Bitcoin, robotics, electric vehicles. Dazzled by the new, it is easy to forget something very retro behind all three. It is a factor that harks back to an era of technological change nearly two centuries old.
All consume vast amounts of electricity – which means the production of that commodity is the greatest overlooked challenge facing the modern state.
Keeping the lights on ranks with the defence of the borders as a first duty of government. The need to produce electricity cheaply to maximise economic growth has not commanded the same attention.
With the initiation of the so-called fourth industrial revolution, power literally resides in efficient generation as never before.
Recent reports have claimed that the production of Bitcoin has consumed as much electricity in recent months as the nation of Denmark – or more than the demands of three million American consumers. Another supposedly more conservative estimate posits that ongoing consumption for producing the blockchain that expands the Bitcoin base was equivalent to four billion watts or several nuclear power plants.
While these figures are big, they remain a fraction of the global energy market. America operates 99 nuclear reactors alone.
The growing demand is significant, given how new the technology remains. Likewise, electric vehicles must be plugged in. When states like France and Germany pledge to phase out the combustion engine by 2040, they are really presaging a surge in electricity demand.
The effects are bound to be distortionary. Already the establishment of so-called Bitcoin mining operations in China is causing concern about global warming targets. The Chinese power sector is dominated by coal, which is cheap but adds to the greenhouse effect on climate.
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If the Bitcoin craze really does take hold, Chinese planners will have their work cut out to keep up. The mania could, of course, go pop and lose steam quite quickly, as the collapse in the trading price showed at the end of last week.
Assume for a moment that cryptocurrencies are here to stay.
The Bitcoin miners prosper by performing large numbers of computer calculations. These crack puzzles and by doing so are rewarded with currency. To solve increasingly complex puzzles, more and more high-powered computers are engaged to perform expanding sequences of calculations. The demand for power comes under doublefold pressure.
And it is not just in the cryptocurrency realm that high-powered computing is a leading focus of investment. The oil giant BP last week unveiled a major new asset in the form of a supercomputer that could process material twice as fast as its last generation predecessor, helping to quadruple the capacity of its Centre for High-Performance Computing, which only opened in 2013.
In fact, the new technologies have something in common with the far less sexy metals and building materials industry. Here, carbon-rich states can hold comparative advantage. The rapid growth of Emirates Global Aluminium is one such example. The innovative construction locally of the carbon fibre circular roof for the Apple HQ in California is another.
As more than two dozen aluminium smelters closed in the US over the last quarter of the century, the price of electricity was just as big a factor as the cost of labour. Not all these businesses disappeared or ended up in China. In fact, several US plants ended up in tiny Iceland in the cold north Atlantic.
Iceland’s very competitive electricity prices stem from abundant hydro and thermal energy sources. For example, glacial meltwater is piped from giant manmade lakes to a plant 25 miles away where the flow drops on to turbines from half a mile up.
The Rocky Mountain Institute in the US has pointed out that Bitcoin miners have located in areas where hydro-schemes produce large amounts of electricity. Production costs can be as low as a few cents per kilowatt hour.
Iceland has also become a leading location for data centres, where it has a second advantage of cold temperature, which assists the efficient running of the machines.
As the scramble for expanded reliable electricity supply intensifies, there is a high stakes battle between the competing claims of renewables and nuclear.
More than a decade ago, Britain decided to embark on a new age of nuclear in a decision that has since been likened to the hubris of the pharaohs building the pyramids.
At the heart of the British scheme is the $26.7 billion Hinckley Point C nuclear reactor. To secure the upfront French and Chinese investment in the project, London agreed to a wholesale price that is double the current market price of electricity.
The troubled project has ominous implications for the French too, who must soon replace ageing nuclear reactors that account for three-quarters of current generation.
Getting the energy mix right could be the biggest power play of all.