Bitcoin operators are showing interest in the state's cheap and reliable electricity.
Since the beginning of November, a small public utility district headquartered in The Dalles has received a big increase in applications for electricity service from an unusual customer: Businesses that operate data centers to mine bitcoin, a virtual cryptocurrency.
Paul Titus, principal engineer and strategic asset planner for Northern Wasco County People’s Utility District, said it has received 10 applications just over the past month from bitcoin mining operators. The PUD is currently host to just one bitcoin business – OregonMines.com, a data center for mining the virtual currency.
Bitcoin is the latest entrant to a batch of new economy businesses that are putting down roots in Oregon. First it was data centers run by global technology titans Google and Facebook; then came marijuana growers and retailers that sprung up after legalization; now bitcoin operators are making a beeline here.
What all these new businesses have in common is they consume vast amounts of electricity. And Oregon is a good place to be if you are an energy hog because it has cheap and reliable electricity.
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The surge in interest in bitcoin is the result in the steep run-up in value of the cryptocurrency. This week it reached more than $16,000, having increased more than 50% over the past week. The digital currency started the year valued around $1,000.
Some attribute the rapid rise in value to bitcoin’s growing acceptance by mainstream businesses. Last week, regulators gave the go ahead to two well-known financial exchanges – CME Group and CBOE Global Markets – to trade bitcoin futures contracts.
The interest in bitcoin data center hosts setting up shop in Oregon could be both a blessing and curse to economic development officials. The issues associated with server farms that mine bitcoin are well documented across the border in Washington, where a handful of counties have attracted bitcoin operators.
Chelan County in eastern Washington is one such jurisdiction. In 2014, the local public utility district began receiving inquiries for small cryptocurrency server farms that far exceeded the typical volume of service. These operations moved into old laundromats, warehouses and even free-standing cargo containers — anywhere they found access to power, according to a utility study.
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The server farms sometimes placed large, energy intensive load on the network that stressed the district’s delivery system and overloaded transformers and transmission. The bitcoin businesses were also unusually mobile and made little infrastructure investments by leasing existing, cheap commercial spaces. Server farms sometimes relocated in and out of the district, resulting in unpredictable electrical use fluctuations.
Chelan County PUD estimated that by early 2015, if it fulfilled all requests from cryptocurrency mining operations, it would have doubled its current retail load.
It is unclear how many bitcoin operators are currently in Oregon. The areas in Washington where cryptocurrency server farms chose to set up shop – Chelan, Douglas and Grant counties – have the cheapest retail electricity rates in the country thanks to their reliance on inexpensive and reliable hydropower.
Oregon also has cheaper electricity rates than many areas of the country, making it a natural host for these energy-hungry businesses.
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Northern Wasco County People’s Utility District is using an outside consultant to explore the capacity needs associated with the recent applications from bitcoin operators. Titus said the requests for electrical service range from a couple of megawatts to up to 100MW.
One of the district’s main preoccupations is maintaining reliability of service for residential and commercial customers while absorbing the extra demand for electricity. The PUD provides service to technology company Google, which has a data enter in The Dalles.
“It is a concern for us that we make sure we have enough electricity for other customers,” said Titus. Chelan County PUD proposed higher rates for high-energy use server farms to cover the costs of serving these customers. Titus said his own utility district would also consider charging higher rates.
The energy-intense profile of bitcoin operations has put the sector on the radar of the region’s power forecasters. Massoud Jourabchi, manager of economic analysis at the Northwest Power Conservation Council, said he will start to look into the demand for electricity from bitcoin mining as part of the council’s energy demand forecasts for the region.
The council does an annual survey of data centers – there are around 100 in the region – to estimate electricity demand from this growing sector. So far, Jourabchi has not seen cryptocurrency server farms posing a “problem” for electricity reliability, he said.
What is bitcoin?
Bitcoin is a digital currency created by software. The currency is generated through cryptography – the science of breaking codes. The computer processing used for creating bitcoins is known as mining.
The currency can be converted into real money.
Why is it so energy intensive?
The computer processing required to create bitcoins consumes a lot of electricity. Bitcoin server farms host vast banks of computers that run all day long to break codes to generate the virtual currency. These algorithms get more complex over time.
The electricity required to mine bitcoin every year is reportedly more than the entire energy use of several European countries.