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California-based Plan C Crypto will operate an old 20,000-square-foot industrial facility near Fayetteville Regional Airport. It will operate at 5,000 kilowatts, according to the company and the Fayetteville Public Works Commission.
PWC doesn’t release specific power consumption information on businesses without consent, but the facility’s electrical draw will put it in the company of PWC’s top customers, including Cape Fear Valley Medical Center, Fayetteville State University, Fayetteville Technical Community College and Walmart, among others.
Many critics consider the industry’s high carbon emissions to be wasteful, contributing to climate change and rising global temperatures.
Lee Reiners, a researcher at Duke University who studies financial technologies such as cryptocurrency, is among those critical of a business plan for which he sees no legitimate financial utility in its future.
“Cryptocurrency provides no useful economic function,” he said. “Anything that is an input into that process is not useful. It is wasteful. That’s my opinion with crypto. There’s no there there.”
Why crypto is so power hungry
Instead of operating through financial institutions, which verify monetary transactions among other things, cryptocurrencies like ethereum and bitcoin operate outside this structure.
Cryptocurrency transactions are verified through a process called proof of work whereby multiple entities on a network will verify withdrawals and deposits in the crypto space, in essence cutting out the need for a centralized bank.
This process of verification is called mining, and once a majority of computers on the network have confirmed the transactions, it’s updated to a public ledger known as the blockchain.
“Everyone has the same exact copy of the ledger, and everyone agrees on the canonical state of the ledger,” Reiners said. “And that’s made possible by mining.”
Mining is incentivized, Reiners said, as miners, like the one coming to Fayetteville, are given a certain amount of bitcoin, or whatever cryptocurrency they are mining, for participation in the verification process.
“You need to incentivize this mining because otherwise, anyone with 51% of the computing power on the blockchain network could just make up whatever they wanted on the ledger,” he said.
“So, you impose a cost, and you impose that cost in the form of energy consumption. You have to solve this complex mathematical puzzle.”
Solving that puzzle is what requires so much energy.
According to reporting from The New York Times last year, the collective process of verifying bitcoin transactions, annually, uses up more energy than the entire country of Finland.
It’s seven times more than all of Google’s global operations.
‘There’s an opportunity cost to all this’
Plan C Crypto CEO Antonio Bestard said he founded the company as a means to provide more clean energy to the power grid. He said his company would provide an incentive for Fayetteville to buy more energy that is carbon neutral.
“I’m creating an economic need for more green energy on the grid,” he said. “We found an economic way to help the city of Fayetteville, help green their grid over time.”
When asked, Bestard would not specifically say how this process would work beyond imploring Fayetteville to find more green energy.
“We look forward to working with the city of Fayetteville on how they procure power,” Bestard said. He said he has asked the city to run the mining facility with 100% clean energy.
And it’s not just Fayetteville. By the time the miner there is up and running, Bestard said, there will be facilities in Tarboro, Wilson and Boone.
But providing exclusively green energy is not something Fayetteville or any of those municipalities can promise.
According to PWC, the city purchases almost all of its power from Duke Energy, which has a near-monopoly over the power grid in North Carolina.
While Duke Energy has a goal of 50% carbon emissions reduction by 2030 and net-zero by 2050, the company has a long way to go.
In 2020, 7% of electricity generated by Duke Energy was from wind, solar and hydroelectric sources. The company’s projections have that number at 23% by 2030.
Nuclear energy, which is also carbon free, made up 35% of electricity generation in 2020.
That still puts carbon-emitting energy at nearly 60%.
Reiners said the claim that crypto incentivizes green production has no basis.
“I hear this argument a lot,” he said. “‘Oh, cryptocurrency incentivizes the production of green energy.’ I mean, there’s no basis of fact to make that claim.”
Even if Plan C Crypto’s facility operated 100% carbon free, Reiners said, green energy could be used for something with a legitimate economic purpose.
“There’s an opportunity cost to all this as well,” he said.
More revenue for Fayetteville with no investment
While Plan C Crypto’s facility will become one of the top power consumers in Fayetteville, Bestard said the miner will not run during peak demand hours, when energy consumption and costs are at their highest.
Fayetteville PWC CEO Elaina Ball said no additional infrastructure will be needed to accommodate the mining facility. Most importantly, it won’t require any peaker plants, large power generating facilities that often use cheaper energy like coal or natural gas during peak hours.
Ball said Plan C Crypto will provide needed revenue due to the high amount of power it will purchase.
“By adding a … 5-megawatt consumer like this, what that does is our retail sales are going to go up,” she said.
“We’re going to have higher usage, 24/7, outside of that window, right, that peak window. When you generate more revenue off of our system that exists, like an industrial customer like this, it helps offset the cost to serve residential customers in the long run.”
Robert Van Geons, CEO of the Fayetteville Cumberland County Economic Development Corp., or FCEDC, said that despite criticisms of the crypto industry, the new facility will be good for the area.
“It brings jobs. It brings taxable investment, it’s beneficial for our utility system. And ultimately, regardless of how you feel about cryptocurrency, it is an emerging technology that will continue to evolve,” he said. “We’re going to continue to have newer and newer technological innovations in this country, and we want those to happen here in Fayetteville and Cumberland County.”
Bestard said the facility will initially employ 19 people, targeting military veterans. Those jobs will be in the electrical, security and information technology fields.
He said the lowest-paid employees will make $40,500 a year, while a majority will earn in the $60,000 to $100,000 range.
Bestard said he anticipates dozens more jobs in the coming years.
Van Geons said that no economic incentives were made to Plan C Crypto, and there is no financial investment from either the city or county.
Ball said that beyond the typical costs for attaching a new customer to the power grid, there will be no significant costs for PWC.
The uncertain future of crypto
In a press release introducing Plan C Crypto to Cumberland, the FCEDC cited market statistics projecting cryptocurrency to grow by more than 100% by 2028.
But Reiners said that projected growth is speculative.
“The only reason people buy (cryptocurrency) is they think they can sell it to someone else for a higher price in the future,” he said.
“It’s been around for a while. It’s been since 2009. So now we’re 13-plus years. How has it impacted a product, a service, a process that we all use, right? It hasn’t. And so, if it hasn’t happened yet, you have to ask yourself when it’s going to happen.”
He described the industry as a bubble, based solely on the speculative value of what someone else is willing to pay for a product that hasn’t proved its value, in his view.
“You’re relying on greater fools showing up, and eventually, the supply of greater fools is exhausted,” Reiners said. “And they don’t show up.”
He said cities like Fayetteville should not be encouraging crypto companies to come to their area in any way.
“Crypto is a cancer,” Reiners said. “You’re making a deal with the devil.”
He cited crypto miners buying up cheap carbon-based power in upstate New York, as reported by The New York Times.
Reiners said he wouldn’t be surprised if the facility in Fayetteville didn’t exist after five years.
Even if the company fails, though, Ball said it’s not a risk for the community.
“If I were building a power plant to support this, that would be a huge risk, but we’re not because they’re not increasing capacity,” she said.
“They’re not increasing the demand. So, this is just sales. We’re not putting in a power plant to support this because they can move out of the demand window. …
“I know other people in other communities want to have their own perspectives on the industry — that’s fine. But I wear the hat of what’s right for our community and our customers, and this is good.”
Photo Credit: Fayetteville operates its own Public Works Commission, a public utility that purchases power almost entirely from Duke Energy. Ben Sessoms / Carolina Public Press