Company Bets Bitcoin Mining Can Ease Flaring
A Denver-based company has been installing data centers at shale drilling sites to take advantage of excess natural gas. Now, according to a new Bloomberg report, that company hopes to harness some of that gas to power data centers for Bitcoin mining.
With US unconventional production growing and pipeline capacity failing to keep pace, natural gas flaring has risen to record levels, but a company from Colorado says it has an unconventional method to combat the problem.
According to a new Bloomberg report, Denver-based Crusoe Energy Systems has been installing data centers at shale drilling sites to take advantage of excess natural gas supplies, harnessing some of the surplus gas to turn it into electricity. The company has eight operations across the US, with plans for an additional 30 in the first half of next year, and now it wants to use the electricity generated from these centers to power data centers to mine Bitcoin.
The report said that Crusoe plans to set up 70 units in 2020, each with a maximum electric output of 1 MW, which the company said would keep approximately 10 MMcf/D of gas from being flared. Crusoe said in the report that it can scale the technology by deploying multiple data centers at a single site. As that total increases, Crusoe said it plans to use the computing capability generated from those centers to develop an artificial intelligence cloud-computing service.
Alex Urdea, chief investment officer of Upper90 Capital Management, said to Bloomberg that the business model was a “very creative way to solve an environmental and economic problem for the oil and gas industry.” Upper90 has agreed to provide $40 million of project financing, and Bloomberg said Crusoe is attracting interest from large oil and gas producers. Crusoe has also raised $30 million through the sale of equity to investors such as Bain Capital Ventures.
“Mining” Bitcoin requires computers known as mining machines to connect to the cryptocurrency network and verify transactions made by people who send or receive Bitcoin. The network uses a lot of electricity because people often connect large numbers of miners to help maximize revenue generation.
Citing a tool from the University of Cambridge, the BBC reported in July that the Bitcoin network uses approximately 7 GW of electricity, roughly equal to the power consumption of Switzerland. A study released in the scientific journal Joule said that the electricity used for Bitcoin produces approximately 22 Mt of CO2 annually, which is comparable to the level of Kansas City.