Mining for cryptocurrencies requires plenty of computational power, and power of the regular kind. Just don’t expect it to upend the utilities industry, at least for now.
That’s from analysts at Morgan Stanley, who predicted mining for bitcoin and its rivals would suck more power from global electric grids this year than electric vehicles would draw in the next seven.
The analysts estimated power demand to mine for bitcoin, a pioneering cryptocurrency, to equal 0.6% of the world’s electricity consumption in 2018, or roughly equivalent to Argentina’s consumption, they said in a note Wednesday.
That would be bigger than the investment bank’s projected global demand from electric vehicles in 2025, but still small on an absolute basis, and not likely to have “a material impact on utility stocks any time soon,” the analysts said.
“Cryptocurrency power consumption is a very small percentage of global power usage, and given the dispersion of this demand, we believe it is not likely to impact utility valuations in the near- to medium-term,” the analysts said. Consumption levels “are manageable.”
It bears watching, however. Future energy consumption of bitcoin and other cryptocurrencies and their underlying technology, blockchain, could become a hot topic for the sector, the analysts said.
“Bitcoin demand may represent a new business opportunity for renewable-energy developers, given the emergence of ’cheap, firm renewable energy’ – a combination of wind, solar and storage,” they said.
That would include utilities such as NextEra Energy Inc. NEE, -0.88% Span’s Iberdrola SA IBE, -1.09% Italy’s Enel SpA ENEL, -1.88% “new big oil entrants, or maybe new entrants backed by (initial coin offerings) capital raises,” the analysts said.
They put a price range on “mining” one bitcoin at anywhere from $3,000 to $7,000, including electricity and computer-power costs.
The analysts estimated power costs would represent roughly a third of the cost of mining a bitcoin. A potential fall in costs of renewable energy and large-scale, long-term power storage would drive electricity costs lower, they said. In turn, that would spur more mining.
“Needless to say there are plenty of uncertainties which means energy consumption could inflect in either direction,” the analysts said.
Seeking low electricity costs, bitcoin mining will continue to be concentrated on low-cost power generation countries such as China and, in the U.S., areas like the Midwest and Northwest, the analysts said.
While that could have some impact on China’s electricity demand and coal consumption, that impact is relatively small at the moment and the Chinese government’s regulation might limit it even further, the analysts said.
In a typical mining operation, electricity consumption accounts for the highest fraction of operational costs, which is why the largest bitcoin mines are based in China, they said.