The Green Side of Bitcoin (Part I)

Bitcoin mining will make use of surplus renewable energy in Kenya – by Christoph Bergmann

Some people accuse Bitcoin of “wasting energy” or being “bad for the environment”. In this series of articles we will show that this is not the case. Quite the opposite: studies show that Bitcoin mining can be crucial for turning renewable energies into a viable business. Our first article in this series is about an example for this from Africa.

Kenya Offers Surplus Geothermal Energy to Bitcoin Miners

Kenya is the African pioneer of geothermal power generation. Its leading energy producer KenGen is using geothermal wells at the volcanically very active Great African Rift Valley. Recently, they have offered Bitcoin miners surplus power that otherwise could not be used. Since Africa has no mining industry of its own yet, they should mainly target mining companies from the U.S., Europe and China.

KenGen plans to locate the miners at an energy park located at the company’s largest geothermal plant in Olkaria, about 120 kilometers from Kenya’s capital, Nairobi. It claims that surplus electricity will flow in a very stable manner due to the proximity to its source.

Geothermal energy plant in Kenya (image: KenGen)

The Kenyan Electricity Market

Kenya’s electricity demand reached a new record of 2,051 megawatts in May 2022. By comparison, Germany consumed 221.3 gigawatts in 2020, over a hundred times more. However, only 9 percent of Kenya’s total energy supply is based on electricity. 68 percent still comes from wood. In rural areas, only 60% of households have access to electricity. The electricity grid currently does not connect every Kenyan, because there is a lack of capital to invest in it. Bitcoin can fix this.

As Kenya’s largest electricity provider, KenGen provides about two-thirds of the total amount. Around 80 percent of the electricity it feeds into the grid come from renewable sources. Hydropower still has the largest share at 826 megawatts, but the main driver of growth is geothermal energy. Since 2014, its output has increased from 230 to 713 megawatts. KenGen plans to bring another 83 megawatts online soon. Another growing energy source is wind power.

Control room of a geothermal energy plant in Kenya (image: KenGen)

Untapped Potential

The potential of geothermal energy in the region is huge. According to estimates, 20,000 megawatts of geothermal energy are available from sources around the Great Rift Valley in East Africa. These are spread across several countries, from Ethiopia to Congo, but Kenya alone has a potential of 10,000 megawatts. The Geothermal Development Company is currently exploring at least nine more wells, several will be ready for exploitation soon.

The Great Rift Valley in Kenya

In terms of energy supply, Kenya is in a comfortable situation: it already has a strong hydropower base, a huge reservoir of geothermal energy sources, and a large untapped potential for photovoltaic and wind power.

However, there is a problem: the demand for electricity is growing more slowly than the supply. Kenya already has a grid capacity of 2,732 megawatts in 2019, while the recent peak in consumption is nearly 700 megawatts lower. Therefore two major consumers, Kenya Power and Lighting Co. Ltd., have suspended signing new contracts with suppliers in 2019. This has blocked more than 2,240 megawatts that were to be developed.

Suppliers hope that the Kenya National Electrification Strategy, initiated in 2018, will further expand access to electricity. According to this strategy, every Kenyan household should be connected to the grid by 2022. Severe challenges are the high building cost of the electricity grid and a lack of investment capital.

Due to these difficulties, Kenya is relying to a large extent on off-grid systems. This might be a temporary solution, but should be replaced by the more stable grid supply in the long term.

Geothermal energy plant in Kenya (image: KenGen)

Natural Allies

Bitcoin mining and geothermal energy seem to be natural allies in Kenya: The geothermal surplus energy can help Bitcoin become greener. Furthermore, Bitcoin mining can help energy providers market their surplus energy. Money generated by Bitcoin mining can provide urgently needed capital that can solve the investment backlog for expanding the power grid. 

Bitcoin mining can motivate KenGen and other companies to harness more of the available geothermal energy. Mining profits could be used for investments into infrastructure, establishing Kenya as an industrial hub with cheap green energy, thus providing more prosperity and a better standard of living for the Kenyan people.

To be continued

Christoph Bergmann is the editor of Bitcoinblog.de, Germany’s leading publication on cryptocurrencies. This article has been published there first in German. Translation and editing: Aaron Koenig