NRCan highlights benefits of energy market diversification in Ontario

US Climate Alliance 100% Renewables 2035 accelerates clean energy, electrification, and decarbonization, replacing coal and gas with wind, solar, and storage to cut air pollution, lower energy bills, create jobs, and advance environmental justice.

Key Points

A state-level target for alliance members to meet all electricity demand with renewable energy by 2035.

✅ 100% RES can meet rising demand from electrification

✅ Major health gains from reduced SO2, NOx, and particulates

✅ Jobs grow, energy burdens fall, climate resilience improves

The Union of Concerned Scientists joined with COPAL (Minnesota), GreenRoots (Massachusetts), and the Michigan Environmental Justice Coalition, to better understand the feasibility and implications of leadership states meeting 100 percent of their electricity needs with renewable energy by 2035, a target reflected in federal clean electricity goals under discussion today.

We focused on 24 member states of the United States Climate Alliance, a bipartisan coalition of governors committed to the goals of the 2015 Paris Climate Agreement. We analyzed two main scenarios: business as usual versus 100 percent renewable electricity standards, in line with many state clean energy targets now in place.

Our analysis shows that:

Climate Alliance states can meet 100 percent of their electricity consumption with renewable energy by 2035, as independent assessments of zero-emissions feasibility suggest. This holds true even with strong increases in demand due to the electrification of transportation and heating.

A transition to renewables yields strong benefits in terms of health, climate, economies, and energy affordability.

To ensure an equitable transition, states should broaden access to clean energy technologies and decision making to include environmental justice and fossil fuel-dependent communitieswhile directly phasing out coal and gas plants.

Demands for climate action surround us. Every day brings news of devastating "this is not normal" extreme weather: record-breaking heat waves, precipitation, flooding, wildfires. To build resilience and mitigate the worst impacts of the climate crisis requires immediate action to reduce heat-trapping emissions and transition to renewable energy, including practical decarbonization strategies adopted by states.

On the Road to 100 Percent Renewables explores actions at one critical level: how leadership states can address climate change by reducing heat-trapping emissions in key sectors of the economy as well as by considering the impacts of our energy choices. A collaboration of the Union of Concerned Scientists and local environmental justice groups COPAL (Minnesota), GreenRoots (Massachusetts), and the Michigan Environmental Justice Coalition, with contributions from the national Initiative for Energy Justice, assessed the potential to accelerate the use of renewable energy dramatically through state-level renewable electricity standards (RESs), major drivers of clean energy in recent decades. In addition, the partners worked with Greenlink Analytics, an energy research organization, to assess how RESs most directly affect people's lives, such as changes in public health, jobs, and energy bills for households.

Focusing on 24 members of the United States Climate Alliance (USCA), the study assesses the implications of meeting 100 percent of electricity consumption in these states, including examples like Rhode Island's 100% by 2030 plan that inform policy design, with renewable energy in the near term. The alliance is a bipartisan coalition of governors committed to reducing heat-trapping emissions consistent with the goals of the 2015 Paris climate agreement.[1]

On the Road to 100 Percent Renewables looks at three types of results from a transition to 100 percent RES policies: improvements in public health from decreasing the use of coal and gas2 power plants; net job creation from switching to more labor-oriented clean energy; and reduced household energy bills from using cleaner sources of energy. The study assumes a strong push to electrify transportation and heating to address harmful emissions from the current use of fossil fuels in these sectors. Our core policy scenario does not focus on electricity generation itself, nor does it mandate retiring coal, gas, and nuclear power plants or assess new policies to drive renewable energy in non-USCA states.

Our analysis shows that:

USCA states can meet 100 percent of their electricity consumption with renewable energy by 2035 even with strong increases in demand due to electrifying transportation and heating.

A transition to renewables yields strong benefits in terms of health, climate, economies, and energy affordability.

Renewable electricity standards must be paired with policies that address not only electricity consumption but also electricity generation, including modern grid infrastructure upgrades that enable higher renewable shares, both to transition away from fossil fuels more quickly and to ensure an equitable transition in which all communities experience the benefits of a clean energy economy.

Currently, the states in this analysis meet their electricity needs with differing mixes of electricity sourcesfossil fuels, nuclear, and renewables. Yet across the states, the study shows significant declines in fossil fuel use from transitioning to clean electricity; the use of solar and wind powerthe dominant renewablesgrows substantially:

In the study's "No New Policy" scenario"business as usual"coal and gas generation stay largely at current levels over the next two decades. Electricity generation from wind and solar grows due to both current policies and lowest costs.

In a "100% RES" scenario, each USCA state puts in place a 100 percent renewable electricity standard. Gas generation falls, although some continues for export to non-USCA states. Coal generation essentially disappears by 2040. Wind and solar generation combined grow to seven times current levels, and three times as much as in the No New Policy scenario.

A focus on meeting in-state electricity consumption in the 100% RES scenario yields important outcomes. Reductions in electricity from coal and gas plants in the USCA states reduce power plant pollution, including emissions of sulfur dioxide and nitrogen oxides. By 2040, this leads to 6,000 to 13,000 fewer premature deaths than in the No New Policy scenario, as well as 140,000 fewer cases of asthma exacerbation and 700,000 fewer lost workdays. The value of the additional public health benefits in the USCA states totals almost $280 billion over the two decades. In a more detailed analysis of three USCA statesMassachusetts, Michigan, and Minnesotathe 100% RES scenario leads to almost 200,000 more added jobs in building and installing new electric generation capacity than the No New Policy scenario.

The 100% RES scenario also reduces average energy burdens, the portion of household income spent on energy. Even considering household costs solely for electricity and gas, energy burdens in the 100% RES scenario are at or below those in the No New Policy scenario in each USCA state in most or all years. The average energy burden across those states declines from 3.7 percent of income in 2020 to 3.0 percent in 2040 in the 100% RES scenario, compared with 3.3 percent in 2040 in the No New Policy scenario.

Decreasing the use of fossil fuels through increasing the use of renewables and accelerating electrification reduces emissions of carbon dioxide (CO2), with implications for climate, public health, and economies. Annual CO2 emissions from power plants in USCA states decrease 58 percent from 2020 to 2040 in the 100% RES scenario compared with 12 percent in the No New Policy scenario.

The study also reveals gaps to be filled beyond eliminating fossil fuel pollution from communities, such as the persistence of gas generation to sell power to neighboring states, reflecting barriers to a fully renewable grid that policy must address. Further, it stresses the importance of policies targeting just and equitable outcomes in the move to renewable energy.

Moving away from fossil fuels in communities most affected by harmful air pollution should be a top priority in comprehensive energy policies. Many communities continue to bear far too large a share of the negative impacts from decades of siting the infrastructure for the nation's fossil fuel power sector in or near marginalized neighborhoods. This pattern will likely persist if the issue is not acknowledged and addressed. State policies should mandate a priority on reducing emissions in communities overburdened by pollution and avoiding investments inconsistent with the need to remove heat-trapping emissions and air pollution at an accelerated rate. And communities must be centrally involved in decisionmaking around any policies and rules that affect them directly, including proposals to change electricity generation, both to retire fossil fuel plants and to build the renewable energy infrastructure.

Key recommendations in On the Road to 100 Percent Renewables address moving away from fossil fuels, increasing investment in renewable energy, and reducing CO2 emissions. They aim to ensure that communities most affected by a history of environmental racism and pollution share in the benefits of the transition: cleaner air, equitable access to good-paying jobs and entrepreneurship alternatives, affordable energy, and the resilience that renewable energy, electrification, energy efficiency, and energy storage can provide. While many communities can benefit from the transition, strong justice and equity policies will avoid perpetuating inequities in the electricity system. State support to historically underserved communities for investing in solar, energy efficiency, energy storage, and electrification will encourage local investment, community wealth-building, and the resilience benefits the transition to renewable energy can provide.

A national clean electricity standard and strong pollution standards should complement state action to drive swift decarbonization and pollution reduction across the United States. Even so, states are well positioned to simultaneously address climate change and decades of inequities in the power system. While it does not substitute for much-needed national and international leadership, strong state action is crucial to achieving an equitable clean energy future.

Related News

• Electricity Forum News

• Renewable Energy News

France Nuclear Power Outages threaten the grid as EDF reactors undergo stress corrosion inspections, maintenance delays, and staff shortages, driving electricity imports, peak-demand curtailment plans, and potential rolling blackouts during a cold snap across Europe.

Key Points

EDF maintenance and stress corrosion cut reactor output, forcing imports and blackouts as cold weather lifts demand.

✅ EDF inspects stress corrosion cracks in reactor piping

✅ Maintenance backlogs and skilled labor shortages slow repairs

✅ Government plans demand cuts, imports, and rolling blackouts

France is bracing for possible power outages in the coming days as falling temperatures push up demand while state-controlled nuclear group EDF struggles to bring more production on line.

WHY CAN'T FRANCE MEET DEMAND?
France is one of the most nuclear-powered countries in the world, with a significant role of nuclear power in its energy mix, typically producing over 70% of its electricity with its fleet of 56 reactors and providing about 15% of Europe's total power through exports.

However, EDF (EDF.PA) has had to take a record number of its ageing reactors offline for maintenance this year just as Europe is struggling to cope with cuts in Russian natural gas supplies used for generating electricity, with electricity prices surging across the continent this year.

That has left France's nuclear output at a 30-year low, and mirrors how Europe is losing nuclear power more broadly, forcing France to import electricity and prepare plans for possible blackouts as a cold snap fuels demand for heating.

WHAT ARE EDF'S MAINTENANCE PROBLEMS?
While EDF normally has a number of its reactors offline for maintenance, it has had far more than usual this year due to what is known as stress corrosion on pipes in some reactors, and during heatwaves river temperature limits have constrained output further.

At the request of France's nuclear safety watchdog, EDF is in the process of inspecting and making repairs across its fleet since detecting cracks in the welding connecting pipes in one reactor at the end of last year.

Years of under-investment in the nuclear sector mean that there is precious little spare capacity to meet demand while reactors are offline for maintenance, and environmental constraints such as limits on energy output during high river temperatures reduce flexibility.

France also lacks specialised welders and other workers in sufficient numbers to be able to make repairs fast enough to get reactors back online.

WHAT IS BEING DONE?
In the very short term, after a summer when power markets hit records as plants buckled in heat, there is little that can be done to get more reactors online faster, leaving the government to plan for voluntary cuts at peak demand periods and limited forced blackouts.

In the very short term, there is little that can be done to get more reactors online faster, leaving the government to plan for voluntary cuts at peak demand periods and limited forced blackouts.

Meanwhile, EDF and others in the French nuclear industry are on a recruitment drive for the next generation of welders, pipe-fitters and boiler makers, going so far as to set up a new school to train them.

President Emmanuel Macron wants a new push in nuclear energy, even as a nuclear power dispute with Germany persists, and has committed to building six new reactors at a cost his government estimates at nearly 52 billion euros ($55 billion).

As a first step, the government is in the process of buying out EDF's minority shareholders and fully nationalising the debt-laden group, which it says is necessary to make the long-term investments in new reactors.
 

Related News

• Electricity Forum News

• Power Generation News

Ukraine Power Grid Restoration accelerates across liberated Kharkiv, restoring electricity, heat, and water amid missile and drone strikes, demining operations, blackouts, and winterization efforts, showcasing resilience, emergency repairs, and critical infrastructure recovery.

Key Points

Ukraine's rapid push to repair war-damaged grids, restore heat and water, and stabilize key services before winter.

✅ Priority repairs restore electricity and water in liberated Kharkiv.

✅ Crews de-mine lines and work under shelling, drones, and missiles.

✅ Winterization adds generators, mobile stoves, and large firewood supplies.

On the freshly liberated battlefields of northeast Ukraine, a pile of smashed glass windows outside one Soviet-era block of apartments attests to the violence of six months of Russian occupation, and of Ukraine’s sweeping recent military advances.

Indoors, in cramped apartments, residents lived in the dark for weeks on end.

Now, with a hard winter looming, they marvel at the speed and urgency with which Ukrainian officials have restored another key ingredient to their survival: electric power, a critical effort to keep the lights on this winter across communities.

Among those things governments strive to provide are security, opportunity, and minimal comfort. With winter approaching, and Russia targeting Ukraine’s infrastructure, add to that list heat and light, even as Russia hammers power plants nationwide. It’s requiring a concerted effort.

“Thank God it works! Electricity is civilization – it is everything,” says Antonina Krasnokutska, a retired medical worker, looking affectionately at the lightbulb that came on the day before, and now burns again in her tiny spotless kitchen.

“Without electricity there is no TV, no news, no clothes washing, no charging the phone,” says Ms. Krasnokutska, her gray hair pulled back and a small crucifix around her neck.

“Before, it was like living in the Stone Age,” says her grown son, Serhii Krasnokutskyi, who is more than a head taller. “As soon as it got dark, everyone would go to sleep.”

He shows a picture on his phone from a few days earlier, of a tangle of phone and computer charging cables – including his – plugged in at a local shop with a generator.

“We are very grateful for the people who repaired this electricity, even with shelling continuing,” he says. “They have a very complicated job.”

Indeed, although a lack of power might have been a novel inconvenience during the warm summer season, it increasingly has become a matter of great urgency for Ukrainian citizens and officials.

Coping through Ukraine’s winter with dignity and any degree of security will require courage and perseverance, as the severity and suffering that the season can bring here are being weaponized by Russia, as it seeks to compensate for a string of battlefield losses.

In recent days, Russian attacks have specifically targeted Ukraine’s electrical and other civilian infrastructure – all with the apparent aim of making this winter as hard as possible for Ukrainians, even as Moscow employs other measures to spread the hardship across Europe, while Ukraine helps Spain amid blackouts through grid support.

Ukrainian President Volodymyr Zelenskyy said Monday that Russian barrages across the country with missiles and Iran-supplied kamikaze drones had destroyed 30% of Ukraine’s power stations in the previous eight days, including strikes on western Ukraine that caused outages. Thousands of towns have been left without electricity.

Kharkiv’s challenges
Emblematic of the national challenge is the one facing officials in the northeast Kharkiv region, where Ukraine recaptured more than 3,000 square miles in a September counteroffensive. Ukrainian forces are still making gains on that front, as well as in the south toward Kherson, where Wednesday Russia started evacuating civilians from the first major city it occupied, after launching its three-pronged invasion last February.

Across the Kharkiv region, Ukrainians are stockpiling as much wood, fuel, and food as possible while they still can, and adopting new energy solutions as they prepare, from sources as diverse as the floorboards of destroyed schools and the pine forests in Izium, which are pockmarked with abandoned Russian trenches adjacent to a mass burial site.

“Of course, we have this race against time,” says Serhii Mahdysyuk, the Kharkiv regional director in charge of housing, services, fuel, and energy. “Unfortunately, we probably stand in front of the biggest challenge in Ukraine.”

That is not only because of the scale of liberated territory, he says, but also because the Kharkiv region shares a long border with Russia, as well as with the Russian-controlled areas of the eastern Donbas.

“It’s a great mixture of all threats, and we are sure that shelling and bombings will continue, but we are ready for this,” says Mr. Mahdysyuk. “We know our weak spots that Russia can destroy, but we are prepared for what to do in these situations.”

Ukraine’s battlefield gains have meant a surging need to pick up the pieces after Russian occupation, even as electricity reserves are holding if no new strikes occur, to ensure habitable conditions as more and more surviving residents require services, and as others return to scenes of devastation.

Restoring electricity is the top priority, amid shifting international assistance such as the end of U.S. grid support, because that often restarts running water, too, says Mr. Mahdysyuk. But before that, the area beneath broken power lines must be de-mined.

Indeed, members of an electricity team reconnecting cables on the outskirts of Balakliia – one of the first towns to see power restored, at the end of September – say they lost two fellow workers in the previous two weeks. One died after stepping on an anti-personnel mine, another when his vehicle hit an anti-tank device.

Ukrainian electricity workers restore power lines damaged during six months of Russian military occupation in Balakliia, Ukraine, Sept. 29, 2022. Ukrainians in liberated territory say the restoration of the electrical grid, and with it often the water supply, is a return to civilization.
“For now, our biggest problem is mines,” says the team leader, who gave the name Andrii. “It’s fine within the cities, but in the fields it’s a disaster because it’s very difficult to see them. There is a lot of [them] around here – it will take years and years to get rid of.”

Yet officials only have a few weeks to execute plans to provide for hundreds of thousands of residents in this region, in their various states of need and distress. Some 50 field kitchens capable of feeding 200 to 300 people each have been ordered. Another 1,000 mobile stoves are on their way.

And authorities will provide nearly 200,000 cubic yards of firewood for those who have no access to it, and may have no other means of keeping warm – or where shelling continues to disrupt repairs, says Mr. Mahdysyuk.

“The level of opportunity and resources we have is not the same as the level of destruction,” he says. People in districts and buildings too destroyed to have services restored soon, such as in Saltivka in Kharkiv city, may be moved.

Related News

• Electricity Forum News

• Utility Operations News

Alberta coal phaseout accelerates as utilities convert to natural gas, cutting emissions under TIER regulations and deploying hydrogen-ready, carbon capture capable plants, alongside new solar projects in a competitive, deregulated electricity market.

Key Points

A provincewide shift from coal to natural gas and renewables, cutting power emissions years ahead of the 2030 target.

✅ Capital Power, TransAlta converting coal units to gas

✅ TIER pricing drives efficiency, carbon capture readiness

✅ Hydrogen-ready turbines, solar projects boost renewables

Alberta is set to meet its goal to eliminate coal-fired electricity production years earlier than its 2030 target, amid a broader shift to cleaner energy in the province, thanks to recently announced utility conversion projects.

Capital Power Corp.’s plan to spend nearly $1 billion to switch two coal-fired power units west of Edmonton to natural gas, and stop using coal entirely by 2023, was welcomed by both the province and the Pembina Institute environmental think-tank.

In 2014, 55 per cent of Alberta’s electricity was produced from 18 coal-fired generators. The Alberta government announced in 2015 it would eliminate emissions from coal-fired electricity generation by 2030.

Dale Nally, associate minister of Natural Gas and Electricity, said Friday that decisions by Capital Power and other utilities to abandon coal will be good for the environment and demonstrates investor confidence in Alberta’s deregulated electricity market, where the power price cap has come under scrutiny.

He credited the government’s Technology Innovation and Emissions Reduction (TIER) regulations, which put a price on industrial greenhouse gas emissions, as a key factor in motivating the conversions.

“Capital Power’s transition to gas is a great example of how private industry is responding effectively to TIER, as it transitions these facilities to become carbon capture and hydrogen ready, which will drive future emissions reductions,” Nally said in an email.

Capital Power said direct carbon dioxide emissions at its Genesee power facility near Edmonton will be about 3.4 million tonnes per year lower than 2019 emission levels when the project is complete.

It says the natural gas combined cycle units it’s installing will be the most efficient in Canada, adding they will be capable of running on 30 per cent hydrogen initially, with the option to run on 95 per cent hydrogen in future with minor investments.

In November, Calgary-based TransAlta Corp. said it will end operations at its Highvale thermal coal mine west of Edmonton by the end of 2021 as it switches to natural gas at all of its operated coal-fired plants in Canada four years earlier than previously planned.

The Highvale surface coal mine is the largest in Canada, and has been in operation on the south shore of Wabamun Lake in Parkland County since 1970.

The moves by the two utilities and rival Atco Ltd., which announced three years ago it would convert to gas at all of its plants by this year, mean significant emissions reduction and better health for Albertans, said Binnu Jeyakumar, director of clean energy for Pembina.

“Alberta’s early coal phaseout is also a great lesson in good policy-making done in collaboration with industry and civil society,” she said.

“As we continue with this transformation of our electricity sector, it is paramount that efforts to support impacted workers and communities are undertaken.”

She added the growing cost-competitiveness of renewable energy, such as wind power, makes coal plant retirements possible, applauding Capital Power’s plans to increase its investments in solar power.

In Ontario, clean power policy remains a focus as the province evaluates its energy mix.

The company announced it would go ahead with its 75-megawatt Enchant Solar power project in southern Alberta, investing between $90 million and $100 million, and that it has signed a 25-year power purchase agreement with a Canadian company for its 40.5-MW Strathmore Solar project now under construction east of Calgary.
 

Related News

• Electricity Forum News

• Power Generation News

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.

Related News

• Electricity Forum News

• Energy Policy News

ERCOT Winter Capacity RFP seeks up to 3,000 MW through generation and demand response to bolster Texas grid reliability during peak load, leveraging Reliability Must-Run, incentive factors, and EEA risk mitigation for the 2023-24 season.

Key Points

An ERCOT initiative to procure 3,000 MW of generation and demand response to reduce EEA risk and improve reliability.

✅ Targets 3,000 MW from generation and demand response

✅ Uses RMR-style contracts with flexible incentive factors

✅ Aims to lower EEA probability below 10% this winter

The Electric Reliability Council of Texas (ERCOT) issued a request for proposals to stakeholders to procure up to 3,000 MW of generation or demand response capacity to meet load and reserve requirements during the winter 2023-24 peak load season (Dec. 1, 2023, through Feb. 29, 2024), amid ongoing Texas power grid challenges across the region.

ERCOT cited “several factors, including significant peak load growth since last winter, recent and proposed retirements of dispatchable Generation Resources, and recent extreme winter weather events, including Winter Storm Elliott in December 2022, Winter Storm Uri in February 2021, and the 2018 and 2011 winter storms, each of which resulted in abnormally high demand during winter weather.” It now seeks additional capacity under its “authority to prevent an anticipated Emergency Condition,” reflecting nationwide blackout risks identified by grid experts.

In its notice regarding the RFP, ERCOT identified a number of mothballed and recently decommissioned generation resources that may be eligible to offer capacity under the RFP. It further stated that offers must comport with the format of its “Reliability Must-Run” agreement but could include a proposed “Incentive Factor” that reflects the revenues the unit owners determine would be necessary to bring the unit back to operation. It added that the Incentive Factor is not necessarily limited to 10%. Providers of eligible demand response can submit offers based on similar principles that are not necessarily constrained by cost. The notice identifies potential acceptable sources of demand response, describes certain parameters for the kinds of demand response that are permitted to respond to the RFP, and outlines the time periods during which ERCOT must be able to deploy the demand response resources to improve electricity reliability across the system.

To meet the Dec. 1, 2023, service start date, ERCOT developed an aggressive timeline to solicit and evaluate proposals through the RFP. Responses to the RFP are due Nov. 6, 2023. ERCOT’s schedule provides that it will notify market participants that obtain awards on Nov. 23, 2023. Expect contracts to be executed by Nov. 30, 2023.

Unlike Regional Transmission Organizations in the Northeastern United States, ERCOT does not have a capacity market. Instead, ERCOT relies on a high price cap of $5,000 per MWh for its energy market (decreased from the $9,000 per MWh cap in effect during Winter Storm Uri) and an Operating Reserve Demand Curve adder that pays additional funds to generators supplying power and ancillary services, an area recently scrutinized for improper payments when supply conditions are tight. In the wake of Winter Storm Uri, some calls were made to have ERCOT adopt a capacity market for reliability reasons, and a number of legal battles continue to play out in the wake of Winter Storm Uri. (See recent McGuireWoods legal alert “Winter Storm Uri Power Dispute Reaches the Supreme Court of Texas.”) Though a capacity market was not adopted, the Texas Legislature approved a $7.2 billion loan program, widely described as an electricity market bailout for generators, to build up to 10,000 MW of dispatchable generation. The legislature also approved a version of the Public Utility Commission of Texas’ proposal to establish a “Performance Credit Mechanism,” but with a cost cap of $1 billion.

The loss of life and economic impacts of Winter Storm Uri in 2021, along with the energy crunches and calls for conservation this past summer, are driving changes to ERCOT’s “energy-only” market, including electricity market reforms under consideration. Texas policymakers are providing multiple financial incentives to promote investment in dispatchable on-demand generation, and voters will consider funding to modernize generation measures this year to make the Texas grid more reliable and able to deal with power demand from a growing economy and increased demand for electricity driven by weather. In the meantime, ERCOT’s plan to procure 3,000 MW through this RFP process is a stopgap measure intended to bolster reliability for the upcoming winter season and lower the probability of load shed in the event of severe winter weather.

Related News

• Electricity Forum News

• Energy Policy News