Bitcoin Miners Are Giving New Life to Old Fossil-Fuel Power Plants

The lofty prices of cryptocurrencies have investors sinking money into electricity generation, risking a backlash

By Brian Spegele and Caitlin Ostroff
May 21, 2021 7:00 am ET

Across America, older fossil-fuel power plants are shutting down in favor of renewable energy. But some are getting a new lease on life—to mine bitcoin. In upstate New York, an idled coal plant has been restarted, fueled by natural gas, to mine cryptocurrency. A once-struggling Montana coal plant is now scaling up to do the same.

The lofty price of bitcoin and other cryptocurrencies has investors pouring money into power generation—and risking a backlash. Elon Musk tweeted last week that Tesla Inc. would no longer accept bitcoin as payment for vehicles over concerns about fossil-fuel use in bitcoin mining. That rocked the market; bitcoin prices are now down around 25% since last week.

The drive for power has its roots in bitcoin’s intractable mathematics: To operate securely, the cryptocurrency’s network relies on computers solving puzzles; in return the solvers get fresh bitcoin. The higher the bitcoin price, the more of these miners compete to solve the puzzles—a process that chews up electricity. The more competition, the harder the puzzles get and the more electricity is used.

A University of Cambridge index pegs the annual power consumption of bitcoin mining at around 130 terawatt-hours, more than three times higher than at the beginning of 2019. That would be more than the power consumption of Argentina.

The coal-fired Hardin Generating Station in Montana had been struggling for years. Late last year, a Nasdaq-listed miner called Marathon Digital Holdings Inc. MARA 0.16% partnered with Hardin’s owner to transform the power plant into a hub for mining bitcoin.

“It was an idle asset,” Fred Thiel, Marathon Digital’s chief executive, said in an interview. “We were able to get access to a large amount of power at a very attractive price.”

The project is in the process of scaling up, with more than 100 megawatts of power capacity planned. Marathon Digital, whose investors include BlackRock Inc. and the hedge fund Renaissance Technologies LLC, said that by tapping the Montana coal plant, its break-even costs to produce a bitcoin will fall to $4,600, 38% less than previously.

The company is aiming to produce at least 55 bitcoins daily by the first quarter of next year, up from an average of two a day in 2020.

Besides mining bitcoin, Marathon Digital said that as of March it had nearly $300 million worth of bitcoin on its balance sheet, in an effort to signal its confidence in bitcoin’s future and attract institutional investors to the stock who might want exposure to the cryptocurrency but were unable to or unwilling to invest in it directly.

BlackRock and Renaissance declined to comment.

One of the most ambitious—and controversial—projects comes from private-equity firm Atlas Holdings. Based in Greenwich, Conn., the firm specializes in turnarounds of troubled companies. It bought the Greenidge coal-fired power station in 2014 after the plant in Dresden, N.Y. had been shut a few years earlier because it was economically unattractive to operate.

Atlas first converted the plant to natural gas from coal. Then, last year, it launched a data center for mining bitcoin using power the plant generated. The company said it currently has 19 megawatts of mining capacity and plans to raise it to 85 megawatts by the end of 2022.

Yvonne Taylor, vice president of the environmental nonprofit Seneca Lake Guardian, said air pollution and water runoff will damage a small community whose fresh air and clean water enables tourism, agriculture and fishing in the Finger Lakes.

Last month, local campaigners led a march to the gates of the power plant, and some groups have written letters to New York’s Department of Environmental Conservation and Gov. Andrew Cuomo urging them to revoke the plant’s permits.

The state has declined to do so. Last month, however, the Department of Environmental Conservation said it was closely monitoring Greenidge’s planned expansion. It said it also would consult the U.S. Environmental Protection Agency about the facility’s greenhouse-gas implications.

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