Bitcoin firms pop up near power plants
Mining operations that use large amounts of energy find partners near Lehigh Valley
Think about it like mining for gold — no pickax required.
Only these miners are racing to unearth Bitcoin, the leading digital currency. To do so, they load up on super powerful computers capable of solving complex puzzles to verify digital Bitcoin transactions and add them to a ledger. For essentially acting as auditors to secure the payment network, miners earn bitcoin — the process by which new bitcoins are put into circulation.
Welcome to the world of Bitcoin mining, a growing industry across the globe, and in Pennsylvania, that requires a substantial amount of energy. For that reason, many mining facilities have popped up near power plants.
The latest example: Talen Energy Corp. on Tuesday announced a partnership with Maryland-based TeraWulf Inc. to develop up to 300 megawatts of Bitcoin mining capacity adjacent to its Susquehanna nuclear power plant in Luzerne County. The joint venture, dubbed Nautilus Cryptomine, will be built in two phases — the first could be in operation by mid-2022 — and will be powered by the nuclear plant, providing low-cost electricity.
“Bitcoin mining, and crypto
currency mining, takes a substantial amount of electricity, so miners who can find the lowest cost of electricity supply are going to be better off than other miners who have higher costs for electricity,” said Travis Miller, an energy and utilities strategist for Morningstar who tracks the industry.
The need for cheap energy is a significant reason why most power-thirsty Bitcoin mining had been concentrated in China, though that is starting to change. Even before China announced a crackdown on Bitcoin mining this year, its share of global hashrate, the total combined computational power that is being used to mine and process transactions, dropped from 75% in September 2019 to 46% in April. During that period, the share in the United States grew from 4% to nearly 17%, according to the Cambridge Bitcoin Electricity Consumption Index.
For Talen, a power producer that was spun off from PPL Corp. in 2015 and maintains an office in downtown Allentown, the Bitcoin mining announcement fits into a strategy unveiled last year geared toward repositioning its power fleet away from coal and toward renewable energy. In addition, the move can provide a stable source of revenue for its nuclear plant, pressured in recent years by competition from cheaper natural gas and subsidized renewables such as wind and solar power.
While the Talen joint venture will be powered by zero-carbon electricity, other Bitcoin mining companies have scooped up old coal plants, restarting them to power the machines that mine cryptocurrency. That has caused controversy, spurring the headline-grabbing comments from Elon Musk in May that Tesla would not accept bitcoin as payment due to his concerns over the increasing use of fossil fuels for Bitcoin mining.
Stronghold Digital Mining Inc., by comparison, owns a waste-coal power plant in western Pennsylvania and says it uses “21st-century crypto mining techniques to remediate the impacts of 19th and 20th century coal mining in some of the most environmentally neglected regions of the United States.” Stronghold says it removes the coal refuse from piles, thus eliminating the source of acid mine drainage, fires and toxic emissions produced, and burns it in
an emissions-controlled manner.
Stronghold, which filed for an initial public offering last month, is buying two more coal refuse plants, Panther Creek Plant near Nesquehoning in Carbon County and an unidentified power generation facility in Pennsylvania, according to a July 27 filing with the U.S. Securities and Exchange Commission.
So more Bitcoin mining facilities are on the way in Pennsylvania.
Nuclear’s role
Back in December 2007, long before PPL spun off its competitive generation business to create Talen, the Allentown company announced a plan to build the Bell Bend nuclear power plant on a site adjacent to the Susquehanna plant. Early estimates indicated such a project could cost $15 billion.
Fast-forward to Aug. 31, 2016, and Talen was withdrawing its license application for the proposed plant after the company that developed the reactor design asked the U.S. Nuclear Regulatory Commission to suspend the design-certification process more than a year earlier.
With the plan mothballed, that left Talen with available land next to its Susquehanna plant — space it is now using for a digital infrastructure campus, which includes the planned Bitcoin mining facility. The development fits into a strategic repositioning Talen announced in November as it winds down its coal plants in Pennsylvania and Maryland and transitions to investing in renewable energy, battery storage and digital infrastructure projects.
The first phase of Nautilus Cryptomine will be a 180-megawatt Bitcoin mining facility, an investment of roughly $350 million-$400 million. Given its 50% interest in the venture, Talen expects to invest $175 million-$200 million in the project, funds that will come from its current liquidity and from thirdparty debt and equity sources.
If the mining operation eventually uses the planned 300 megawatts, that would be about 12% of the Susquehanna’s generating capacity of 2,494 megawatts. The Susquehanna plant, which generates enough to power about 2 million homes, and other nuclear plants have felt pressure in recent years to sell their energy into the grid against the likes of cheap natural gas.
Nuclear plants also have much higher operational costs. Talen spokesperson Taryne Williams said the Susquehanna plant employs about 900 people.
“Susquehanna has achieved an operating and cost performance level that is best in class,” Williams said. “That track record allows the site to be attractive to many new businesses. By supplying power directly to Nautilus Cryptomine, Susquehanna is able to contract a portion of its power under a long-term contract, providing a stable source of revenue.”
Miller, the Morningstar analyst, said having a steady source of electricity demand, such as a data center or Bitcoin mining facility, can only improve the economics of nuclear plants.
And Talen isn’t the only one jumping in. Ohio-based Energy Harbor Partners, which owns the Beaver Valley nuclear plant in western Pennsylvania, on July 12 announced a five-year partnership, starting in December, to provide electricity from its nuclear fleet to Standard Power’s new Bitcoin mining center in Ohio.
“Once a nuclear plant is running, it’s very costly to stop and restart,” Miller said. “So if
you think about where the U.S. is headed in terms of a larger share of intermittent solar and wind, nuclear is not a great fit for that type of energy mix. The key to sustaining nuclear on an economic basis is going to be finding those consistent, 24/7types of electricity demand, that solar and wind and other technologies don’t do a good job serving.”
Like a Bitcoin mining operation.
Coal refuse
Across Pennsylvania, there are hundreds of coal refuse sites, covering 8,500 acres with piles containing the byproduct of decades and decades of coal mining operations. Those piles are made up of waste coal, rock, and shale, among other materials, prone to running off into nearby streams and rivers, creating air pollution and catching fire.
What Stronghold Digital Mining is doing is reclaiming some of those sites, removing coal refuse from piles and then burning it in what it calls “an emissions-controlled manner” to power its Bitcoin mining operations.
So far, Stronghold is doing that at its Scrubgrass plant, which has a generation capacity of 85 megawatts and is on a 650-acre site in Venango County. There, according to SEC filings, the plant powers about 1,800 crypto-asset mining computers.
As coal refuse is classified by Pennsylvania as a Tier II alternative energy resource, Stronghold also is able to earn renewable energy credits under state law.
But the process itself still isn’t clean. The Scrubgrass plant in 2019 emitted just over 405,000 tons of carbon dioxide, the equivalent of about 88,000 cars driving for one year, according to the latest data from the U.S. Environmental Protection Agency.
The piles, however, also emit pollution just from sitting there, and Stronghold sees a long runway of using coal refuse around the state.
While Stronghold did not respond to a request seeking comment, an SEC filing shows the company believes, based on the number of coal refuse sites it is reclaiming near the Scrubgrass plant, that there is at least 30 years’ worth of fuel available — just for that facility.
And, per the SEC filing, Stronghold has an agreement to buy the 80-megawatt Panther Creek, a coal-refuse plant in Carbon County, and a letter of intent to purchase an unnamed coal-refuse plant in Pennsylvania, described as having 112 megawatts of electricity generation.
Stronghold is buying both from Olympus Power LLC of Morristown, New Jersey. The only coal-refuse plant on Olympus’ website that fits the description of the unnamed plant is the Northampton Generating Facility in Northampton borough, near the border with Allen Township. Olympus also did not respond to a request seeking comment.
The Northampton plant emitted nearly 223,000 tons of carbon dioxide in 2019, EPA data shows.
By operating the Scrubgrass plant at capacity and via the build-outs of Panther Creek and the not-yet-disclosed third plant, Stronghold forecasts expanding its crypto-asset mining operations to about 57,000 computers by the end of 2022.
“We believe that our expected expansion to three environmentally-beneficial power generation facilities dedicated to Bitcoin mining is repeatable and scalable,” reads Stronghold’s filing.