Bitcoin miners eye nuclear power as environmental criticism mounts

Bitcoin miners, under fire for their sizable environmental footprint, are forging partnerships with owners of struggling nuclear-power plants with electricity to spare.

The matchups have the potential to solve key issues facing each industry, executives and analysts say: Electricity-hungry bitcoin miners want stable and carbon-free power, while nuclear plants facing competition from cheaper power sources need new customers.

Talen Energy Corp. has entered into a joint venture with bitcoin-mining company TeraWulf Inc., which has started land development for a mining facility the size of four football fields next to its Pennsylvania nuclear plant. Nuclear generator Energy Harbor Corp. will provide power to a Standard Power mining center in Ohio starting in December.

"We are building demand adjacent to the existing nuclear plant," said Talen Energy President Alex Hernandez, who heads the subsidiary jointly developing the mining project near the Susquehanna Steam Electric Station.

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New nuclear projects are eyeing cryptocurrency miners as well: Startup Oklo Inc., which plans to build a small-scale fission power plant that can run on used nuclear fuel, has signed a 20-year supply deal with hardware and hosting firm Compass Mining.

"Both industry’s challenges are the other industry’s positives," said Sean Lawrie, partner at consulting firm ScottMadden Inc.

Mining bitcoin is an energy-intensive process. To unlock more of the currency, miners must solve mathematical puzzles that become increasingly complex, which means they require more computing power—and electricity. Mining a decade ago required only a person with a PC, but rising bitcoin prices and a limited supply have created a race. The way to boost the odds of figuring out the puzzle is to put more machines to work.

"At the core of bitcoin mining is energy and energy infrastructure," said Paul Prager, chief executive of TeraWulf.

The rise of vast mining operations has fueled criticism from environmentalists and others that growing use of fossil-fuel electricity for cryptocurrency could waste resources and worsen climate change. A tweet from Tesla Inc. Chief Executive Elon Musk expressing concern over the environmental impact of mining operations briefly caused bitcoin prices to fall in May.

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Nuclear power, meanwhile, has lost public favor in the wake of accidents such as Japan’s 2011 Fukushima disaster and has struggled to compete economically in the U.S.

Nuclear plants provide a steady source of emissions-free power, but like coal-fired power plants, many face a daunting challenge selling their output in wholesale power markets amid stiff competition from wind and solar power—and natural-gas generation, which became cheaper after the fracking boom led to huge new discoveries of the fuel.

"They’re still making money because they’re still running, but it’s very hard for them in the current power markets to recover a fair return on their maintenance investments," said Travis Miller, energy and utilities strategist for Morningstar.

Numerous nuclear plants have been retired in the U.S. in recent years, including the Indian Point facility outside of New York City formerly owned by Entergy Corp. With retirements likely to outpace new projects, nuclear is poised to decrease in the U.S. electricity mix in coming years, according to the Energy Information Administration.

Exelon Corp. in June said that it would shut two of three Illinois nuclear plants that failed to sell their electricity during the most recent wholesale power auction for PJM Interconnection, which operates a market serving 13 states and Washington, D.C. That led state lawmakers to approve a bailout this month to keep the plants running.

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Talen’s Susquehanna plant also had fewer megawatts clear the same PJM auction than the previous one in 2018. The outlook for Talen subsidiary Talen Energy Supply LLC was revised to negative by Fitch Ratings and Moody’s Investors Service. The upshot will be a decline in auction revenue of $209 million over 2022 and 2023, according to Fitch.

"We find ourselves in a place where the power markets continue to be oversupplied, and in general with a few exceptions, pretty weak," said Mr. Hernandez, Talen’s president. The company sees the bitcoin facility as key in building out a carbon-free digital infrastructure business, he added. It also plans a data center next to Susquehanna, and on Tuesday said it had secured another $175 million in capital for the projects.

While more nuclear-bitcoin tie-ups are expected, they aren’t likely to be large enough or happen quickly enough to save nuclear plants teetering on the edge of closure, said Bill Dugan, a director at Customized Energy Solutions, an energy advisory firm.

"It would have to be a lot of them aggregated together," Mr. Dugan said.

For bitcoin miners, the partnerships allow them to promote projects as having an environmentally friendly source of power.

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"That was a big differentiator for us," said Maxim Serezhin, chief executive at Standard Power, which is building a nuclear-powered bitcoin-mining facility at a former paper mill in Coshocton, Ohio. Standard Power’s formal name is 500 N 4th Street LLC.

Energy Harbor declined to comment and referred questions to Mr. Serezhin.

The Compass Mining deal with startup Oklo doesn’t include a set price for power, but Whit Gibbs, chief executive of Compass, said he is confident that the companies will agree on a price that allows for profitable cryptocurrency mining.

Jacob DeWitte, co-founder and chief executive at Oklo, said he had received inquiries from other bitcoin miners interested in the company’s 1.5-megawatt project using small modular reactors. It still needs federal approval, however, and isn’t likely to happen until sometime between 2023 and 2025, he said.

In Miami, Mayor Francis Suarez has been touting his hometown as a destination for cryptocurrency miners, exchanges and investment firms. Part of his pitch includes the nearby nuclear-power plant owned by Florida Power & Light Co., a subsidiary of NextEra Energy Inc. 

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Many environmental, social and governance, or ESG, concerns about bitcoin mining "come from the fact that a lot of the mining was being done in coal-producing countries," said Mr. Suarez.

Talks with Florida Power & Light officials have included whether mining facilities might be located near the nuclear plant, and challenges such as the lack of cheap land to build big warehouses for mining gear, Mr. Suarez said.

Florida Power & Light declined to comment on the discussions, but spokesman Bill Orlove said South Florida has become a relocation destination for the tech industry. "We look forward to supporting the continued innovation and growth those companies bring," Mr. Orlove said.