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Bitcoin backlash as ‘miners’ stress power grids in Central Washington
- Semirhage 8y agoThose bargain rates are possible largely because the Basin’s five dams generate around six times what the region can use locally. Much of the surplus is exported, at premium prices, to outside buyers such as Puget Sound Energy, and those outside sales subsidize local rates. But if the utilities are selling more of their power to local Bitcoin miners, they’re exporting less power at those premium prices, which makes it harder to keep local rates low. Further, because much of the surplus is currently committed in long-term contracts, supplying miners with all the megawatts they want might require the utilities do something virtually unprecedented: buy power on the open market, at prices far above what locals have come to expect. Solution: pass a law to charge miners export prices. It’s not as though Bitcoin mining helps the local economy, so you either return revenues to pre-mining levels, or drive the leeches out. Either outcome is equivalent.
- tradedash 8y agoWhy is the solution to everything "pass a law"? there is an ocean of possible solutions to this problem yet people somehow always jump to "pass more laws" before other options are considered. I find that rather weird.
- matte_black 8y agoAgreed, they should just straight up cut off power to miners if they want them to go away.
- iovrthoughtthis 8y agoEverything looks like a nail when you've a hammer in your hand.
- bnegreve 8y agoWhat are the other solutions?
- trophycase 8y agoBecause when you live in a "civilised" society such as ours, an individual has no power outside of asking those with power to do things for us.
- wpietri 8y agoThese are public utilities, so changing their rate structures so significantly could well require legal changes. And if the solution is outside the utility, then it definitely requires legal changes, as then we're in to the realm of business regulation, and American business regulation is generally of the style of "everything is allowed except for these specifically forbidden things that have proven to be bad". Of course, if you'd like to propose some less intrusive solution I'm sure both we and the people of Central Washington would be all ears.
- deleted 8y ago[deleted]
- seunosewa 8y agoAlso, unless there is a law compelling them to charge miners the same prices, a new law is not needed. The utility can just implement it as a price policy.
- skybrian 8y agoThis is like asking why the solution to bad software is to commit more code. It's because the way to fix a bad law is to pass another law. Otherwise you're saying we should keep the bad laws we have and work around it some other way. Sometimes fixing the symptoms actually is better, but it's not surprising when people suggest changing the code.
- abecedarius 8y agoPatches on top of patches are not the only way to maintain software.
- MBCook 8y agoThere are externalities that they want to control for some people but not others or through a means other than a price hike on everyone.
- Faaak 8y agoSolution 2: don't subsidize prices. Problem solved.
- MichaelApproved 8y agoPrices aren't being outright subsidized. The other states who don't have the foresight of creating enough power for their own citizens have to pay premium prices to the states that properly planned infrastructure. The situation is being taken advantage of by miners who can exploit low rates that couldn't realistically be planned for when power production infrastructure was being created.
- UncleEntity 8y agoThe other states did plan ahead by getting long-term contracts for power, probably makes more sense to buy excess hydro-power than building a coal fired plant locally. Now they find they can't supply export power and local power because their crystal ball didn't predict there would be a power hungry technology moving in.
- DenisM 8y agoThere might be a challenge in wording the law properly. Miners might claim they are “content creators” or “scientific labs” to avoid the law, leading to protracted litigation. But yeah, raise the prices I say.
- tomhallett 8y agoI was just wondering about this - are the miners being charged taxes on the revenues generated?
- d0ugie 8y agoAccording to this Q&A from the IRS, yes, miners are on the hook: https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf: A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. (...) A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute self-employment income and are subject to the self-employment tax.
- BrandonM 8y agoThat's only federal tax. I don't think Washington has state income tax. And generally only large cities have local income tax.
- dahdum 8y agoIf you are going to forego energy neutrality, why stop with the bitcoin miners? Could they charge controversial businesses like adult entertainment more as well? Since they sell excess above local prices, all local usage drives up local prices.
- mark_edward 8y agoEnergy neutrality? Every utility has differential industrial and residential and commercial pricing, and energy discounts are super common for localities to lure development. China is the extreme end, where some places actually get free power, but even here there's all kinds of discounts our special rates. What do you think Amazon is trying to get cities to grovel for? Special tax discounts, energy rates, whatever they can get.
- dahdum 8y agoAs far as I know differential pricing is based on classes like industrial vs commercial and applied fairly. Incentives for development are super common of course, and controversial in themselves. This would be different though, targeting a business to pay more than other commercial enterprises. That's a targeted disincentive, and if not structured generically and applied fairly it's bad policy. Seems hardly different than Comcast deliberately slowing Netflix down, not to extract revenue, but to put them out of business.
- mark_edward 8y agoIt's just the opposite of targeting a business to pay less than other enterprises, which happens all the times as development incentives. I don't think it's any worse policy than that, it's just the flipside. In this case, due to the fact that by taking the town's total usage up, they raise the costs for everyone in the town, you could also just see as internalizing an externality.
- JamisonM 8y agoSubsidising energy prices for local consumers based on export revenues is widely practiced but is bad policy. The utilities should charge market rates for consumption and cut local rate-payers a cheque annually using a scheme that encourages energy saving practices.
- CPLX 8y agoIt's not necessarily bad policy it's just policy. The local residents are also the ones that generally live with the consequences and externalities of the local power generation industry.
- rdl 8y agoThey should get a check independent of consumption to pay for those externalities.
- JamisonM 8y agoLow-cosumption residents are then forced to live with the externalities of the generation infrastructure as well as the externalities of the behaviour induced by the electricity subsidy while benefiting the least from the subsidy - it seems like a pretty bad policy.
- dahdum 8y agoIf it’s a public municipal utility, any dividend in lieu of price reductions, should go to the local government, not the individual residents. The local government could then issue out checks to everyone if they want, but more likely it would go towards general budget and benefit everyone.
- JamisonM 8y agoI wouldn't be fussy about the rebate mechanism but funding a government based on energy prices can also be a tricky business - but even a poorly managed local government subsidised by energy exports is far better than local energy consumption subsidised by energy exports.
- HillaryBriss 8y agothree cents per kWh. nice.
- testplzignore 8y ago> But backers insist that a local mining sector, if allowed to grow, will attract other ancillary services, such as software development, and ultimately provide the Basin with some of the tech-fueled prosperity that Seattle has enjoyed. Wow. Any municipality who falls for this crock of shit would be crazy.
- tass 8y agoIt sounds good to people who don’t understand how mining works. Since this argument has been made however, they could make local prices contingent on number of jobs. If you consume x power employing less than y local employees, pay the export rate.
- zbentley 8y agoIn my limited understanding, that sounds like a highly unusual type of regulation by US standards. Are there any other practices/industries regulated in similar ways?
- Rapzid 8y agoUtilities; https://en.m.wikipedia.org/wiki/Public_utility https://en.m.wikipedia.org/wiki/Public_utility .
- tass 8y agoI’m not sure, though not allowing “crypto mining” specifically is also pretty unusual. In this way, they can protect their power industry and still remain attractive to other businesses who might bring other benefits to the area without having to redefine who is and isn’t allowed.
- stephengillie 8y agoIndeed, my first thought for how to exploit is already covered in the article: > In other cases, utility crews responding to unusual spikes in power usage have found racks of remotely controlled servers whirring away in empty apartments. House and apartment rental and sale prices are lower than the Seattle area as well. You could rent a 1 bedroom apartment as a "weekend getaway studio with attached server room". One alternative that would drive their intentions is that Bitcoin miners must be Washington State businesses, registered in state and with offices in-state. There are work-arounds for this, but it's another hurdle for foreign groups to overcome.
- Havoc 8y agoEasy...increase rates and set off profits directly against municipal levies. That way the average person on the street doesn't lose, yet the miners are encouraged to get lost.
- tsaoutourpants 8y agoThis. Your first 1,000kWh in a month are at a reduced rate. Each kWh thereafter is at a premium rate. Easy.
- jldugger 8y agoThis solves the rogue operator problem, but doesn't solve the bit where an operator comes in expecting to build a large mining installation. Even if they paid something close to the export premium (perhaps lower due to diminished transmission losses), the asks are larger than the utility currently provides. This leaves the utility with a dilemma. Bitcoin miners can up and move pretty easily, but the hydro dams are stuck for life. If somewhere cheaper pops up, or if a double spend attack causes a bitocalpyse, the utility has little recourse but to pass on the costs to remaining consumers.
- 11235813213455 8y agothis is quite irresponsible in a world suffering from over-pollution, global-warming, ..
- amorphid 8y agoAt what point will miners just start building there own power plants? And I wonder if environmental concerns will start forcing good and/or bad regulations of crypto mining.
- deleted 8y ago[deleted]
- hapnin 8y agoMiners could organize and generate some goodwill by offering to pay more for their power use. So that'll never happen.
- casefields 8y agoWarren Buffet and other billionaires love to complain that they pay too little in taxes. They could band together and give the IRS more revenue yet they don't. If billionaires won't do the right thing, why the hell do you think small town Joe Schmoe should?
- asdsa5325 8y agoBecause donating tax money doesn't fix the core problem, and will barely make a dent anyway.
- mindfulplay 8y agoIt's hard to explain the levels of stupidity in this. - people trading 'coins' in the same way Pokemon / WWF kids trade cards. - thinking this is actually a long-term 'investment' strategy (well its idiots trading with each other ...) - to top it off, siphoning off electricity and giving a load of shitty excuses 'it could be like Seattle's. I don't know where to begin with this Bitcoin crap; it's gotten crazy that so many naive people are into this plopping their hard-earned money into a well-functioning sinkhole.
- jimnotgym 8y agoWhilst I agree that it is a sinkhole, I also hold a fraction of a bitcoin just-in-case I am totally wrong! I don't want to say to my kids, "in my day you could still buy a bitcoin for only $7k."
- deleted 8y ago[deleted]
- briandear 8y agoThe other side is that you paid $7,000 for a pet rock.
- adsfasdfsad111 8y agoMy 7X year over year gains disagree with you ;)
- jimnotgym 8y ago> a fraction of a bitcoin Significantly less than $7k worth. I paid £30 for a framed print and that sits on the wall doing nothing (it's resale value is probably a fiver on ebay), I have even bought a particularly pleasant rock on more than one occasion, pet or not. I have no use for them. Some are sat on the side because I like to look at the impressions of the creatures who died in it. Some are embedded in my wife's engagement ring (a pointless piece of bent metal), I'm not sure I get any value for them any more since we are married. Why do we ascribe value to anything? I have a piece of paper in my wallet with a picture of the queen on. It's just a piece of paper, yet if I take it to the shop they will swap it for food! If I take it to the bank they will swap it for a number in a database (woop). Yet if I have a big number in that database or a lot of those special pictures I become a Big Man in society. Yet, through no fault of my own, if I wanted to swap those pieces of paper for pieces with dead US presidents on, I would get 20% less than I would have 2 years ago! It would be worse but the value of dead-president-paper is not as high as it was. Holding Queen-paper or Dead-president-paper sounds like a huge risk.
- mondoshawan 8y agoI don't quite understand something: why are the terms "unpermitted", "unauthorized", and "bootleg" used in the article? When I signed up with Seattle Public Utilities, I didn't sign an agreement saying I wouldn't mine or run servers out of my apartment.
- digianarchist 8y agoComing to a power utilities terms and conditions soon I would guess. I wonder what source they will use in response. Generators, solar, move to Quebec?
- oh_sigh 8y agoKeep reading after 'unpermitted', and the answer right there in the article: "...running computer servers far too large for the electrical grids of residential neighborhoods"
- mondoshawan 8y agoI read the article past that statement, but saw no reference to regulation or ToS that states this is a violation of any statute or local law -- "far too large" is what, exactly? My problem with that statement is that it doesn't actually answer the question -- it smacks of journalistic supposition and no root facts. I can run two refrigerators, two freezers and an AC unit all day and night and push myself into the top tier of energy usage, being the equivalent of a closet full of computers running 24/7, but all that would do is push myself into the top tier and cost me lots of moolah -- what's the line between authorized and unauthorized?
- bsaul 8y agoFWIU next gen DLT moving out of proof of work will probably change the electricity consumption profiles anyway. it would be really stupid to spend just a dime trying to meet that demand.
- blazespin 8y agoAnother strain crypto currency creates is on GPU resources. Resources that could be going to AI projects. It’s why prices haven’t fallen as fast as they should.
- louprado 8y agoSome more info on kwh price. "Beginning Jan. 1, 2012, Chelan County PUD moved to a flat residential rate for electricity of just 2.7 cents per kilowatt hour."[1] "energy costs can run as low as 2.88¢ per kWh and average 4.13¢ per kWh statewide for industrial customers." [2] [1] https://www.chelanpud.org/my-pud-services/rates-and-policies https://www.chelanpud.org/my-pud-services/rates-and-policies [2] http://choosewashingtonstate.com/why-washington/our-strengths/low-cost-energy/ http://choosewashingtonstate.com/why-washington/our-strength... [edit] The parent article does state a price of 3cents/kwh.
- rb666 8y agoThe problem is simple, power is too cheap in too many places. Fix that.
- darkstar999 8y agoYour solution to bitcoin mining is to raise power rates for everyone? Wow.
- pm24601 8y agoCommentators talking about solutions. There are already solutions in the article: > The three PUDs have been experimenting with policies that force miners to shoulder these extra costs and risks, while insulating ratepayers and the utilities themselves. >1 .Chelan County, for example, created a special rate for miners and other so-called “high density loads,” or HDLs, back in 2015, that was effectively twice the residential rate. > 2. Douglas County, meanwhile, began requiring miners to pay up front for any new infrastructure. > 3. Grant County PUD is establishing special rates applied to companies “whose primary revenue stream is evolving and unproven” and whose product is “vulnerable to extreme value fluctuations.”
- apo 8y agoHanging over May’s hearing was the fate of the Basin’s last big electrical customer: the Alcoa aluminum smelter, which employed more than 400 workers before it was idled several years ago thanks to competition from cheaper Chinese imports. Cryptocurrency mining won’t replace all those jobs — the process is heavily automated. But backers insist that a local mining sector, if allowed to grow, will attract other ancillary services, such as software development, and ultimately provide the Basin with some of the tech-fueled prosperity that Seattle has enjoyed. There's a lot to chew on here. The Alcoa plant story is practically a cliche. Yet another instance of what a world overflowing with cheap stuff looks like. The loss of the Alcoa plant means an ever bigger oversupply of electricity. Chelan County seems to have nothing to fill the gap. Why not sell the surplus to a buyer who will use the power locally? Who decides that an aluminum manufacturer is any more or less a legitimate business than an Bitcoin miner?
- therealdrag0 8y agoIt's just a part of our culture that speculators are looked down upon. They appear to be "predatory" and not produce anything of value. A manufacturer on the other hand, it is clear that it produces things that are valued by society at large. Similar reasons wall-street gets all the hate-er-aide.
- johnm1019 8y agoI like how it is done by the utility in San Francisco. Depending on the size of your place, and your main method of heating (electric or not), there are tiers setup (based on average weather in each month) where the first X kWh are the cheapest and correspond to what they think a dwelling of that size should need. Then the next Y kWh are about 30% more expensive, then after that there is a final tier which is 60% more expensive. In this way by saving energy you save doubly - you pay for less kWh, and what you do pay for is on a cheaper tier. I think this seems like an easy way to handle these miners, while allowing non "electricity-based" to continue unimpeded.
- trumped 8y agoDon't most areas charge you less for the first X kWh? I understand that you have 3 tiers, but wherever I went there was always 2.
- unpopular42 8y agoWhy do you like it? To me it sounds stupid, it's the same electricity, it costs the same to produce and all other side effects effects like network load or pollution are the same too. Why first X units would cost less? Even more idiotic is that it apparently depends on the size of your house, so if you have a larger home, you get more cheap electricity.
- vertex-four 8y agoIt does not cost the same amount to distribute different amounts of energy, as a matter of fact. If you build infrastructure capable of handling a certain amount of electricity plus some overhead, you want to disincentivise eating into that overhead before you can build better infrastructure.
- unpopular42 8y agoIf this was the case, it would make sense to charge for capacity, not for usage. Like, if you ever want to use more than X amps of electricity, you have to pay for upgraded wires and stuff. Doesn't explain charging less for first X units per month.
- ResearchAtPlay 8y agoThe problem boils down to: What is a fair electricity price to charge a company that adds very little benefit to the local economy? Two approaches would be: 1) charge the going local rate and treat them like any other business. 2) Charge the export rate to recover the lost revenue from outside electricity sales. 1) This is unfair, because it drives up local costs for everyone without providing local economic benefit. 2) I argue this is still unfair, because the export rate alone does not capture the value and revenue of the ability to provide backup power services (i.e. load shaping+ and firming generation++). Across the northern border, BC Hydro has also been flooded with miners asking to purchase power. The province is powered ~98 % by hydro and residential electricity rates are ~0.07 – 0.09 $US/kWh. Power export services subsidize local rates. Revenue from export services (~15 %) & revenue from local rate payers are set to recover utility costs, while maximizing economic benefit to the province. The export rate (i.e. the price of electricity that physically flows across the border) represents only a fraction of the revenue from export services. Hydro exports have the ability to shape load+ and firm contracts for power++. The key is that power doesn’t necessarily flow across the border when load shaping and firming contracts are in place. But customers pay good money for the ability to call upon that power when it is needed. That ability is diminished by the additional electricity demand of miners. The value of that ability is not captured in the raw export rate. +load shaping service: Import/export power so that the net-load a customer sees matches that customer’s contracted or self-generation. ++firming generation: Provide backup power to a customer who has agreed to provide power to a third party at a certain time. Should the generators of the customer fail, the exporter will quickly ramp up production to fill the gap. --- To those calling for “free markets”: Determining a fair rate to charge miners is difficult, because the economics of hydro power systems work differently than most other liberalized electricity markets. In liberalized markets, all generators bid how much electricity they are willing to supply at which cost, for the next hour or so. Then you stack all the cheapest generators until your demand is satisfied and, voila, that last dispatched generator dictates your market price for that hour. Large consumers can buy electricity at that fluctuating market rate, or choose to shut down. Here, miners would pay the marginal cost, fair enough. Markets with large hydro power stations can’t work like that. Withholding a large dam from generating electricity gives the operator enough “market power” to be the price-setting generator every hour year round, which gives that operator the ability to dictate prices. (edits: formatting)
- SlowRobotAhead 8y agoI’ve seen THREE cities in my state (cheap hydro power) invest money and land into “tech jobs” around cypto-commodities... Which is a roundabout way of saying my state is giving away money to people intentionally wasting power for personal gain under the false impression this is good for the economy.
- angel_j 8y agoWhen it comes to public utilities, commonwealth, and natural resources, the more you use, the more you should pay per unit.
- nodesocket 8y agoWouldn't a sliding scale that get's more more expensive beyond typical medium household levels prevent penalizing normal household/commercial usage? For example, a simple rule like 90th percentile usage and above is charged 25% more.
- deleted 8y ago[deleted]