Crypto mining isn’t the only challenge to power dilemma

Energy faces a new frontier.

Demands on data storage and energy to fuel computing power are exponentially ramping up as technology evolves and digital industries follow.

The utilities that manage local power grids work around the clock to keep ahead of the curve and meet demand as the Tri-Cities and its surrounding communities grow at a breakneck pace.

One emergent industry of the past 12 years is cryptocurrency. New cryptocurrency is created by computers solving complex equations to verify transactions involving digital currency.

Utility rates are a big determinant of where crypto mining businesses and their data mining cousins decide to locate operations.

The main ingredient in cryptocurrency and data mining is computing power, which is in turn fueled by electricity. The more computing capacity, the more cryptocurrency or data can be mined.

As with other energy intensive sectors or large-scale operations, the hunt for low-cost energy from new industries can create a full-court-press of demand on public utility districts (PUDs) and rural electric associations (REAs) offering the lowest rates.

“One of the things we see here (in the Columbia Basin), in comparison to U.S. energy prices, is our prices at Franklin PUD are substantially lower than the majority of the country,” said Scott Rhees, general manager and CEO of Franklin PUD.

This is due in part to the hydroelectric dams that produce power for the Bonneville Power Administration (BPA), which serves the three primary local utilities: Franklin PUD, Benton PUD and Benton REA.

However, Franklin and Benton counties can’t claim the cheapest rates in the state.

“We just can’t compete with some of the pricing of the Chelan, Grant and Douglas County PUDs (which own their own dams),” said Holly Dohrman, assistant general manager at Franklin PUD.

Prospective high-energy-need clients have headed elsewhere due to the cost of sourcing additional energy to meet their needs.

As a result, each utility reported having less than a dozen cryptocurrency or data mining-type operations in their respective customer bases. None are large-scale operations.

Because the utilities source the bulk of their energy from BPA, they are subject to the federal power marketing agency’s policies and procedures.

“If the load goes above 10 megawatts, there’s a provision where it’s called a ‘new large single load’ that cannot be served by any reference power,” said Jon Meyer, senior director of finance and customer service at Benton PUD.

To exceed this cap, customers must obtain a contract for additional energy either from BPA or from another provider.

If buying from BPA, Meyer said, “It’s more than double – maybe triple – what the BPA Tier 1 rate is.”

“For a customer to go out on the open market, the cost has increased dramatically,” Rhees said. “It’s what makes it difficult for people to come in. We have seen price escalation in the past two years.”

In addition, each utility has its own rate schedules in place for different levels of energy users and types of customers, which serve to shield other customers from shouldering the burden of heavy users.

Though utilities are obligated to serve customers within their jurisdiction, customers are directly responsible for paying the cost of necessary upgrades to infrastructure to accommodate their load demand. This is not limited to just transformers, but entire substations as well.

“Something of a really large magnitude, like Darigold or Amazon, they require substations … and those take time to build. It might take three years to build a substation. Sometimes it’s just a matter of timing,” said Troy Berglund, interim general manager and vice president of member services, Benton REA.

“We encourage prospective customers to contact us to make sure that their service is sized appropriately,” Meyer said. “If they damage infrastructure, they take responsibility for that too.”

“You don’t get a lot of mystery loads that are large loads,” Rhees said. “Ultimately, that transformer is going to be undersized. Worst case, they are going to burn up the transformer or will blow a fuse.”

He explained that though residential customers do set mining operations up in a spare room or garage to make extra income, they would be hard-pressed to cram enough servers into a house to cause significant impact.

At capacity

The Northwest power grid is essentially at capacity, which compounds the situation and leads to increases in the market prices for energy.

Energy production is not a limitless supply even when renewable energy such as hydropower is involved. Existing facilities are only capable of generating so much energy.

“Our total load is above that firm allocation of BPA Tier 1 energy. Anything else above that we supply with market wholesale,” Meyer said. “Firm allocation” refers to the amount of power BPA can reliably deliver in a low-water year when dams aren’t producing at capacity. If demand exceeds that level, the system buys power on the open market, which is typically expensive.

“Right now, we’re in an area where we’re worried about if there’s enough total generation to meet our member needs moving forward,” Berglund said.

He said this is due to the double-edged situation faced by utilities. Coal plants, long a reliable energy source but a significant source of carbon emissions, are being shut down in the Pacific Northwest and around the country at the same time new technologies are coming online that place new demand on the grid.

“Even in counties that own dams … even they’re meeting their limits. Utilities are looking a lot closer at what loads they’re bringing on and if they can meet that demand,” Berglund said.

“All the utilities have a really good relationship with TRIDEC and other economic development organizations in the surrounding communities. (TRIDEC) is involved directly with meetings with BPA and Energy Northwest; they know how important power is to bringing in these businesses and the energy to support them,” Berglund said.

Both Meyer and Berglund said data and crypto mining operations are not permanent investments in communities.

“It’s not like a manufacturing plant that gets built that someone has invested billions of dollars in that you can’t move. These are operations that can be moved in a weekend. They’re just not compatible with long-term energy planning,” Meyer said.

“These mining operations represent a lot of load growth but not a lot of job growth, so are not a great fit for us,” Berglund added.

Sustainability challenges

Berglund pointed out that crypto and data mining are not the only sources of demand affecting utilities.

Rising demand from electric vehicles (EVs) poses a serious demand for additional power to keep them charged.

“The general population thinks about how far an EV can go on a charge, but we’re looking at it from the standpoint of: if we see EV adoption as projections are showing, then we will have a whole myriad of issues to confront.”

He said that with multiple houses powered by a single transformer, energy demand to charge EVs and installation of at-home fast charging stations will significantly strain residential infrastructure as more people opt for EVs.

As carbon-emitting sources of energy production are retired and environmental groups push to remove dams, local utilities and BPA are being pushed to explore new energy options such as nuclear, solar, wind and more.

As Berglund summed it up, “There are a tremendous amount of challenges utilities face moving forward. It’s not the first time and it creates opportunities to get innovative.”

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