An Italian town of 2,500 is experimenting with 'bitcoin mining'

The author authorized Wu Shuo for Alps Blockchain to publish part of the content reported by CoinDesk

Is Eco-friendly Bitcoin Mining in Italy Possible?

In Italy, environmentally friendly bitcoin mining is becoming possible with additional support for renewable energy producers.

This year, under Graziadei's leadership, Borgo d'Anaunia, with about 2,500 people, became the first Italian city to operate an encrypted data center. On a small shelf at the end of Alta Novella's historic turbine room are 40 state-of-the-art application-specific integrated circuit (ASIC) machines that power bitcoin, the world's most popular cryptocurrency.

Image via CoinDesk

Some regulators and lawmakers in the European Union are seeking to outlaw proof-of-work, under pressure from rising energy costs and concerns about meeting climate goals. But in Italy, the same mechanism has become an economic incentive for hydropower producers to continue or expand their renewable energy production.

Bordered by the snow-capped Alps, the northern region of Italy is home to dozens of hydroelectric plants of all sizes, thanks to an abundance of water and varying altitudes. In 2008, the municipality decided to reopen the facility by replacing the turbines, and the Italian government offered some incentives to the facility.

But last winter, there was little rain or snow in Borgo d'Anaunia, Graziadei said. In February, the valley was largely snow-free, save for a thin layer of ice on the road leading to the facility. Operating and maintaining hydropower plants therefore becomes an expensive burden. "Without the snow increasing the water level in the river, the power generation would be so low that we would have closed the facility for maintenance during those months in previous years," Graziadei said.

The state incentive, which included buying electricity produced at the facility for 0.20 euros (about $0.22) instead of the standard price of around $0.06, expired a few years ago.

Despite relatively unfavorable conditions, the factory is still running: the small amount of energy produced is used to run some bitcoin mining machines. "During periods of little precipitation like this winter, when the flow of water from the river is very low, this new technology allows us to maximize production and thus provide higher value to our facility," Graziadei said, adding that Adding, "Mining allows us to keep our facilities productive even when water levels are low.

Image via CoinDesk

Graziadei's main motivation for building a data center at a municipal hydroelectric power plant was economic. Municipalities do not mine or trade bitcoins. Alps Blockchain, an Italian technology company that built and maintains a mining farm in Alta Novella, bought the computing power generated by the facility’s mining farm at a price at least 35% higher than what the government pays for energy.

Alps Blockchain was born in 2018, and by focusing on hydropower, it found a solution to encourage the development of this business. Large mining farms are often installed in cold locations to save on processor cooling costs, or where electricity is cheap. In Italy, electricity prices are very high, but Alps Blockchain still managed to introduce Bitcoin mining to the country.

The co-founder of Alps Blockchain explains: We are faced with two problems: the sustainability of this energy-intensive activity and economic issues related to energy costs, which in Italy are not competitive compared to the rest of the world.

Graziadei, who has dabbled in crypto trading himself, said it would not be difficult to convince the city council and its constituents to build a data center: In the absence of government incentives, they would have to find a way to pay for the maintenance of the facility and turn it into a municipal A sustainable source of income for the authority. "Revenue from the Alta Novella power plant is used to maintain the facility, as well as the public work of the municipality to serve the community," Graziadei said.

Alps Blockchain mining farms are small operations compared to large mining facilities in European countries such as the United States and Sweden, which have thousands of mining rigs. Alps Blockchain’s hydropower plant has between 20 and 600 ASIC mining rigs. The company is at a larger hydroelectric plant in the city of Valstagna with 300 machines and is adding 150 more.

The Valstagna hydroelectric plant is a facility owned by a large local energy company. According to Giacomo Magoni, who manages the power plant’s mining project, since July 2020, the plant has been consuming 20-25% of its total electricity to generate Bitcoin hashrate out of 10 megawatts.

In November, Sweden’s financial and environmental regulator published an open letter calling for the European Union to ban crypto mining over energy concerns. It was not immediately clear whether Italian hydropower producers were affected.

Failoni believes that without bitcoin mining, Valstagna would not be able to invest in expanding its renewable energy production, and that Alta Novella would shut down completely this winter, unable to cover the costs.

Failoni said that both Italy’s renewable energy sector and the crypto economy would benefit from strong and clear regulations that target mining machine efficiency levels rather than specific consensus mechanisms. "One of the things that makes this kind of activity very energy-intensive is ... the hardware used is not very efficient. If they can make some regulations about only using efficient mining machines, only using renewable energy, it will definitely help. change," Failoni said.