US environment agency says it can regulate crypto farms - are datacenters next?

First Bitcoin, next bit barns? Unlikely

In a letter to the US Environmental Protection Agency (EPA) Monday a small group of Democrats called on the agency to enact policies designed to force US crypto-mining operations to report their annual energy consumption.

"This data is crucial, and your agencies should not have to rely on the good nature of the crypto or electric utility industries to obtain it. Indeed, the rolling series of scandals, scams, and corporate governance failures that have occurred in the crypto industry — most recently with the collapse of the crypto exchange FTX — underscores the need for strong mandatory rules that ensure the industry's compliance," the letter, penned by several outspoken environmental advocates, inducing Senators Elizabeth Warren, read.

The letter also alleges that the EPA has the authority to enact these reporting requirements under Executive Order 14067. Signed by President Joe Biden last March, the order titled "Ensuring Responsible Development of Digital Assets," establishes policy under which the federal government can take actions to reduce the risk imposed by digital assets, including those concerning the climate.

In light of the Democrat's concerns the EPA has acknowledged its authority under the executive order, with Associate Administrator William Niebling saying that the agency is examining a September report by the White House Office of Technology and Science Policy (OTSP) on the implications of crypto mining in the US and working to implement its recommendations.

While the focus of the letter from the Democratic politicos primarily focuses on crypto mining operations, it's not too far of a stretch to see how similar rules could be extended to force more datacenters to report their energy consumption and/or meet stricter sustainability guidelines.

As it stands, most hyperscale and cloud providers usually don't disclose the design capacity of their facilities, but it's not unusual for a datacenter campus to consume in the neighborhood of 60 megawatts.

Senator Sheldon Whitehouse of Rhode Island, one of the co-authors of the letter, is working on a bill to address the environmental implications of both crypto mining and conventional datacenters.

And according to a recent report by analysts at the Uptime Institute, regulation on datacenters may be more meaningful. While the OTSP report estimated that crypto mining accounted for 0.9-1.7 percent of US energy consumption in 2021, analysts point out that this data is likely out of date.

The OTSP report fails to "take into account the likely impact of Ethereum mining operations — estimated to account for one-quarter to one-third of industry consumption — moving from proof of work to proof of stake.

This transition, they note, is expected to reduce Ethereum's mining energy consumption by more than 99 percent. "Given that most, if not all, enterprise blockchain deployments use proof-of-stake validation and given the ability of proof-of-work infrastructure to move quickly to locations with minimal regulation and energy costs, much of this anticipated energy growth may not materialize.

By comparison, cloud, hyperscale, and colocation service providers continue to expand their footprints, it argues. In some cases, datacenter operators like Meta have postponed their investments to make heavier use of AI accelerators that may increase power consumption by an order of magnitude.

Senator Whitehouse's proposed legislation would impact any public or private datacenter or crypto farm with more than 100 kilowatts of equipment to report their consumption data to the Energy Information Administration. To put that in context, 100kW is roughly equivalent to 17 standard racks running at 6kW a piece. However, for datacenters engaged in AI or ML workloads that could be as few as 15 high-end GPU servers.

Uptime doesn't expect federal regulation of US datacenters to happen any time soon. "Legislative and regulatory processes and procedures in the US can be laborious, and final standards governing datacenter information and energy efficiency reporting are likely to remain several years away," they wrote.

However, state-level regulation may have a better chance.  A bill introduced in the Oregon state assembly would require any person who owns or operates a datacenter or cryptocurrency mining operation to cut greenhouse gas emissions by 60 percent by 2027 or risk stiff penalties. The state has already enacted similar regulation on fossil fuel power plants in 2021.

Meanwhile, across the pond, the European Commission's Energy Efficiency Directive, which also mandates new reporting and efficiency standards, is under review by the European Parliament. The directive should be expected signed into law this year. ®