The Conflict Between Net Zero and the Energy Demands of AI and Crypto Isn't Going Away

It's no surprise that a "giant Yorkshire gas field" is to be exploited "to mine Bitcoin"

An article in the Telegraph this week claims that a “giant Yorkshire gas field” is to be exploited “to mine Bitcoin instead of boosting British energy”. At issue is a stake that energy company Reabold Resources has in the West Newton gas field in northwest England. Reabold plans to extract the gas in a process similar to fracking but at much lower pressures than the Guardian would call “controversial”. The Telegraph, however, is not against generating a bit of controversy itself. It highlights the seemingly frivolous use of electricity from gas to make cryptocurrency, rather than, as the article suggests, to “meet more than a tenth of the UK’s annual need”. Nonetheless, confected ‘controversies’ aside, the story does highlight some important issues.

The creation of the controversy that produced the headline is owed to a comment by co-Chief Executive of Reabold Resources, Sachin Oza, who is quoted as saying: “A private gas supply means we can run a data centre to mine Bitcoin relatively cheaply.” This gives the cue to the idea that the entire gas field will support a cryptocurrency operation. “This would help fund the further development of the gas field and prove the concept – meaning it could become the precursor to a far larger data centre,” adds Oza. Yes – “could”. There might be more data centres. Or, “alternatively, we could also sell the gas to one of the adjacent industrial centres or connect it to the national gas grid”, explained Oza’s colleague Stephen Williams.

I can’t help thinking that this controversy has been generated somewhat knowingly by the intrepid gas explorers. The decision about how the gas will be used seems not to have been made concretely. “A power station would need to burn around 150,000 cubic metres of gas,” explains the Telegraph, “to generate the electricity needed to create one Bitcoin.” This alarming figure equates to about one gigawatt hour of electricity, and twice that amount of gas, given the efficiency of gas-fired power stations. Last autumn, UK power prices were about 26.63p per kWh, according to the International Energy Agency, as reported by David Turver – the highest in the developed economies. So producing a Bitcoin from mains power would cost £266,333, which at today’s price of £55,560 per Bitcoin is clearly uneconomic.

We all know the reasons for this. And it’s not the price of gas. There is some controversy about whether current prices on spot markets reflect the actual price of ‘physical’ energy commodities such as oil and gas, or whether they are the result of government manipulation. However, if we do accept them, then today’s prices of approximately £1 per therm means that the cost only of the fuel for 1 GWh of power-from-gas is £68,259. Turning gas into Bitcoin in Britain thus still seems like a bad idea. You still need to buy the generator and the cryptocurrency generating hardware. And you’d still be hit with carbon taxes and duty. So gas drillers would be better off selling their product than burning it to make crypto.