How Bitcoin is Helping Coal Miners
Bitcoin is all the rage these days. Everyone from hairdressers to Wall Street tycoons are purchasing this form of digital currency. I have no idea whether this asset will continue its meteoric rise or fade like a pair of old jeans but one thing it has been doing is cranking through some serious juice.
The average Bitcoin transaction uses 250 kWh of electricity. The number of transactions per day is around 345,000, which equates to 31,481 GWh of electricity – or enough power to supply 5 million homes in Australia. Considering most Bitcoin miners exist in China and the USA, both of which source a sizeable portion of their electricity from coal, it’s having an impact on the coal industry.
If we assume the following, we can estimate the coal consumption from Bitcoin:
- China and USA are the main countries housing Bitcoin miners.
- An average 45% coal consumption between China and USA.
- 14,166 GWh of electricity is consumed in coal plants applying the coal generation component (45%) to the 31,481 GWh consumed by Bitcoin transactions.
- A 100 MW capacity coal plant produces 770,880 MWh of electricity per year (100 MW Capacity * 365 days/year * 24 hours/day * 0.88 capacity factor).
- 18 to 19 100 MW capacity coal power plants are required to support 45% of Bitcoin transactions using coal-based electricity.
- Assuming Newcastle benchmark specifications of 5,500 kcal/kg NAR = 23,012 KJ/kg (1:4.184 kcal/kg:kJ/kg).
- Capacity factor of 88% for the boiler and combustion of the power plant and 38% efficiency for steam cycle leading to an overall conversion efficiency of 33.4%.
- 1 kwW= 3600 kJ/hr (10,765 kJ/hr of heat required to produce 1 kWh of energy 3600/33.4%).
- Coal required to produce 1 kWh of electricity = 10,765/23,012 = 0.47 kg of Newcastle coal. Therefore 362,314 tonnes of coal (770,880,000 kWh produced by 100 MW plant * 0.47 kg/kWh / 1000 kg/tonne) is consumed per year at a 100 MW coal power plant.
- 7 Mt of thermal coal is consumed to power 18 to 19 coal power plants (100 MW capacity) or the equivalent of one medium-sized coal mine in the Hunter Valley for the support of Bitcoin transactions (coal component).
The calculations above estimate 18 to 19 coal power plants and one medium-sized coal mine exist solely to support the coal component of Bitcoin transactions. This is good news for coal miners and electricity generators alike. If the cryptocurrency market continues to grow, it means more good news for the coal industry.
It can be argued that some of the Bitcoin farms will use renewables, nuclear, and so on, but generally these companies will gravitate to lower-cost energy regions, most of which derive a large quantity of their power from coal.
Admittedly, the crypto market has many challenges ahead. These include transaction speed, cost (currently it costs over US$20 to transact with a digital currency), and acceptance and use by regulatory bodies. I’m not sure what the future holds but, as a coal miner, I say, “Keep the party going”.