BERLIN, EL SALVADOR: At a geothermal power plant near El Salvador鈥檚 Tecapa volcano, 300 computers whir inside a trailer as they make complex mathematical calculations day and night verifying transactions for the cryptocurrency bitcoin.
The pilot project has inspired a rash of volcano emojis from President Nayib Bukele, who made bitcoin legal tender in September, and promises of cheap, renewable energy for so-called bitcoin 鈥渕ining.鈥� Bukele and others say El Salvador鈥檚 geothermal resources 鈥� generating electricity from high-pressure steam produced by the volcano鈥檚 subterranean heat 鈥� could be a solution. But the picture in the tiny Central American country is more complicated.
鈥淲e don鈥檛 spend resources that contaminate the environment, we don鈥檛 depend on oil, we don鈥檛 depend on natural gas, on any resource that isn鈥檛 renewable,鈥� Daniel Alvarez, president of the Rio Lempa Hydroelectric Executive Commission, which oversees the plant, said during a tour on Friday.
Cheap power and a supportive government are the two critical factors for attracting bitcoin mining operations, said Brandon Arvanaghi, a bitcoin mining consultant.
Two years ago, China provided about three-quarters of all the electricity used for crypto mining, with operations flocking to take advantage of its cheap hydroelectric power. But the government began restricting mining and in September declared all transactions involving bitcoin and other cryptocurrencies illegal.
That has led to a scramble to set up mining operations in other countries.
It would appear to be fortuitous for Bukele, who shocked the nation and many around the world with his announcement last summer that bitcoin would become legal tender beside the US dollar in El Salvador. The president sold the plan in part as a way for Salvadorans living overseas 鈥� mostly in the US 鈥� to send money home to their families more cheaply. It also made him a darling of the bitcoin world.
Bitcoin mining in El Salvador would appear to have a supportive government in Bukele, but cheap electricity is so far just a promise.
El Salvador imports about one-fifth to one-quarter of its electricity. The rest of production is divided among hydroelectric, geothermal and plants fired by fossil fuels.
Geothermal accounts for about a quarter of the country鈥檚 energy. El Salvador has 23 volcanoes.
鈥淲hen you add these renewable sources like these vast abundant areas, a ton of renewable sources and a friendly regime it can be very attractive and El Salvador may very well fit that model,鈥� Arvanaghi said.
Right now, El Salvador鈥檚 electricity is not considered particularly cheap.
The website GlobalPetrolPrices.com, which publishes retail energy prices around the world, puts electric costs to households and businesses in El Salvador well above the global average.
Arvanaghi said that bitcoin mining incentivizes the expansion of renewable energy production by providing high demand for cheap power and that miners have shown themselves to be willing to pause a portion of their machines at times when there is less power available from the grid.
Bukele鈥檚 promise of cheap power for bitcoin mining then would have to involve a subsidy, at least until renewable capacity expanded and rates declined.