistance to install EV charging stations

✅ Boosts property value and reduces emissions citywide

As the demand for electric vehicles (EVs) continues to rise, and as national EV targets gain traction, Calgary is taking significant strides to enhance its charging infrastructure, particularly in apartment and condominium complexes. A recent initiative has been introduced to facilitate the installation of EV charging stations in these residential buildings, addressing a critical barrier for potential EV owners living in multi-unit dwellings.

The Growing EV Market

Electric vehicles are no longer a niche market; they have become a mainstream option for many consumers. As of late 2023, EV sales have surged, with projections indicating that the trend will only continue. However, a significant challenge remains for those who live in apartments and condos, where high-rise charging can be a mixed experience and the lack of accessible charging stations persists. Unlike homeowners with garages, residents of multi-unit dwellings often rely on public charging infrastructure, which can be inconvenient and limiting.

The New Initiative

In response to this growing concern, the City of Calgary has launched a new initiative aimed at easing the process of installing EV chargers in apartment and condo buildings. This program is designed to streamline the permitting process, reduce red tape, and provide clear guidelines for property managers and condo boards, similar to strata installation rules adopted in other jurisdictions to ease installations.

The initiative includes various measures, such as providing technical assistance and resources to building owners and managers. By simplifying the installation process, the city hopes to encourage more residential complexes to adopt EV charging stations. The initiative also emphasizes practical support, such as providing technical assistance, including condo retrofit guidance, and resources to building owners and managers. This is a significant step towards creating an eco-friendly urban environment and meeting the growing demand for sustainable transportation options.

Benefits of the Initiative

The benefits of this initiative are manifold. Firstly, it supports Calgary's broader climate goals by promoting electric vehicle adoption. As more residents gain access to charging stations, the city can expect a corresponding reduction in greenhouse gas emissions, contributing to cleaner air and a healthier urban environment.

Additionally, providing charging infrastructure can enhance property values. Buildings equipped with EV chargers become more attractive to potential tenants and buyers who prioritize sustainability. As the market for electric vehicles expands, properties that offer charging facilities are likely to see increased demand, making them a sound investment for landlords and developers.

Overcoming Challenges

While this initiative marks a positive step forward, there are still challenges to address. Property managers and condo boards may face initial resistance from residents who are uncertain about the costs associated with installing and maintaining EV chargers, though rebates for home and workplace charging can offset upfront expenses and ease adoption. Clear communication about the long-term benefits, including potential energy savings and the value of sustainable living, will be essential in overcoming these hurdles.

Furthermore, the city will need to ensure that the installation of EV chargers is done in a way that is equitable and inclusive. This means considering the needs of all residents, including those who may not own an electric vehicle but would benefit from a greener community.

Looking Ahead

As Calgary moves forward with this initiative, it sets a precedent for other cities, as seen in Vancouver's EV-ready policy, facing similar challenges in promoting electric vehicle adoption. By prioritizing charging infrastructure in multi-unit residential buildings, Calgary is taking important steps towards a more sustainable future.

In conclusion, the push for EV charging stations in apartments and condos is a critical move for Calgary. It reflects a growing recognition of the role that urban planning and infrastructure play in supporting the transition to electric vehicles, which complements corridor networks like the BC Electric Highway for intercity travel. With the right support and resources, Calgary can pave the way for a greener, more sustainable urban landscape that benefits all its residents. As the city embraces this change, it will undoubtedly contribute to a broader shift towards sustainable living, ultimately helping to combat climate change and improve the quality of life for all Calgarians.

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Canadian electricity transmission enables grid resilience, long-distance power trade, and decarbonization by integrating renewables, hydroelectric storage, and HVDC links, providing backup during extreme weather and lowering costs to reach net-zero, clean energy targets.

Key Points

An interprovincial high-voltage grid that shares clean power to deliver reliable, low-cost decarbonization.

✅ Enables resilience by sharing power across weather zones

✅ Integrates renewables with hydro storage via HVDC links

✅ Lowers decarbonization costs through interprovincial trade

As the recent disaster in Texas showed, climate change requires electricity utilities to prepare for extreme events. This “global weirding” is leaving Canadian electricity grids increasingly exposed to harsh weather that leads to more intense storms, higher wind speeds, heatwaves and droughts that can threaten the performance of electricity systems.

The electricity sector must adapt to this changing climate while also playing a central role in mitigating climate change. Greenhouse gas emissions can be reduced a number of ways, but the electricity sector is expected to play a central role in decarbonization, including powering a net-zero grid by 2050 across Canada. Zero-emissions electricity can be used to electrify transportation, heating and industry and help achieve emissions reduction in these sectors.

Enhancing long-distance transmission is viewed as a cost-effective way to enable a clean and reliable power grid, and to lower the cost of meeting our climate targets. Now is the time to strengthen transmission links in Canada, with concepts like a western Canadian electricity grid gaining traction.

Insurance for climate extremes
An early lesson from the Texas power outages is that extreme conditions can lead to failures across all forms of power supply. The state lost the capacity to generate electricity from natural gas, coal, nuclear and wind simultaneously. But it also lacked cross-border transmission to other electricity systems that could have bolstered supply.

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Long-distance transmission offers the opportunity to escape the correlative clutch of extreme weather, by accessing energy and spare capacity in areas not beset by the same weather patterns. For example, while Texas was in its deep freeze, relatively balmy conditions in California meant there was a surplus of electricity generation capability in that region — but no means to get it to Texas. Building new transmission lines and connections across broader regions, including projects like a hydropower line to New York that expand access, can act as an insurance policy, providing a back-up for regions hit by the crippling effects of climate change.

A transmission tower crumpled under the weight of ice.
The 1998 Quebec ice storm left 3.5 million Quebecers and a million Ontarians, as well as thousands in in New Brunswick, without power. CP Photo/Robert Galbraith
Transmission is also vulnerable to climate disruptions, such as crippling ice storms that leave wires temporarily inoperable. This may mean using stronger poles when building transmission, or burying major high-voltage transmission links, or deploying superconducting cables to reduce losses.

In any event, more transmission links between regions can improve resilience by co-ordinating supply across larger regions. Well-connected grids that are larger than the areas disrupted by weather systems can be more resilient to climate extremes.

Lowering the cost of clean power
Adding more transmission can also play a role in mitigating climate change. Numerous studies have found that building a larger transmission grid allows for greater shares of renewables onto the grid, ultimately lowering the overall cost of electricity.

In a recent study, two of us looked at the role transmission could play in lowering greenhouse gas emissions in Canada’s electricity sector. We found the cost of reducing greenhouse gas emissions is lower when new or enhanced transmission links can be built between provinces.

Average cost increase to electricity in Canada at different levels of decarbonization, with new transmission (black) and without new transmission (red). New transmission lowers the cost of reducing greenhouse gas emissions. (Authors), Author provided
Much of the value of transmission in these scenarios comes from linking high-quality wind and solar resources with flexible zero-emission generation that can produce electricity on demand. In Canada, our system is dominated by hydroelectricity, but most of this hydro capacity is located in five provinces: British Columbia, Manitoba, Ontario, Québec and Newfoundland and Labrador.

In the west, Alberta and Saskatchewan are great locations for building low-cost wind and solar farms. Enhanced interprovincial transmission would allow Alberta and Saskatchewan to build more variable wind and solar, with the assurance that they could receive backup power from B.C. and Manitoba when the wind isn’t blowing and the sun isn’t shining.

When wind and solar are plentiful, the flow of low cost energy can reverse to allow B.C. and Manitoba the opportunity to better manage their hydro reservoir levels. Provinces can only benefit from trading with each other if we have the infrastructure to make that trade possible.

A recent working paper examined the role that new transmission links could play in decarbonizing the B.C. and Alberta electricity systems. We again found that enabling greater electricity trade between B.C. and Alberta can reduce the cost of deep cuts to greenhouse gas emissions by billions of dollars a year. Although we focused on the value of the Site C project, in the context of B.C.'s clean energy shift, the analysis showed that new transmission would offer benefits of much greater value than a single hydroelectric project.

The value of enabling new transmission links between Alberta and B.C. as greenhouse gas emissions reductions are pursued. (Authors), Author provided
Getting transmission built
With the benefits that enhanced electricity transmission links can provide, one might think new projects would be a slam dunk. But there are barriers to getting projects built.

First, electricity grids in Canada are managed at the provincial level, most often by Crown corporations. Decisions by the Crowns are influenced not simply by economics, but also by political considerations. If a transmission project enables greater imports of electricity to Saskatchewan from Manitoba, it raises a flag about lost economic development opportunity within Saskatchewan. Successful transmission agreements need to ensure a two-way flow of benefits.

Second, transmission can be expensive. On this front, the Canadian government could open up the purse strings to fund new transmission links between provinces. It has already shown a willingness to do so.

Lastly, transmission lines are long linear projects, not unlike pipelines. Siting transmission lines can be contentious, even when they are delivering zero-emissions electricity. Using infrastructure corridors, such as existing railway right of ways or the proposed Canadian Northern Corridor, could help better facilitate co-operation between regions and reduce the risks of siting transmission lines.

If Canada can address these barriers to transmission, we should find ourselves in an advantageous position, where we are more resilient to climate extremes and have achieved a lower-cost, zero-emissions electricity grid.

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Illinois Zero Emission Credits support nuclear plants via tradable credits tied to wholesale electricity prices, carbon costs, created by the Future Energy Jobs Bill to avert Exelon closures and sustain low-carbon power.

Key Points

State credits that value nuclear power's zero-carbon output, priced by market and carbon metrics to keep plants running.

✅ Pegged to wholesale prices, carbon costs, and state averages.

✅ Created by Future Energy Jobs Bill to prevent plant retirements.

✅ Supports Exelon Quad Cities and Clinton nuclear facilities.

Nuclear plants have produced over half of Illinois electricity generation since 2010, but the states two largest plants would have been retired amid the debate over saving nuclear plants if the state had not created a zero emission credit (ZEC) mechanism to support the facilities.

The two plants, Quad Cities and Clinton, collectively delivered more than 12 percent of the states electricity generation over the past several years. In May 2016, however, Exelon, the owner of the plants, announced that they had together lost over $800 million dollars over the previous six years and revealed plans to retire them in 2017 and 2018, similar to the Three Mile Island closure later announced for 2019 by its owner.

In December 2016, Illinois passed the Future Energy Jobs Bill, which established a zero emission credit (ZEC) mechanism

to support the plants financially. Exelon then cancelled its plans to retire the two facilities.

The ZEC is a tradable credit that represents the environmental attributes of one megawatt-hour of energy produced from the states nuclear plants. Its price is based on a number of factors that include wholesale electricity market prices, nuclear generation costs, state average market prices, and estimated costs of the long-term effects of carbon dioxide emissions.

The bill is set to take effect in June, but faces multiple court challenges as some utilities have expressed concerns that the ZEC violates the commerce clause and affects federal authority to regulate wholesale energy prices, amid gas-fired competition in nearby markets that shapes the revenue outlook.

Illinois ranks first in the United States for both generating capacity and net electricity generation from nuclear power, a resource many see as essential for net-zero emissions goals, and accounts for approximately one-eighth of the nuclear power generation in the nation.

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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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