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When Will Bitcoin Hit Tesla’s 50% Renewables Energy Target?

Bitcoin has recovered some of its former momentum. Having fallen as low as $31,500 on June 8, it has since returned to $40,000, helped in no small part by a tweet from Elon Musk. The Tesla CEO revealed that the carmaker will resume accepting bitcoin as payment for its cars, but not until reliable evidence indicates that renewable energy comprises at least 50% of the total energy used by Bitcoin miners.

Even though Tesla hasn’t begun accepting BTC again, this admission that it might was apparently enough to spend the bitcoin market shooting upwards. Since Musk’s tweet on June 13, bitcoin’s price has risen by just over 14%. This indicates the disproportionate power Musk has over the market, yet it also indicates the likely impact Tesla will have when it actually does resume accepting bitcoin as payment.

But when is this likely to happen? Certain prominent figures within crypto have responded to Musk by claiming that Bitcoin is already mostly powered by renewable energy, although this is likely false and based on a misunderstanding of data. Instead, research from Cambridge University’s Centre for Alternative Finance indicates that renewables account for 39% of the total energy used by miners, and that it may take around two years or more for these miners to reach at least 50%.

When will Bitcoin be powered by at least 50% renewable energy?

Elon Musk and Tesla Set Bitcoin a 50% Renewables Target

Responding to speculation that Tesla had sold all of its bitcoin and perpetrated a large-scale pump-and-dump, Musk confirmed that the carmaker has sold only 10% of the 46,000+ bitcoin it purchased in February (and this 10% was sold to ‘test liquidity’). He also confirmed that Tesla will resume accepting bitcoin when “there’s confirmation of reasonable (~50%) clean energy usage with positive future trend.”

Source: Twitter

Bitcoin supporters were quick to pounce on this declaration, claiming that miners are already using substantially more than 50% renewable energy.

Source: Twitter

As mentioned above, the best available research on Bitcoin’s energy usage — Cambridge’s Global Cryptoasset Benchmarking Study — contradicts claims that miners use at least 70% renewables as a proportion of their total energy consumption.

Instead, what the latest edition of the study finds is that 76% of miners use renewable energy “as part of their energy mix.” In other words, 76% of Bitcoin miners use green energy some of the time. This doesn’t mean that 76% of all energy used by Bitcoin comes from renewable sources.

According to Cambridge’s data (which was culled from 105 mining entities), 39% of the total energy used in Bitcoin mining comes from green sources. Such sources mostly involve hydroelectricity, with wind and solar energy remaining marginal (and far behind coal and gas).

Source: Cambridge Centre for Alternative Finance

When Will We Get to 50%?

Assuming that 39% is a more or less definitive figure, when can we expect Bitcoin to hit 50%?

Predictions are always a fraught business, with the Centre for Alternative Finance declining to provide us with a projection for the purposes of this article. However, at the very least, previous increases offer some hint of when to expect a big Tesla-induced price surge.

Cambridge’s previous Global Cryptoasset Benchmarking Study was published in December 2018, with data being collected up until July 2018. For the latest survey, data was collected between March and May 2020, indicating a 22-month gap between the endpoints of the periods covered by the two studies.

In this nearly two-year interval, the share of renewables in Bitcoin’s total energy consumption increased by 11%, from 28% to 39%.

Assuming a conveniently linear trajectory, we could therefore expect Bitcoin to hit the 50% target in roughly two years from May 2020. Put simply, expect 50% by May 2022.

However, this simple picture is complicated by a number of factors. First of all, the International Energy Agency has predicted a 13% decline in the growth of renewable energy capacity in 2020 compared to 2019. Likewise, peer-reviewed research has shown that Covid-19 has decelerated the rollout of renewables in developing nations.

Given the impact of the coronavirus pandemic on economic development, it would probably be wise to assume that Bitcoin won’t move to 50% renewable energy use in exactly two years. It may take a little longer, with something like the end of 2022 or the middle of 2023 looking more realistic.

Again, the situation is complicated. In fact, Cambridge’s researchers note that different methods of calculating the use of renewables result in different estimates for their overall share in Bitcoin’s total energy consumption. For instance, by using survey data from SHA-256 hashers and its own Cambridge Bitcoin Electricity Consumption Index, it arrives at an estimate of only 29%.

This would push the 50% target even further into the future, perhaps to 2024 or 2025.

This may seem discouraging, but it’s worth remembering that the trend is very much in the direction of more (and not less) renewable energy. As we’ve written in the past, China’s share of the global Bitcoin hashrate is gradually declining, with the United States in particular leading the charge of other nations occupying an increasing share. This is a positive development, since as the table above illustrates, the regional average share of renewables among miners in North America stands at 66%, whereas in the Asia Pacific region (where China is located) this percentage is only 25%. This would suggest that Bitcoin will become greener the more mining moves out of China, which is a process that’s gaining speed as the Asian nation expels miners.

Dependence on Tesla

If the 50% threshold really is three or four years away, it suggests the market really should stop waiting for Tesla to make a move before making moves of its own. Not only is Musk’s assurance that Tesla will resume accepting bitcoin entirely informal, but it’s also pretty vague, with the use of a tilde (“~”) indicating that the carmaker may wait until the share of renewables rises even higher than 50%.

On the other hand, you could also argue that the real story here is that Bitcoin is so starved of adoption and investment from other big companies that it remains utterly dependent on Tesla. This still appears to be the case, given how quickly the market reacted after Musk’s tweet. Fortunately, when it does eventually reach 50% renewable energy use, its success in cleaning itself up will have won over many other companies, reducing its reliance on Musk.

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CryptoVantage Author Simon Chandler

About the Author

Simon Chandler

Simon Chandler is a journalist based in London. He writes about technology, markets and politics, and has bylines for Forbes, Digital Trends, CCN, Wired, TechCrunch, the Verge, the Sun, the New Internationalist, and TruthOut, among many others. His Twitter handle is @_simonchandler_

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