Plattsburgh becomes first city in Upstate NY to ban Bitcoin mining. Will opportunities be lost?As I sit in the Koffee Kat Espresso Bar on Margaret Street in Plattsburgh, you wouldn’t necessarily know that the City was subject to a recent crypto-controversy surrounding Bitcoin mining. Its sleepy main street is reminiscent of many of the rust belt towns scattered across New England. Recently though the City of Plattsburgh voted to become the first city to ban bitcoin mining (and all cryptocurrency operations) citing concerns over energy consumption. A copy of LOCAL LAW P-3 OF 2018 can be found on the City’s website. The ban will be an 18-month moratorium in order to preserve natural resources, protect the health of residents and preserve the “character and direction” of the City.
This comes on the heals of a New York State Public Service Commission (PSC) ruling that local power authorities can charge higher rates to cryptocurrency developers citing concerns over power consumption. For an explanation on how exactly cryptocurrency mining uses so much energy check out this Washington Post article from December.
In full disclosure, I passed on an opportunity about five years ago to invest in bitcoin mining. Ironically my concern at the time was creating a large enough operation to achieve the economies of scale necessary to outweigh the estimated energy costs. Yup, I too passed on bitcoin mining because of energy. That’s a decision I sometimes regret depending on the price of bitcoin.
But I digress. Back to my coffee (which I might add is pretty delicious) and the point of this story.
The problem for Plattsburgh is that it only has an allotment of 104 megawatts of power per month. The largest bitcoin mining operation here is Coinmint LLC, which, according to at least one source, used roughly 10 percent of the City’s total power allotment through Q1. Another problem? If the City exceeds its allotment with Quebec Hydro, its rates double. In December and January this is exactly what happened and local residents saw their bills increase as much as $300 (according to testimony). Meanwhile the PSC says the average increase is closer to $10. To be fair, that is not an insignificant financial issue for towns and cities which may already be facing tightening budgets and struggling economic conditions. It’s also not isolated to Plattsburgh as this very same issue has become a recent problem in St. Lawrence County.
The fundamental question raised here is how upstate cities and towns like Plattsburgh are going to compete for high growth startups (and jobs) when they face competitive challenges like access to low cost energy and high-quality infrastructure like fiber—things most tech companies rely on. At the end of the day it is a cost benefit analysis for local municipalities. A bet they cannot afford to lose.
Unfortunately, when it comes to cryptocurrency operations these factors don’t give a clear answer. No doubt these operations are making a profit for their principles (some of which presumably is going back into the economy eventually), but much of the operation is done through automation and CPUs—resulting in few, if any, employees being hired. This creates an impediment to accessing lower cost power since much of the economic development incentives for cheap power are tied to job creation.
But what about the space these crypto-operations are utilizing? They presumably are paying rent, paying taxes, generating some degree of economic impact. In Plattsburgh mining companies are currently occupying an abandoned Ames department store and a former Georgia Pacific building. While this may be utilizing what would otherwise be abandoned or underutilized spaces, this is far from the best adaptive reuse project I’ve ever seen. But still, probably a net gain.
Some cryptocurrency operations are turning to more creative solutions. In Batavia, New York for instance, one operation is currently utilizing a rural power cooperative in order to ensure access to cheap power for mining operations. Other operations are turning towards green or renewable energy sources which should reduce the cost burden in the long run.
Still, this is a conflict which likely will not be going away anytime soon. The creation of advanced AI systems and automated technologies are likely going to require more, not less, power. Under this context, closing the door to innovation for upstate communities is not going to bode well for economic growth in the future. Finding a way to accommodate that growth however may not be easy. It is undeniable that the high energy consumption of crypto-operations is creating difficult challenges for local municipalities and residents. As they work on answers lets hope that creative, value-add solutions will be on the table.
Because closing the door to upstate shouldn’t be.
Original article can be found on the Upstate Venture Connect website: