The pilot project inspired a wave of volcanic emojis from President Nayib Bukele, who made bitcoin legal tender in September.
At a geothermal power plant near El Salvador’s Tecapa volcano, 300 computers roar inside a trailer as they perform complex mathematical calculations day and night to verify transactions for the cryptocurrency bitcoin.
The pilot project inspired a wave of volcanic emojis from President Nayib Bukele, who made bitcoin legal tender in September, and promises of cheap, renewable energy for the so-called “mining” of bitcoin. Such operations, including those on an industrial scale, have been harshly criticized elsewhere in the world for the massive amounts of electricity they use and the resulting carbon footprint.
Bukele and others say El Salvador’s geothermal resources – generating electricity from high-pressure steam produced by the volcano’s heat underground – could be a solution. But the situation in this small Central American country is more complicated.
“We do not spend resources that contaminate the environment, we do not depend on oil, we do not depend on natural gas, any resource that is not renewable”, Daniel Álvarez, president of the Rio Hydroelectric Executive Board Lempa, who oversees the plant, said during a tour on Friday.
Cheap electricity and a supportive government are the two key factors in attracting bitcoin mining operations, said Brandon Arvanaghi, a bitcoin mining consultant.
Two years ago, China supplied about three-quarters of all the electricity used for crypto mining, with operations flowing in to take advantage of its cheap hydropower. But the government started restricting mining, and in September declared all transactions involving bitcoin and other cryptocurrencies illegal.
This led to a rush to set up mining operations in other countries.
It would seem fortuitous to Bukele, who shocked the nation and many around the world by announcing last summer that bitcoin would be legal tender alongside the US dollar in El Salvador. The president sold the plan in part as a way for Salvadorans living abroad – mainly in the United States – to send money to their families cheaply. It also made him a darling in the bitcoin world.
But the launch was stormy. The digital wallet that Salvadorans had to use to perform basic transactions experienced a problematic rollout. Some users said they just wanted the $ 30 offered by the government as an incentive. There are continuing concerns that the digital currency, which claims to be controlled by no government, may invite criminal activity.
So far, the United States has been a big winner in attracting more bitcoin mining operations, especially the state of Texas, which has abundant renewable energy and a deregulated market.
Bitcoin mining in El Salvador appears to have a Bukele-friendly government, but cheap electricity is only a promise so far.
El Salvador imports about one-fifth to one-quarter of its electricity. The rest of the production is divided between hydroelectricity, geothermal energy and fossil fuel power plants.
Geothermal energy represents about a quarter of the country’s energy. El Salvador has 23 volcanoes.
“When you add these renewable sources like these large abundant areas, a ton of renewable sources and a friendly diet, it can be very appealing and El Salvador can fit that model very well,” Arvanaghi said.
At present, El Salvador’s electricity is not considered particularly cheap.
The GlobalPetrolPrices.com website, which publishes retail energy prices around the world, places electricity costs for households and businesses in El Salvador well above the global average.
Arvanaghi said bitcoin mining spurs expansion of renewable energy production by providing strong demand for cheap electricity, and miners have shown a willingness to put some of their machines on hiatus at low prices. times when there is less electricity available on the grid.
Bukele’s promise of cheap energy for bitcoin mining should then involve a subsidy, at least until renewable capacity rises and prices drop.
Luis González, director of public policy at the non-governmental organization Salvadoran Ecological Unit (UNES), said if El Salvador can deliver cheaper renewable energy, it should go to families in the country, not to mining operations. of cryptocurrency.
“The cheapest, cleanest and most national energy would ideally be for the people,” González said.
He also warned that geothermal-like advertising carries caveats. It’s cleaner than burning fossil fuels, he said, but it has its own impacts. Sites where wells are dug to draw underground heat have an impact on local habitat. He also expressed concern that aquifers could be contaminated at geothermal sites.
“We are the country with the least access to water in Central America,” he said, noting that was the main reason El Salvador banned metal mining four years ago. years.
Many bitcoin mining operations have also focused in colder climates, because beyond electricity to power the machines there is more to keep them cool, González said. El Salvador has a tropical climate.
At Berlin’s geothermal power station, a two-hour drive east of the capital, Gustavo Cuellar, special projects advisor for the Rio Lempa Hydroelectric Executive Board, oversees mining. He said the specialized mining machines at the site use 1.5 megawatts of the 102 megawatts produced by the plant. El Salvador’s other geothermal power plant at Ahuachapan produces an additional 95 megawatts.
Together, the plants provide electricity to 1.5 million of El Salvador’s 6.5 million citizens.
Álvarez said that the project will develop over time “because we have the renewable energy resource, we have a lot of potential to continue producing energy to exploit”.
Sherman reported from Mexico City.
