St Petersburg continues to establish itself as a city of technology and innovation, and there’s a proposal in the works that could increase its relevance to a critical element of the blockchain industry: cryptocurrency miners. Miners earn revenue by performing energy intensive computations to verify blockchain transactions. City Councilmember Robert Blackmon has a plan to drastically reduce the energy costs for miners who move to St. Petersburg.
Blackmon broached the subject at the Oct. 14 city council meeting in response to Director of Public Works, Claude Tankersley’s presentation on the city’s “biosolids-to-energy” program and its subsequent shortcomings.
“The biosolids to energy project was approved before my time on the Council but has not lived up to its promise of massive returns in yield,” Blackmon told the Catalyst. “This is an opportunity to take a $93 million boondoggle and turn it into a huge win for the citizens and taxpayers.”
Catalyst publisher Joe Hamilton, who represents St. Petersburg in the Florida Business Blockchain Association, also praised the idea.
“Blockchain will emerge as a dominant technology in the coming years,” said Hamilton. “Miners are an important part of the ecosystem. To attract them and their businesses would be hugely valuable to St. Petersburg.”
Despite its benefits, mining some cryptocurrencies such as bitcoin remains energy-intensive. Miners are constantly looking for the most efficient way to power the complex computer systems required to produce the coins and are increasingly turning to green energy solutions. According to Forbes, miners in Texas act as a “shock absorber” for green energy, buying excess power when it is not needed and shutting down their rigs when demand surges.
Similar to what is happening with St. Pete’s biosolids-to-energy program and what Blackmon has proposed, Crusoe Energy has raised $250 million to mine bitcoin in remote oil and gas fields. Crusoe’s mining computers are powered using natural gas that would otherwise go to waste. When drillers complete new oil wells but do not yet have pipelines hooked up to gather the gas, or when there is an excess of natural gas, they burn it off or “flare” it, as releasing it into the atmosphere would be even worse for the environment.
Tankersley told city council the biosolids-to-energy program has lowered biosolid disposal costs, reduced energy needs and generated renewable energy. This renewable energy has led to a decrease in greenhouse gasses. However, the market for natural gas plummeted, preventing the city from further utilizing the energy created.
Council Chair Ed Montanari noted that when the project was first presented, council members were told the $93 million program would save customers $30 million. Tankersley explained it saves the city $2.2 million annually in operating costs, and the previous savings projection was based on a 20-year timeline. Montanari then stated the council was also told the project would generate enough biogas to fuel “a good part of our fleet” and asked Tankersley how much gas was produced and used by the sanitation fleet.
“Right now, we’re not using any with the sanitation fleet,” replied Tankersley. “We’re using all the gas to power the plant.”
Tankersley said the infrastructure is built so that when the economics of distributing the gas to the fleet is feasible, the city could then take that step. Minus a short gap in the pipelines, Tankersley said the infrastructure was in place to send the gas to the Tampa Electric Company, but that would incur an expense of $250,000 a year over a five-year term.
Tankersley added that it no longer makes economic sense to pursue that transfer.
“What we saw over the last four years or so is that the renewable natural gas market crashed,” said Tankersley. “It went down.”
Montanari asked if there was another city in Florida or the U.S. with a similar biosolids-to-energy program that was successful in fueling its vehicles or selling its biogas – to which Tankersley replied he was not aware.
Blackmon then confirmed the project incurred $93 million in capital costs while saving the city $2.2 million annually in operating costs. Blackmon said from an investment perspective, he was trying to calculate the time, value and operating costs, and “it does not seem great.”
Blackmon then relayed that he has spoken with someone “very well-regarded in this sphere” and who was “nationally and internationally recognized” and asked Tankersley if he had considered using the energy created from the biosolids for cryptocurrency mining operations.
Tankersley sounded somewhat surprised by the suggestion and said he had not previously considered that as an option.
Blackmon said he was not an expert on the matter, but “somebody well-regarded said that could be an alternative to try and recoup some of the costs on something like this.” He then said he would talk with Tankersley more on the matter at another time.
Hamilton believes such a move could send a message that St. Petersburg is a destination for innovation, especially within the blockchain industry.
“Miami has done a fantastic job of putting Florida on the map for blockchain,” said Hamilton. “We should absolutely leverage that head start with bold ideas, like repurposing the biogas project to attract miners.”
The idea comes as the U.S. replaces China as the leading destination for bitcoin miners. The Economist reported that in September 2019, China accounted for three-quarters of the world’s bitcoin mining operations. In May 2021, sensing a threat to the country’s authoritarian control over its financial system, China vowed to put an end to the entire industry.
This morning, the Wall Street Journal reported that more than a third of the global computing power dedicated to mining bitcoin is now drawn from rigs in the U.S. This is up from less than a fifth last spring, according to data from the University of Cambridge.
Claude Tankersley did not respond to requests for additional comment Wednesday.