Gillette officials worry about cryptocurrency mining impact

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By Patrick Filbin

Gillette News Record

Via Wyoming News Exchange

GILLETTE — It would seem a little off-brand if the Gillette City Council would be against any kind of mining, but that seems to be the case when it comes to mining for cryptocurrency.

City officials have expressed worry that mining for cryptocurrencies like bitcoin could overload the city’s energy capacity and take advantage of Gillette’s low utility rates.

To get ahead of the problem, the city is considering regulations that would put additional fees on people or businesses that would want to mine for cryptocurrencies or other practices that would require high-density loads of power.

Cryptocurrency is a currency that only exists digitally that usually has no central issuing or regulating authority and is not backed by a central bank or government.

Instead, it uses a “decentralized system to record transactions and manage the issuance of new units,” according to its new definition by Merriam-Webster.

The most well-known cryptocurrency, bitcoin, was created in 2009, but there are hundreds of other cryptocurrencies, known as “altcoins,” out there.

Blockchain is a public, verifiable ledger that records cryptocurrency transactions.

Cryptocurrency is mined through computers that work on solving increasingly difficult algorithms. When a computer finds the solution, its owner gets a certain amount of cryptocurrency.

Ry Muzzarelli is a senior electrical engineer with the city. He’s also the resident expert of cryptocurrency at the city.

Muzzarelli said computers mining for cryptocurrencies require a lot of power and can draw heavily on on electrical systems.

The computers, or cryptomining rigs, use an incredibly high amount of energy because they are always running, he said. An owner of one of those rigs can’t make money unless it’s turned on, plugged in and actively mining.

Muzzarelli uses the metric of kilowatt hour, per foot, per year (kWh/ft2/year) to compare crypto mining rigs to other high-density loads in a community.

For example, a hospital will use an average of 15 kWh/ft2/year and a restaurant like Old Chicago will use anywhere between 40 and 80. Meanwhile, one of these crypto rigs will use 250.

Not only do the rigs require large load capacities, they also need heavy-duty wiring to be able to run all day, every day.

That means if someone would want to mine for bitcoin in their two-bedroom apartment, the wiring more than likely would not be able to keep up with the rigs.

When those computers are mining, it’s as if every appliance, light or gadget in a home is on and running at full capacity.

The city is worried about a few things when it comes to cryptocurrency mining. The main issue is the capacity of the city’s electric grid and not being able to recover capital costs if miners come to town.

At full tilt, the city can serve 130 megawatts of power per day. During an average day in the summer, when demand is highest, the city regularly serves about 80 megawatts per day.

Muzzarelli said the city first started looking at the issue when a company from Connecticut asked about coming to Gillette to use its power system to mine for cryptocurrency.

The problem, Muzzarelli said, is that the company asked for a discounted electric rate.

Since then, Muzzarelli said the city is aware of two locations in Gillette where people are actively mining for cryptocurrency, which puts the city’s electrical system in a bit of a vulnerable state.

The customer service department for the city found the locations after the addresses were red flagged when their power usage jumped from 1,000 kilowatt hours per month to 11,000.

Essentially, cryptocurrency mining “has the potential to become a large concentration of power demand on the city’s system,” Muzzarelli said.

In the last legislative session, Wyoming state lawmakers passed four groundbreaking cryptocurrency bills that made it easier for companies to start businesses that deal with the digital currency.

While the bills helped the state create a business environment that is friendly to those wanting to start companies, they didn’t exactly address capacity and rate issues when these miners roll into town.

Muzzarelli said that isn’t the only thing these companies do. He explained that a lot of the companies, like the Connecticut one, will have dozens of crypto rigs in vans or trailers.

That makes the load extremely portable so miners are able to mobilize and relocate “in response to short-term economic signals.”

Another issue surrounding cryptocurrency mining is the lack of job creation it breeds.

According to Muzzarelli, a typical data center will create anywhere from five to 25 jobs per megawatt of energy capacity. If those megawatts are being used to mine for cryptocurrency, it makes room for 0.4 to 1.2 jobs.

“You just need someone to drive the truck,” Councilman Shay Lundvall joked.

The city has plans to build up its power system by 1 megawatt per year for the next 10 years to keep up with natural demands.

Muzzarelli said cryptocurrency companies have approached the city asking for 3 megawatts of space to operate and later expanding up to 18 megawatts.

To get ahead of that, city staff has asked the City Council for permission to start investigating options.

Those options include creating a permitting process for mining operations, implementing fines for unauthorized use, putting a capital contribution fee for cryptocurrency on the books and most importantly, setting a new electricity rate for cryptocurrency mining.

The city makes no profit on its electrical system. The increased rates for cryptomining would be to offset what it costs to produce the energy.

“We don’t want to get into a situation where we’re subsidizing cryptocurrency mining by raising rates on our normal residential and commercial customers,” Muzzarelli said.

City Council members were at odds about the issue, toeing the line of making sure the city is covered but also not turning away revenue opportunities.

Councilman Tim Carsrud said the mobile miners looking for cheaper rates “has sketch written all over it,” while Councilman Shawn Neary wants to make sure the money that can be made wouldn’t be turned away easily.

The city is making money on the two mining operations it knows of now. Muzzarelli said the key to sustaining that is to get ahead of a surge of cryptocurrency miners before the system is overloaded with them.

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