Whatever cryptocurrency mining actually is — and even enthusiasts have a hard time explaining how it works — it takes a lot of electricity to make it happen.
Whether it’s a few servers in one hobbyist’s garage or rows of racks in warehouses, bitcoin mining machines consume power at rates comparable to what homes use, making electricity perhaps the biggest expense item in producing cryptocurrency, exceeding even that of the hardware needed to do the calculations.
Fortunately for the miners, there’s a place where electricity is plentiful, cheap and available: the mid-Columbia utilities of Washington. Three public utility districts — in Chelan, Douglas and Grant counties — own their own dams on the Columbia River: Rocky Reach and Rock Island for Chelan, Wanapum and Priest Rapids for Grant, and Wells for Douglas. The dams produce far more electricity than the utilities need for their own customers, so they have power to sell to other utilities, to industrial projects like aluminum smelters and to bitcoin miners. (There are other cryptocurrencies, but bitcoin is the best-known one, to the point it’s become almost a generic term for a digital, nongovernmentally backed form of monetary exchange.)
And so would-be miners are flocking to central Washington with plans to add facilities to join those that are already there. The Chelan County Public Utility District reported earlier this year that it had received four queries for service amounting to 400 megawatts, enough to power about 180,000 homes, along with multiple queries ranging from 10 to 50 megawatts. And that’s not counting the increased demand posed by hobbyist miners.
Chelan PUD’s average monthly retail load is 200 megawatts, with a winter peak of 491 megawatts set during cold weather in January 2017. Most homes in its territory rely on electric heat.
It’s much the same story in Grant County, which already has 10 commercial cryptocurrency mining operations, according to PUD spokesman Ryan Holterhoff. The utility at one point had 79 requests for new service, three-quarters of those from currency miners, amounting to 1,100 megawatts of power. Grant PUD’s average countywide load is 590 megawatts. An average load of one megawatt, Holterhoff adds, would provide service to 450 homes.
In Douglas County, the public utility district reports eight mining operations have interconnection agreements, representing an aggregate demand of six to nine megawatts. Fourteen more applications are pending from mining operations that want more than 100 megawatts in total. Douglas PUD’s average load is 108 megawatts.
POWER APLENTY: Atlas Cloud Enterprises plans to put as many as 1,700 servers in Electric City near the Grand Coulee Dam, above. It will pay 3 cents a kilowatt hour for energy, “one of the least expensive commercial rates in the world.”
The requests for power to run servers and buildings to put them in keep arriving at utilities, port districts, economic development agencies and real estate firms. A Canadian company, Atlas Cloud Enterprises Inc., announced in December it had acquired a 6,600-square-foot building in Electric City, near the Grand Coulee Dam, in which it plans to put as many as 1,700 servers to produce bitcoin. Atlas says it bought the building for $300,000 and will spend $2.6 million to outfit it with servers. The reason for locating where it did? Atlas says it will be paying just 3 cents per kilowatt hour, “one of the least expensive commercial rates in the world.”
But the mid-Columbias have long had some of the cheapest power rates in the world. What has fueled the latest round of bitcoin mining mania is what has happened with the price of the currency itself: It rose from less than $1,200 per single bitcoin in February 2017 to just over $19,000 by December, according to CoinDesk Inc., which tracks the cryptocurrency and blockchain communities.
Since the mid-Columbias are always on the lookout for customers for their surplus power, having a new class of electricity-thirsty users would at first blush look like a windfall for them.
It isn’t, for several reasons.
Steve Wright, general manager of Chelan PUD and a former administrator of the Bonneville Power Administration, says getting electricity to bitcoin miners isn’t as simple as connecting it to the nearest distribution line. So-called high-density loads require reinforcements to substations, transformers and lines, and the utility needs engineering staff to plan and design those improvements. Both of those take money and time.
PUDs also worry about the transient nature of the bitcoin operations and what happens should the price tumble, as it did earlier this year, falling back to less than $8,200. “You’ve got to have a lot of money to create the infrastructure to provide service,” Wright says. “Here today, gone tomorrow doesn’t work very well for us.”
The rapid run-up in bitcoin prices is bringing a flood of queries for new service, but if those operations fold because interest in bitcoin evaporates, the utility’s long-standing customers would be stuck with the planning and infrastructure bills. Noting the currency’s recent volatility, Wright adds, “If the price can go up that much, it can go down that much.”
Wright speaks from some experience because this isn’t the utility’s first brush with mining fever or high-density loads. Those same low power rates attracted multiple high-tech companies eager to build server farms for data storage. The difference with those, Wright notes, is that the server farms represent major long-term investments by established companies. “They plan on being there a while,” he says.
In 2014, faced with a surge in applications from bitcoin miners, both the Chelan and Douglas PUDs imposed moratoriums until they could come up with new fee and rate schedules; Chelan’s lasted until January 2017. In Douglas County, “We reviewed our policies and decreased the minimum size of power load requiring a special contract to 1.5 megawatts,” spokeswoman Meaghan Vibbert said in an email. “The deposit policy was also changed to protect the district from commercial accounts accumulating charges and not paying.”
The difference between then and now is that those requests were for considerably smaller blocks of power; Chelan PUD’s new rate scheme covered operations of up to five megawatts. “We were focused on the small guys,” Wright says. “Now we’re dealing with big operations.”
The small guys in 2014 were chasing what was then a dramatic rise in the price of bitcoin —from barely $125 to nearly $900. The most recent price spike is luring the big operations, but it also has enticed small fry, and that’s another headache for the utilities. In December, Chelan PUD had to put out a warning to customers not to set up unauthorized mining operations that might overload the system and touch off fires. “People don’t understand how electricity works,” Wright says. “They just think, ‘I’ll plug them in and pay more.’”
A RIVER RUNS THROUGH IT: Central Washington is home to three public utility districts with an excess of electricity generated from five dams on the Columbia River: 1. Wells Dam in Douglas County; 2. Rocky Reach and 3. Rock Island dams in Chelan County; and 4. Wanapum and 5. Priest Rapids dams in Grant County.
Bitcoin mining is also an economic development issue. Even the big operations don’t create much in the way of employment the way the currently idled Alcoa smelter did, or a proposed artificial diamond foundry moving into Wenatchee promises to do.
That’s one debate, though, that the utilities don’t get too involved in. “At the end of the day, our job is not to take that into account,” Wright says. “Our job is to provide electrical service,” while ensuring that the rates charged cover the costs of building and operating the system.
A utility like Chelan’s, he adds, “would be derelict in our duty if we weren’t selling all the electricity available to us.” It does so through contracts with Puget Sound Energy, with Alcoa and through market contracts running from one to 10 years. “We don’t keep electricity in our back pocket in case somebody shows up.”
But now that someone has shown up, the utilities face big decisions. Grant County PUD is reviewing its application process and studying the available system capacity, rate policies and rate classes, Holterhoff says. “The study will help us determine what improvements to our system infrastructure and other changes are necessary to keep up with load growth. Significant infrastructure system improvements (both localized distribution and high-voltage delivery and switching capacity) will be required for Grant PUD to meet continued load growth and retain system reliability we do have. Some areas of the county are better equipped than others to serve new growth. The result of the study will provide direction with how to serve the new power requests.”
That study is to be completed late this year. In the meantime, Grant PUD is taking in queries from potential customers, but they will likely experience a delay as the district determines how best to meet the demand, Holterhoff adds.
Utilities aren’t the only ones wrestling with the issue. Municipal governments are also wading in. The Chelan City Council has enacted a moratorium on the issuance of building permits for cryptocurrency operations. The Wenatchee City Council didn’t go quite that far, setting up interim land-use rules blocking bitcoin mining operations in residential zones.
Wright says Chelan, which is also going through its own review of how to handle the influx of requests, has something of a head start from the work done previously on service to high-density loads. But given the number and size of this round of service requests, another moratorium is a possibility. “We’ve got some very big questions that we’re working on and I couldn’t predict where we’re going to go,” he says.