For days, neighbours had been suspicious about the warehouse at Great Bridge Industrial Estate in Tipton.
Unusual wiring and ventilation ducts surrounded the otherwise anonymous building in the heart of the Black Country. To the police, acting on a tip, it had all the classic signs of a cannabis farm – but what they found when the property was raided was instead a sophisticated bid to cash in on a global craze in finance.
Inside the warehouse was a bank of 100 computers, humming away as they generated cryptocurrencies.
“It’s certainly not what we were expecting,” said police sergeant Jennifer Griffin.
Sites such as this one are proliferating around the world as demand explodes for digital coins such as Bitcoin and Ether.
The scramble by criminals to secure illegal power supplies for their crytocurrency efforts highlights a key challenge for this boom – it consumes a vast amount of electricity.
Bitcoin energy consumption compared
Computers generate new coins in a process is known as mining. This is currently estimated by the Cambridge Centre for Alternative Finance (CCAF) to eat up about as much electricity as the entire population of the Netherlands.
Addressing those concerns is now seen as increasingly important to the industry’s future, and legal crypto miners are turning to renewable energy generators to help improve their green credentials.
One emerging source of ‘green’ energy for crypto miners is British farms
Phil Hughes, who owns a beef and sheep farm in Corwen, Denbighshire, has been using electricity from his on-site anaerobic digester to power computers mining new crypto currency.
Anaerobic digestion works by decomposing cow manure to create a methane gas. This can then be fed into a generator to create electricity.
An example of a food waste anaerobic digestion plant
Credit: James Crockford
Most of the energy produced by Hughes’ anaerobic digester powers his farm, but around a third is used to run crypto mining rigs.
“It is a profitable enterprise – we’ve had a good return and it’s a bit of fun, a curiosity,” he says.
“It’s a lot easier to run a computer than a herd of cows or a flock of sheep, and you don’t have to wake up at five in the morning.”
For crypto companies, teaming up with farmers provides them with a way of labelling their coins as environmentally-friendly. And for farmers, it provides much-needed extra income.
Demand is only set to grow. Since Bitcoin was created in 2009, the cryptocurrency market has surged to $1.3 trillion (£920bn). The price of Bitcoin has climbed from £215.20 in late 2015 to £26,484.26 on Friday, reaching an all-time high of nearly £45,000 in April.
Hughes is among a growing number of clients to team up with 31-year-old Josh Riddett, an entrepreneur who has found a way to create a business out of the blossoming relationship between farmers and crypto miners.
Riddett recalls spending hours on YouTube figuring out the intricacies of cryptocurrency mining before setting up his Easy Crypto Hunter business. It links computer banks to renewable energy generators – including farmers who produce power from cow manure.
“It’s a new way to generate money from those energy sites, which isn’t government-backed – it’s much more independent,” Riddett says, arguing that the growing business is a boost to renewable energy overall by providing demand at higher rates than generators earn from the grid.
“Effectively, farmers are turning their barn or cattle shed into a mini-data centre and getting paid for renting out their computer processing power.”
Critics point out that whether green or not, electricity being diverted to crypto is not available for use by wider society.
But regardless of this scepticism, Riddett is convinced he is onto a winner.
Josh Riddett was named Bury Businessman of the Year 2020
Credit: Rhizome Media Group
“Unless they come up with some crazy new incentive for farmers to build solar panels, a non-taxpayer benefit is a really nice solution,” he says.
It’s not just direct tie-ups with farms. Efforts to overhaul crypto’s reputation have led to some miners buying energy certificates. These are issued to renewable power generators for each unit they put into the grid and can be sold on.
They are used by many energy users who want to be able to show they are supporting renewable energy even though they are drawing from the same mix of electrons in the national grid as everyone else.
Opponents argue that the certificates do not necessarily make much of a difference to renewable energy supply.
Peter Wall, chief executive of Argo Blockchain, a London-listed business which has data centres powered by hydropower in Quebec, supports their use in the industry.
“I was sceptical, but they are appropriate,” he says.
Mining appreciable amounts of bitcoin requires large banks of computer equipment which draws huge amounts of power
Credit: Andrey Rudakov/Bloomberg
BitRiver, which hosts Bitcoin data centres in Russia, uses power from a next-door hydropower station and last month bought one million renewable energy certificates from the aluminium and hydropower giant EN+ so that it can tell customers its data centres are carbon-free.
“Many of our customers are in Japan, Korea, and they are very concerned about the environmental agenda,” says chief executive Igor Runets, who says he cannot disclose the value of the deal.
Argo Blockchain is one of four companies that have signed up to a new Crypto-Climate Accord, pledging to cut emissions from electricity consumption to net zero by 2030.
The others are DMG Blockchain, listed in Canada; Gryphon Digital Mining, which wants to own its own renewable energy supply; and Zumo, an Edinburgh-based cryptocurrency payment platform.
“Climate change is a reality and we need to do something about it,” says Wall.
“The industry is no different to any other, except it is newer.”
Cryptocurrency and the environment in numbers
It’s early days, but the small numbers so far signing up to the the climate accord and teaming up with renewable energy providers may point to a bigger challenge – getting consensus in an industry founded on principles of decentralisation.
“It’s up to the community,” says Patrick Schroeder, senior research fellow in the Energy, Environment and Resources department at Chatham House .
“Do they want to set up some type of governance for the industry, or is there going to be a sort of whack-a -mole situation, where miners move to areas where there are loopholes or areas with little regulation?
“But they won’t disappear. And as they grow, they cannot ignore the need to contribute to climate protection.”
Elon Musk, the billionaire Tesla boss and cryptocurrency enthusiast, threw the issue into the spotlight last month after he declared the carmaker would no longer accept Bitcoin due to concerns over its fossil fuel use.
With the tide turning against crypto miners, embracing a ‘greener’ agenda has become high on their list of priorities.
The industry’s cheerleaders will be hoping for fewer illegal mines in warehouses and more environmentally friendly farms as they fight for its legitimacy.