Technology

A Bitcoin Miner's Guide to America's Cheapest Electricity

Paul Ausick

Published: August 2, 2018 12:45 pm

Last Updated: January 11, 2020 7:58 pm

The average retail residential cost of a kilowatt-hour (kWh) of electricity in the United States is right around 10 cents. Like all averages, there are lower and higher costs. For large industrial consumers, the U.S. average falls below seven cents per kWh. In one U.S. city, Massena, New York, the industrial rate was a mere $0.02 per kWh. If your business uses a lot of electricity, Massena, located on the St. Lawrence River, is the place to be.

It didn’t take long for bitcoin miners to find Massena, nearby Plattsburgh and other U.S. cities where electricity was cheap. Mining for bitcoin is an energy-intensive process that by one estimate consumes 215 kWh of electricity just to verify one bitcoin transaction. That’s what bitcoin mining is, being the first to track and verify a transaction’s path through the blockchain. Once a miner has verified a transaction (called proof-of-work) the work is rewarded by a payment in bitcoin.

Because a single transaction may involve only a fraction of a bitcoin (currently trading on the futures market for around $7,700), some miners use thousands of computing devices to solve the complex mathematical transaction paths and run their equipment 24 hours a day, seven days a week. The more computing power a miner throws at a transaction, the better the chances of being the first to verify the transaction and get paid.

The state of Washington offers the cheapest average industrial electricity in the country at just 4.37 cents per kWh. The eastern part of the state, in particular, offers some of the lowest rates in the country, largely due to abundant hydroelectric generation. The industrial rate in East Wenatchee is 2.39 cents per kWh, and it’s no coincidence that Microsoft, Dell and Yahoo have all built massive data centers in the city. In nearby Quincy, the average industrial rate is 3.28 cents per kWh, still less than half the national average.

According to the U.S. Energy Information Administration, the following 10 states have the lowest average industrial electricity rates in the country.

1. Washington: 4.37 cents per kWh
2. Montana: 4.72 cents
3. Oklahoma: 5.14 cents
4. Louisiana: 5.15 cents
5. Arkansas: 5.23 cents
6. Nevada: 5.37 cents
7. Georgia: 5.54 cents
8. Texas: 5.57 cents
9. Kentucky: 5.62 cents
10. New Mexico: 5.62 cents

EIA does not report this data down to the city level, but ElectricityLocal.com allows searches by city and returns residential, commercial and industrial rates. The catch is that you have to know what city you’re looking for.

Bitcoin mining is not just a U.S. phenomenon. Other countries with cheap electricity are also attracting miners. At the beginning of this year, China mined about 60% of the world’s bitcoin but provincial governments have begun shutting down “illegal” mining operations. Iceland, where clean, renewable geothermal energy generates the nation’s electricity, is a current hotspot. Canada, like the United States only more so, has abundant hydropower resources and electricity costs can drop below four cents per kWh for mining companies. Russia is rich in hydro and nuclear generation, and the country is actively courting more mining operations.

The cheapest country for miners is Venezuela, where one estimate puts the cost of mining one bitcoin at $531, less than a third that of Uzbekistan, the next cheapest, where it costs $1,788 to mine one bitcoin.

Meanwhile, back in the United States, Plattsburgh, New York, has halted new bitcoin mining operations while the city develops regulations to rein in power consumption. Massena, soon to be suffering from the 2019 closure of an Alcoa aluminum smelter and still wounded from the 2011 shutdown of a General Motors plant, reached an agreement with Coinmint, the bitcoin miner, to lease the firm the space it had already illegally commandeered and allow the miner to operate 16,000 mining computers. Following a moratorium on mining imposed by the New York Power Authority, another cryptominer, Blockchain Industries, scrapped plans to build a mining operation in Massena that would have cost about $600 million and created 500 jobs.