**For my Energy, Technology & Policy class, I was required to write an original research paper on any topic that involved the combination of energy, technology, and policy. I wrote about the feasibility of implementing geothermal technologies to mine Bitcoin in Indonesia. This research paper is an extension of the "Energy Intensity of Bitcoin" video.
“An Investigation of the Feasibility of Using Geothermal Technologies for Bitcoin Mining in Indonesia”
Bitcoin has caught the attention of investors around the world, but its energy intensity is flying under the radar – and could end up being one of its most impactful traits. Its energy intensity not only comes with energy and monetary costs, but environmental costs as well. Coal and natural gas are the most common sources of energy generation in the world, both of which have some of the highest greenhouse gas, GHG, emissions (Amponsah et al., 2014). Thus, Bitcoin mining, or the process of obtaining Bitcoin, can be considered a large power consumer and contributor to air pollution.
Bitcoin mining has become very popular in a place like Iceland, for example, due to its cool weather and hydroelectric and geothermal energy sources that contribute very little GHG emissions, compared to coal and natural gas. While using renewable sources of energy to mine Bitcoin in various countries is not a widely-researched topic, this paper hopes to touch up on the subject of using renewable energies – specifically geothermal energy – to mine Bitcoin, specifically in Indonesia. It is important to note that Indonesia currently does not recognize Bitcoin and other cryptocurrencies as valid forms of currency (Kelso, 2018). Thus, this case study is purely hypothetical. This report is broken down into assessing geothermal resources in various countries; costs of accessing geothermal resources; costs, energy intensity, and benefits and drawbacks of Bitcoin; and the feasibility of establishing a Bitcoin mining farm – powered by geothermal technologies – in Indonesia.
Geothermal Resources by Country
Geothermal, along with hydroelectric, bioenergy, wind, and solar, are the forms of energy that fall under the umbrella category of renewable energy. While it is a, “well-established and relatively mature form of commercial renewable energy”, it constitutes a small share and percentage of worldwide power generation, around 13.4 GW and 0.3%, respectively, in 2016. However, quite a few countries greatly depend on geothermal technologies for power generation, such as Iceland (~27%), Kenya (~44%), and El Salvador (~26%) [BP, 2018], to name a few. While the United States has the largest geothermal power operating capacity in the world – a little over 3,500 MW – geothermal counts for < 1% of the United States’ overall generated The next few countries that rank in geothermal capacity are the Philippines (1,930 MW), Indonesia (1,438.5 MW), and Mexico (1,069 MW) [Ministry of Energy and Mineral Resources, Republic of Indonesia, 2016; Matek, 2016].
One aspect that needs to be addressed before assessing possible candidates for utilizing geothermal technologies for Bitcoin mining, as well as the feasibility of constructing a Bitcoin mining farm, is the development of planned geothermal capacity additions by country. As of 2016, Indonesia ranks first in potential additions of geothermal plants, with an additional 4,103 MW planned geothermal capacity. The next four countries are the United States, Turkey, Kenya, and Ethiopia, with around 1,300-1,000 MW planned capacities (Matek, 2016). Indonesia will be assessed for evaluating the feasibility of establishing Bitcoin farms – and using geothermal technologies to run these farms – in this report, based on current and planned geothermal capacities.
Costs of Accessing Geothermal Resources
Discussing the costs associated with geothermal technologies helps to put into perspective the economic aspect of potentially using these technologies for Bitcoin mining. The cost of constructing an efficient geothermal plant, which includes well drilling and pipeline construction, and the construction of the actual plant itself, can cost anywhere between $2,500-5,000 per installed kW (U.S. Department of Energy, 2018). This initial capital cost might be seen as unattractive, as natural gas combined cycle and combustion turbine plants (NGCC and NGCT, respectively), for example, cost around $600 and $800 per installed kW, respectively (U.S. Energy Information Administration, 2017). However, construction of a typical natural gas plant accounts for around one-third of its total cost, or the levelized cost of electricity, LCOE, while fuel and operations and maintenance make up nearly two-thirds. Construction of a geothermal plant accounts for two-thirds of its LCOE, while everything else (mainly operations and maintenance, since geothermal “fuel” is free) constitutes roughly one-third. Over time, a geothermal plant can become a sound investment, with an LCOE lower than that of NGCC and NGCT plants (Geothermal Energy Association, 2018). As of 2015, the estimated LCOE for a geothermal plant in the United States is $39.5 per MWh, while LCOE’s of NGCC and NGCT can reach up to $56 per MWh and $90-100 per MWh, respectively (Richter, 2016). It is important to note that installing geothermal plants not only come with monetary costs, but environmental costs as well. There are significant amounts of GHG’s trapped beneath the Earth’s surface; wells at geothermal plants allow for these trapped gases, such as silica particulate matter and sulfur dioxide, to escape to the Earth’s surface and into the atmosphere. Additionally, the hot water drawn from reservoirs beneath the Earth’s surface can contain toxic elements such as mercury, arsenic, and boron (Conserve Energy Future, 2017). Interestingly enough, these three elements have been proven to be useful pathfinder elements – elements that are in close association to something that is being sought after (in this case, ideal locations for establishing geothermal technologies) – in geothermal exploration (Shiikawa, 1983).
Costs, Energy Intensity, and Benefits and Drawbacks of Mining Bitcoin
The costs, energy intensity, and benefits and drawbacks of mining Bitcoin need to be addressed in evaluating the feasibility of installing new/using current geothermal technologies to mine Bitcoin.
Miners, or specialized machines used in cryptocurrency mining, mine Bitcoin by solving complicated puzzles that grow in complexity as more Bitcoins are mined. The more complex an algorithm is, the more energy is required for a miner to solve it (Whittle, 2018). To provide an example, the “AntMiner S9”, a popular miner, has a hash rate, or the speed at which an algorithm can be completed, of 12.93 TH/s (terahashes per second), and consumes 1.375 kW. If the average industrial price of electricity in Indonesia is around $0.035-0.081 per kWh (Listrik.org, 2018), this means that running this miner will cost around $0.05-0.11 per hour (Trubetskoy, 2017). The range in price of electricity in Indonesia are based on different levels of industrial “tariffs”, which are dependent on the number of volt-amperes an industrial customer uses.
Bitcoin makes up a large portion of the worldwide hash rate of cryptocurrencies, and its transactions constitute the majority of cryptocurrency transactions. The worldwide Bitcoin hash rate, as of April 16, 2018, is 30,918,263 terahashes per second, or the equivalent of running over 2 million AntMiners S9’s in parallel (Blockchain Luxembourg S.A., 2018). If all mining transactions took place in Indonesia, for example, this could equal anywhere between $110,000-270,000 spent on mining per hour, using around 3.3 GW (3,300 MW) of power. In terms of energy, over 60 TWh is consumed in mining Bitcoin worldwide, or around 0.27% of the world’s generated electricity (Digiconomist, 2018). The worldwide hash rate – and thus the amount of electricity needed to solve these complex algorithms – is expected to increase dramatically, as the hash rate has risen nearly 800% since April 2017 (Blockchain Luxembourg S.A., 2018). Dr. Ladislav Kristoufek, Associate Professor of the Institute of Economic Studies at Charles University, showed in his paper, “What are the main drivers of the Bitcoin price?” that both difficulty, or the complexity of the algorithm, and hash rate are positively correlated with the price of Bitcoin (Kristoufek, 2015).
While this might be an overly-simplified estimation, it shows just how energy-intensive mining can be when it is applied at a global scale. To maximize profits, some cryptocurrency advocates have constructed large mining farms, with hundreds or even thousands of miners set up to solve these algorithms. Often, these farms have dedicated air-conditioning or cooling systems to ensure that their machines do not overheat (Gleeson, 2018). A single Bitcoin transaction might use up to 957 kWh of electricity, the same amount of energy needed to power over 1,900 desktop computers for an entire workday (Direct Energy, 2018).
The energy usage of hundreds or thousands of running miners and the installation of an intricate cooling system are just a couple of drawbacks of running a Bitcoin farm. In terms of cryptocurrencies themselves, cryptocurrencies are known to be volatile currencies, and have an association with possible fraud and money laundering (Hsu, 2018). However, their anonymity, easy access, and lack of a third party have been deemed as attractive by many potential, zealous investors.
The Synergy of Geothermal Technologies and Bitcoin – An Analysis
In a 2016 report from Indonesia’s Ministry of Energy and Mineral Resources, Indonesia’s total geothermal operating capacity was 1,438.5 MW (Ministry of Energy and Mineral Resources, Republic of Indonesia, 2016). A large mining farm might have up to 25,000 miners similar to that of the AntMiner S9 (Redman, 2017). If the high end industrial price of electricity is used ($0.081 per kWh), meaning that it costs $0.11 per hour to keep one miner running, then running these miners for an entire day can total up to $66,000 and consume 34.375 MW. Additionally, if an AntMiner S9 costs roughly $1,000 (Bitmain, 2018), equipment costs can reach up to $25 million!
There are additional energy and monetary costs associated with keeping these miners cool with the aforementioned cooling systems, such as lighting of the facilities and rental space, to name some examples (Wong & Simon, 2018). Focusing on revenues, if one Bitcoin currently costs $8,179.98 (Coindesk, 2018), and, currently, 12.5 Bitcoins are mined every ten minutes worldwide (“Bitcoin Block Reward Halving Countdown”, 2018), then the worldwide mining revenue per day can reach nearly $15 million. A farm of the aforementioned size might be able to mine close to fifty Bitcoins per day (Redman, 2017) and bring in over $400,000 per day. However, the volatile price of Bitcoin can change at any moment, instantaneously affecting the amount of revenue a farm can bring in.
Say the power demand for this hypothetical farm is 34.375 MW, as mentioned above. That is close to the capacity of the PLTP Patuha plant (55 MW) [Ministry of Energy and Mineral Resources, Republic of Indonesia, 2016], one of the five geothermal plants that serve the West Java province of Indonesia (Rudiyanto et al., 2017). In a 2015 study, the estimated overall capacity of West Java was around 6.144 GW (6,144 MW) (“Chapter 4 Electricity Demand”, n.d.). Current geothermal capacity in West Java is around 1,129 MW (Rudiyanto et al., 2017), so if the PLTP Patuha plant was utilized to meet the demand of our hypothetical farm, 4.9% of West Java’s geothermal capacity and 0.89% of West Java’s overall capacity would be lost to this one Bitcoin mining farm.
Establishing this farm could create jobs related to securing the facility, maintaining the facility’s electrical and cooling systems and miners, and information technology, to name some examples. Comparing the costs to buy/rent the needed equipment and space, pay employees to run this farm, and electricity, to daily revenues from mining, this farm could potentially become economically viable in around 4 months (iProperty.com.sg, 2018; Average Salary Survey, 2018). Additionally, there are no combustion processes occurring in geothermal plants, mitigating the amount of GHG’s emitted into the atmosphere (however, as stated before, the primary source of GHG emissions from geothermal plants are from beneath the Earth’s surface). According to a report by Stanford University, worldwide geothermal GHG emissions are a quarter of natural gas GHG emissions, and around 10% of coal GHG emissions (Fridriksson et al., 2017). However, geothermal does produce the third-highest amount of GHG emissions among the renewable sources – 9 grams CO2-eq per kWhe – behind photovoltaics and solar thermal (300 and 150 grams CO2-eq per kWhe, respectively) [Amponsah et al., 2014]. Finally, the average weather in West Java is between 77° and 84.2°F, which might not be optimal temperatures for Bitcoin mining (World Weather Online, 2018), compared to that of Iceland, where the average weather can reach below 45 °F (Holiday Weather, 2018).
This paper analyzed the feasibility of constructing a mining farm and using geothermal technologies to power the farm in Indonesia. Since > 75% of Indonesia’s primary energy supply comes from oil, coal, and natural gas (Ministry of Energy and Mineral Resources, Republic of Indonesia, 2016), if a mining farm were to be established in Indonesia, a renewable source of energy would be an ideal candidate in powering this farm. More specifically, geothermal energy would be the ideal candidate out of all of the renewables, due to its large planned additional capacity, and relatively low GHG emissions compared to that of oil, coal, and natural gas. The feasibility of establishing this farm greatly depends on the price of Bitcoin, electricity, and construction of the farm; power demand of the farm; and whether Indonesia this power demand can greatly West Java’s power grid. As long as the price of Bitcoin remains constant or increases, it can be considered feasible. However, Indonesia does not recognize cryptocurrencies as valid forms of currency, so Bitcoin mining in Indonesia remains a pipe dream.
2016 Handbook of Energy & Economic Statistics of Indonesia - Final Edition (Rep.). (2016). Retrieved https://www.esdm.go.id/assets/media/content/content-handbook-of-energy-economic-statistics-of-indonesia-2016-lvekpnc.pdf
Amponsah, N. Y., Troldborg, M., Kington, B., Aalders, I., & Hough, R. L. (2014). Greenhouse gas emissions from renewable energy sources: A review of lifecycle considerations. Renewable and Sustainable Energy Reviews, 39, 461-475. doi:10.1016/j.rser.2014.07.087
Average Salary Survey (2018). Indonesia | 2017/18 Average Salary Survey. Retrieved from http://www.averagesalarysurvey.com/indonesia
Bitcoin Block Reward Halving Countdown. (2018). Retrieved from http://www.bitcoinblockhalf.com/
Bitmain. (2018). Bitmain - Antminer S9-13TH/s Price. Retrieved from https://shop.bitmain.com/product/detail?pid=0002018041323120936491qy69u90662
Blockchain Luxembourg S.A. (2018). Hash Rate. Retrieved March 03, 2018, from https://blockchain.info/charts/hash-rate
BP. (2018). Geothermal power. Retrieved from https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/renewable-energy/geothermal-power.html
Chapter 4 Electricity Demand Forecast in the Java-Bali Region (n.d.). Retrieved from http://www.bing.com/cr?IG=4889FCB30885460BAD4BEF910EB94A13&CID=27F7B4D1A3CB62D10D4FBF0BA264636D&rd=1&h=JZ7tP9K1B7UktlmuRZHIJB6bme0EJWXyfZcVWvDoDsA&v=1&r=http://open_jicareport.jica.go.jp/pdf/11699865_02.pdf&p=DevEx.LB.1,5456.1
Coindesk. (2018). Bitcoin Price Index - Real-time Bitcoin Price Charts. Retrieved from https://www.coindesk.com/price/
Conserve Energy Future. (2017, May 13). Various Disadvantages of Geothermal Energy. Retrieved from https://www.conserve-energy-future.com/disadvantages_geothermalenergy.php
Digiconomist. (2018). Bitcoin Energy Consumption Index. https://digiconomist.net/bitcoin-energy-consumption
Direct Energy. (2018). The Power of a Kilowatt Hour. Retrieved from https://business.directenergy.com/understanding-energy/the-power-of-a-kilowatt-hour
Fridriksson, T., Merino, A. M., Orucu, A. Y., & Audinet, P. (2017). Greenhouse Gas Emissions from Geothermal Power Production. 1-12. Retrieved from https://pangea.stanford.edu/ERE/db/GeoConf/papers/SGW/2017/Fridriksson.pdf.
Geothermal Energy Association. (2018). Geothermal Basics - Power Plant Costs. Retrieved from http://geo-energy.org/geo_basics_plant_cost.aspx
Gleeson, C. (2018, February 12). Energy footprint of bitcoin beginning to outstrip entire State. https://www.irishtimes.com/business/energy-and-resources/energyfootprint-of-bitcoin-beginning-to-outstrip-entire-state-1.3389239
Holiday Weather. (2018). Reykjavik: Annual Weather Averages. Retrieved from http://www.holiday-weather.com/reykjavik/averages/
Hsu, S. (2018, January 16). China's Shutdown Of Bitcoin Miners Isn't Just About Electricity. Forbes.com. Retrieved from https://www.forbes.com/sites/sarahsu/2018/01/15/chinas-shutdown-of-bitcoin-miners-isnt-just-about-electricity/#50ea00d369b9
iProperty.com.sg. (n.d.). Industrial/Warehouse for Rent in Indonesia. Retrieved from https://www.iproperty.com.sg/international/id/industrial-warehouse/rent/p91/
Kelso, C. E. (2018, January 16). Bank Indonesia: Do Not Sell, Buy, Trade Cryptocurrency. Bitcoin.com. Retrieved from https://news.bitcoin.com/bank-indonesia-do-not-sell-buy-trade-cryptocurrency/
Kristoufek, L. (2015). What Are the Main Drivers of the Bitcoin Price? Evidence from Wavelet Coherence Analysis. Plos One, 10(4). doi:10.1371/journal.pone.0123923
Listrik.org. (2018, March 05). Tarif Dasar Listrik PLN Maret 2018. Retrieved from http://listrik.org/pln/tarif-dasar-listrik-pln/
Matek, B. (2016). 2016 Annual U.S. & Global Geothermal Power Production Report (Rep.). Retrieved from http://geo-energy.org/reports/2016/2016%20Annual%20US%20Global%20Geothermal%20Power%20Production.pdf
Redman, J. (2017, August 23). Media Granted Access to Bitmain's Mongolian Bitcoin Mines. Retrieved from https://news.bitcoin.com/media-granted-access-to-bitmains-mongolian-bitcoin-mines/
Richter, A. (2016, August 24). U.S. EIA: Geothermal very competitive on levelized cost of electricity basis. Retrieved from http://www.thinkgeoenergy.com/u-s-eia-geothermal-very-competitive-on-levelized-cost-of-electricity-basis/
Rudiyanto, B., Illah, I., Pambudi, N. A., Cheng, C., Adiprana, R., Imran, M., . . . Handogo, R. (2017). Preliminary analysis of dry-steam geothermal power plant by employing exergy assessment: Case study in Kamojang geothermal power plant, Indonesia. Case Studies in Thermal Engineering, 10, 292-301. doi:10.1016/j.csite.2017.07.006
Shiikawa, M. (1983). The role of mercury, arsenic and boron as pathfinder elements in geochemical exploration for geothermal energy. Journal of Geochemical Exploration, 19(1-3), 337-338. doi:10.1016/0375-6742(83)90026-2
Trubetskoy, G. (2017, September 27). Electricity Cost of 1 Bitcoin. Retrieved March 03, 2018, from https://grisha.org/blog/2017/09/28/electricity-cost-of-1-bitcoin/
U.S. Department of Energy. (2018). Geothermal FAQs. Retrieved from https://www.energy.gov/eere/geothermal/geothermal-faqs#site_for_geothermal_electric_development
U.S. Energy Information Administration - EIA - Independent Statistics and Analysis. (2017). Today in Energy. Retrieved from https://www.eia.gov/todayinenergy/detail.php?id=31912
Whittle, P. (2018, February 12). Q&A: How is the growth of bitcoin affecting the environment? https://www.houstonchronicle.com/business/technology/article/Q-AHow-is-the-growth-of-bitcoin-affecting-the-12604922.php
Wong, J. I., & Simon, J. (2018, March 05). Photos: Inside one of the world's largest bitcoin mines. Retrieved from https://qz.com/1055126/photos-china-has-one-of-worlds-largest-bitcoin-mines/
World Weather Online (2018). Ciwalengke Monthly Climate Averages. Retrieved from https://www.worldweatheronline.com/ciwalengke-weather-averages/west-java/id.aspx