Bitcoin's upstaging electric cars as bigger source of power use

New York - The global power needed to create cryptocurrencies this year could rival the entire electricity consumption of Argentina and be a growth driver for renewable energy producers from the US to China.

Miners of bitcoin and other cryptocurrencies could require up to 140 terawatt-hours of electricity in 2018, about 0.6% of the global total, Morgan Stanley analysts led by Nicholas Ashworth wrote in a note on Wednesday. That’s more than expected power demand from electric vehicles in 2025.

"If cryptocurrencies continue to appreciate we expect global mining power consumption to increase," Ashworth wrote in the note.

While the figure is too small to be a major driver of global utility shares, it represents an important growth story for companies investing in wind and solar power combined with energy storage - a list that includes NextEra Energy, Iberdrola and Enel, according to the note.

Other potential beneficiaries include big oil companies that are investing in renewable energy and green-power developers that are backed by initial-coin-offering capital raises.

One eager entrant is Hydro-Quebec, Canada’s biggest electric utility. It’s in "very advanced" talks with more than 30 cryptocurrency miners - many of them currently operating in China - and expects to announce agreements in 2018, Marc-Antoine Pouliot, a spokesperson, said on Wednesday in a phone interview.

Within four years, Hydro-Quebec envisions miners soaking up about five terawatt-hours of power annually - equivalent to about 300 000 Quebec homes - from the surplus created by the region’s hydroelectric dams.

"If we have to invest in our transmission network, these investments will be paid for by the miners," Pouliot said.

Electricity demand for bitcoin mining rose to about 20.5 terawatt-hours a year by the end of 2017, according to a report on Wednesday by Bloomberg New Energy Finance. That equates to more than half the 38 terawatt-hours of electricity used annually by the world’s biggest traditional miner, BHP Billiton- or a 10th of the electricity needed to power South Africa.

Uncertainties abound

In China, miners used 15.4 terawatt hours, which is just a blip in the country’s massive power industry. Even though it plays host to the world’s biggest community of bitcoin miners, they only used 0.2% of the country’s annual electricity production, according to the report.

Miners will probably concentrate in low-cost power regions, including China and the US Midwest and Pacific Northwest. Miners earn bitcoin-denominated rewards for performing the complex calculations needed to confirm transactions in the cryptocurrency.

The Morgan Stanley report did, however, offer some caution.

"There are plenty of uncertainties which means energy consumption could inflect in either direction," Ashworth wrote. "This is clearly not an exact science."