Crypto miner seeks to export US electricity for Canadian servers

In what has been called "a maiden effort by an energy-hungry cryptocurrency-mining industry to import electricity from the United States to Canada to meet its significant power demands", a Canadian company has applied to the U.S. Department of Energy for authority to export power from the U.S. into Canada to power blockchain-related computer servers -- but a nonprofit advocacy group has warned that federal approval of this "first-ever application to export power by a cryptocurrency miner" may result in a rush of similar applications.

Under U.S. federal law, the Department of Energy regulates exports of electricity from the United States to a foreign country, which require authorization under section 202(e) of the Federal Power Act. On May 21, 2020, DMG Blockchain Solutions Inc. filed an application with the U.S. Department of Energy, seeking authority under the Federal Power Act to transmit electric energy from the United States to Canada for a term of five years.

According to the website dmgblockchain.com, "DMG is a diversified cryptocurrency and blockchain platform company that is focused on the two primary opportunities in the sector – mining public blockchains and applying permissioned blockchain technology. DMG focuses on mining bitcoin, providing hosting services for industrial mining clients, earning revenues from block rewards and transaction fees, developing data analytics and forensic software products, working with auditors, law firms, and law enforcement to provide technical expertise, DMG’s permissioned blockchain technology is focused on developing enterprise software for the supply chain management of controlled products."

DMG's application to the Department of Energy describes the company as "a consumer of power, whose primary business is to host servers whose primary function is to ensure the security of public blockchains as well as other high-performance computing applications." DMG's application notes, "This business requires large amounts of power, which DMG is currently consuming approximately 15 megawatts on a steady load basis and has plans to grow to up to 60 megawatts in the next year with potentially larger amounts in the future as DMG may add new facilities." The application requests DOE export authorization over any of a long list of cross-border transmission facilities with Presidential Permits, in states including Maine, Vermont, New York, Pennsylvania, Michigan, Minnesota, North Dakota, Montana, and Washington.

But at least one entity has weighed in to urge the Department of Energy to proceed with caution, as it considers this request to export electricity to power foreign blockchain servers and computers. A Motion to Intervene and Comment filed with the Department of Energy on June 25, 2020, by watchdog organization Public Citizen, Inc. frames that organization's concern:

Despite cryptocurrency mining’s status as a relatively immature industry, its alarming power consumption footprint raises concerns about its sustainability and suitability in localized power markets, resulting in moratoria on new cryptocurrency mining operations issued by select U.S. utility districts and government agencies.

Citing language in Section 202(e) of the Federal Power Act requiring applications to export electricity to neither “impair the sufficiency of electric supply within the United States” nor “impede the coordination in the public interest of facilities subject to the jurisdiction of the Commission", Public Citizen commented:

Cryptocurrency mining is extraordinarily energy-intensive and can lead to major strains on local U.S. power supplies. At the same time, the process of mining is designed in a manner that wastes the overwhelming majority of the energy it consumes. U.S. cryptocurrency miners are struggling to meet their own power demands. This appears to be the first-ever application to export power by a cryptocurrency miner, and approval may result in a rush of similar applications.

Public Citizen's comments assert that this "maiden effort by an energy-hungry cryptocurrency-mining industry to import electricity from the United States to Canada to meet its significant power demands... raises serious, potentially fatal concerns under section 202(e)." Public Citizen concludes that the Department should proceed with extreme caution and "likely should deny the application or, if granting it, place conditions on it."

The pending export authorization proceeding before the U.S. Department of Energy is OE Docket No. EA-482, DMG Blockchain Solutions Inc. Application To Export Electric Energy.

Energy and electricity cooperatives on the rise?

Could energy cooperatives or other alternatives to investor-owned utilities play a larger role in connecting consumers with electricity, heating fuel and other forms of energy? Emerging technologies like microgrids and increased interest in decentralization and local governance could support a growth in consumer-owned utilities or similar cooperative structures.

When used as an adjective, "cooperative" generally means "involving mutual assistance in working toward a common goal."  In its noun form, "cooperative" can mean "a farm, business, or other organization that is owned and run jointly by its members, who share the profits or benefits."  Other definitions arise in the specific contexts of electricity and other forms of energy, but the National Rural Electric Cooperative Association cites seven core principles and values common to all cooperatives: open and voluntary membership; democratic member control; members' economic participation; autonomy and independence; education, training, and information; cooperation among cooperatives; and concern for community.  

Today in the U.S., more than 900 cooperatives in 47 states provide electric service to an estimated 42 million people in 47 states.  According to a trade association, distribution and generation and transmission cooperatives collectively own assets worth $175 billion, invest about $13 billion annually in new plant equipment, and employ 71,000 people in the U.S.  Many cooperatives serve relatively rural areas that were not previously served by other utilities, although some have grown within other utilities' territories.  This local model stands in contrast to investor-owned utilities, many of which are owned by large national or global corporations whose ultimate parent companies are based overseas.

Cooperatives or similar organizations are already part of many sectors of the economy besides electricity, including housing, financial services, agriculture, retail, fisheries, and manufacturing.  Values like local self-determination, inclusion and fair dealing can align well with the cooperative form.  Many states recognize the rights of consumers of various products or services to participate in cooperatives.  For example, a Maine statute allows any 3 or more natural persons to incorporate a consumer cooperative association to "engage in any one or more lawful mode or modes of acquiring, producing, building, operating, manufacturing, furnishing, exchanging or distributing any type or types of property, commodities, goods or services for the primary and mutual benefit of the patrons of the association, or their patrons, if any, as ultimate consumers."  This concept can broadly be applied to electricity, oil, wood, or other forms of energy.

Many states have enacted specific laws adapting electricity generation and distribution to the cooperative model.  For example, Maine law allows the creation of rural electric cooperatives, which are cooperative nonprofit membership corporations established for the purpose of supplying electricity and promoting and extending the use of electricity.  Such a cooperative can have powers including the ability to acquire electric transmission and distribution lines or systems, electric generating plants, dams, or other property determined necessary, convenient or appropriate to accomplish the purpose for which the cooperative is organized.  If it distributes and supplies gas or electric transmission and distribution service, the cooperative may be treated as a public utility under state law.  If another public utility is already furnishing or is authorized to furnish a similar service in or to a municipality, Public Utilities Commission approval would be required before the cooperative may furnish that service.

Cooperatives are already engaged in the utility sector as one form of consumer-owned utility.  Other alternatives to investor-owned utilities exist -- for example, municipal power districts or municipally owned utilities exist in some places such as Massachusetts, or public utility districts in Washington.  Whether under a cooperative or municipal form, these alternatives can be aligned with values like local self-determination and energy sovereignty -- for example, the right to choose one's own mix of energy supply resources, or manage more closely for local values.  In some cases, they can also deliver essential services like heat and power at a lower cost or with improved value (such as enhanced reliability or environmental performance) compared to traditional utility systems.

As communities look to the future, cooperatives or other alternatives to investor-owned utilities may be increasingly attractive by virtue of their alignment with the local interests consuming services like electricity.  If consumers perceive investor-owned utilities as not responsive to consumer needs, the cooperative form could continue to make gains in some areas, for example in the form of energy cooperative microgrids.  The cooperative form has significant potential to continue to expand into the energy sector.

NY considers ESCO reforms

New York utility regulators have launched consideration of reforms to how retail electricity suppliers called energy service companies or ESCOs operate in that state.  A December 2, 2016 notice issued by the New York Department of Public Service describes a history of "substantial overcharges and deceptive practices by the ESCO industry harming New York consumers," and establishes a process to "push ahead with reforms to ensure that ESCOs provide useful, value-added, economical services to New York consumers."  New York's ESCO reform process will play out in conjunction with other state initiatives, such as the Reforming the Energy Vision program.

As described in the Notice of Evidentiary and Collaborative Tracks and Deadline for Initial Testimony and Exhibits, the New York Public Service Commission initially opened up the energy services market to retail competition "to spur innovation in the creation of value-added products, particularly energy efficiency services that regulated rates may not provide, and to create commodity price competition that would result in efficiencies."  The notice summarizes the regulatory philosophies driving the historic decision to separate monopoly services (transmission and distribution) from competitive services (energy commodity), and the expectation that robust competitive markets would yield societal benefits.

But based on its "considerable experience with the offering of retail service to mass market customers by ESCOs," in 2014 the Commission determined "that the retail markets serving mass-market customers are not providing sufficient competition or innovation to properly serve consumers."  In the Commission's view, its subsequent efforts to realign the retail market have not succeeded: "customer abuses and overcharging persist, and there has been little innovation, particularly in the provision of energy efficiency and energy management services.  Commodity price differentiation has not worked, and the market for differentiated services is immature or non-existent."

For these reasons, on December 2, 2016, the Commission gave public notice that it "continues to examine measures that must be taken to ensure that these customers receive valuable services and pay just and reasonable rates for commodity and other services."  Among the measures identified for consideration by the Commission are:

• whether ESCOs should be completely prohibited from serving their current products to mass-market customers;
• whether the regulatory regime, rules and Uniform  Business Practices (UBP) applicable to ESCOs need to be modified to implement such a prohibition, to provide sufficient additional guidance as to acceptable rates and practices of ESCOs, or to create enforcement mechanisms to deter customer abuses and overcharging, including whether the Commission decision not to subject ESCOs to Article 4 of the Public Service Law should be revisited; and
• whether new ESCO rules and products can be developed that would provide sufficient real value to mass-market customers such that new products could be provided to them by ESCOs in the future in a manner that would ensure just and reasonable rates.

To pursue these efforts, the Commission established two procedural tracks.  An evidentiary track will consider the first two bullets listed above, while a "collaborative" track will focus on the third bullet. 

The Commission has previously described ESCO reforms as supportive of New York's Reforming the Energy Vision initiative, a comprehensive revisioning of the state's electricity sector.  In a February 2016 order, the Commission noted, "Development of markets in which vendors offer innovative services of value to consumers, and in which consumers can participate with confidence, is critically important to the success of the Reforming the Energy Vision (REV) initiative. Retail energy markets focused on commodity-only products, and in which ESCOs do not meet expectations of many customers, will thwart these objectives."

Initial pre-filed testimony and exhibits for the Track I evidentiary case on ESCO reforms are due on or before April 7, 2017.

March 18, 2011 - FERC's ruling on demand response compensation

This week, a ruling by the Federal Energy Regulatory Commission opened the door to the broader use of demand response to lower society's energy costs.  This ruling, called Order No. 745 (116 page PDF), has the potential to transform energy markets across the country and to provide electricity consumers a tangible benefit.

Part of the nation's smart grid strategy, demand response -- when customers respond to signals about the scarcity of electricity by temporarily reducing their consumption -- helps us reduce the height of the peak demand for electricity.  If we can reduce the height of those peaks, we can minimize the need for expensive peaking generation units that only run during the few hours a year when the grid is most stressed.  Demand resources can thus function much like generators, by creating "negawatts" instead of megawatts.  Because most electricity markets are designed so that power from marginal peaking generators is more expensive than baseload generation, it can often be cheaper to pay a demand resource to curtail its load than to pay a marginal generator to start up and run for several hours.

The value of demand response is clear, but until Tuesday's FERC ruling, how people should be compensated for demand response was up in the air.  The United States' electric grid is made up of a number of interconnected but distinct organized wholesale energy markets.  Each of these markets has been compensating demand response resources differently.  Some markets, like the Midwest ISO and California ISO, paid the same wholesale energy price to demand resources for their negawatt-hours as generators received for their megawatt-hours.  Other markets, like mid-Atlantic grid operator PJM, paid demand resources a reduced price for their negawatt-hours.

In Order No. 745, FERC found that this lack of uniformity of compensation across the nation's energy markets created barriers to reaching demand response's full potential.  FERC also found that other barriers to demand response existed under the status quo, including a disconnection between the wholesale and retail rates for energy.  By establishing a nation-wide policy that -- as long as they are cost-effective and capable of displacing the need for generation -- demand resources should be paid just like generators in organized wholesale markets, FERC hopes to eliminate these barriers.

So what does this mean?  In the wake of Order No. 745, we are likely to see greater use of demand response as a tool to save energy and lower its cost.  A number of businesses already help consumers participate in demand response, providing the technologies and strategies needed to make consumer participation a success.  Through the elimination of uncertainty and the establishment of a clear and fair compensation standard, these companies may see their businesses grow.  End-use consumers will also see a benefit, whether or not they participate in demand response.  Those consumers who do enroll in demand response programs will now know that they will be compensated fairly for their negawatts, a strong incentive to help the grid by curtailing their load during peak demand.  Even for those consumers who don't directly participate, greater implementation of demand response will lower everyone's electricity costs by displacing expensive marginal peaking generation.  Smart grid technologies are touted as capable of saving consumers money; through Order No. 745, the potential consumer savings have become more real.

July 20, 2010 - China passes US as world's largest energy consumer; NextEra signs wind deal with Google

China has passed the United States as the world's largest consumer of energy. The International Energy Agency measures states' energy consumption in a unit called "oil equivalent". The most recent IEA report shows that China used 2.252 billion tons of oil equivalent, whereas the U.S. used only 2.170 billion tons of oil equivalent. This reverses the trend for more than the past 100 years, when the United States has been considered to consume more energy than any other country. While energy consumption has traditionally been viewed as directly correlated to GDP, this shift breaks that trend as well. Commentators point to China's increased industrial activity, particularly in light of the stagnant consumer-driven American economy.

Interestingly, American energy intensity remains high: the average U.S. citizen uses five times as much energy as does the average Chinese citizen. What will happen when China reaches the energy intensity of the U.S.?

NextEra's competitive energy subsidiary, NextEra Energy Resources, has entered into a power purchase agreement with Google Energy, LLC. Under the deal, Google will buy 114 megawatts of power from NextEra Energy Resources' Story II Wind Energy Center in Iowa.