Central Washington Jurisdictions Call 'Time Out' On Bitcoin Boom

Apr 9, 2018

When the price of one bitcoin soared to almost $20,000 late last year, an influx of entrepreneurs and developers came to the Pacific Northwest in search of cheap hydropower to do bitcoin "mining."

But now cities, counties and utilities at the epicenter in central Washington are hitting the pause button. The cryptocurrency businesses bring tech jobs—but they are also electricity hogs.

Without inside information, you probably would never suspect that cryptocurrency fortunes are made and lost in adjacent Chelan, Douglas and Grant counties. The best giveaway that something big is going on is the nonstop, 24/7 clatter and hum from massive cooling fans blowing warm air out of repurposed warehouses, used cargo containers and even self-storage units. The fans are cooling specialized computer chipsets packed to the brim, data center style.

"There is huge emerging technology opportunity for this region to maintain a first-mover advantage in this technology space,” said Wenatchee local Malachi Salcido.

Salcido is developing multiple bitcoin mines, which are all about computing power rather than digging minerals. The digital miners earn cryptocurrency, virtual money, for processing and recording transactions on a decentralized global network.

Zoning controls and moratoriums

The draw of the Wenatchee Valley is its rock-bottom power rates -- thanks to abundant hydropower -- and the mild climate, which is helpful for efficient cooling. But cities and counties in north central Washington seem unsure whether to embrace this new line of business.

In the past month-and-a-half, the Wenatchee City Council, the City of East Wenatchee and city councils in nearby Leavenworth, Entiat and Chelan have all passed emergency zoning controls or outright moratoriums for six or 12 months on cryptocurrency operations.

A company called Giga Watt is building this campus of pre-wired, ventilated ''pods'' in East Wenatchee to lease bitcoin mining space to remote owners.
Credit Tom Banse / Northwest News Network

Much of this action was spurred by the Chelan County electric utility, which has its own moratorium on processing new hook-ups for large loads. Chelan County Public Utility District Customer Service Director Andrew Wendell and colleagues made the rounds of local governments.

"We're not sure exactly how much of the cryptocurrency that the community would like us to serve,” Wendell said. “That's one of the major questions, 'How much do you want?' And if you do want it in your community, where do you plan for it?"

Wendell said the specialized data centers that process and record virtual currency transactions suck vast amounts of electricity. And there's only so much spare electric capacity left.

"The cryptocurrency applications, many of them that we're getting, are taking up all of the remaining capacity in distribution circuits that were designed to bring on schools, housing and other commerce—other organic growth,” Wendell said in an interview.

The Chelan County Board of Commissioners is next in line to consider emergency zoning controls on cryptocurrency operations. County Commissioner Keith Goehner said it makes sense to take a time out before getting overwhelmed.

"We hope we're on the front end,” he said. “We don't want to play defense and come in a reactive mode. We'd rather be proactive."

Could miners seek greener pastures?

Bitcoin miner Salcido said the local governments and utilities should be careful not to kill a goose that lays golden eggs. He founded and runs Salcido Enterprises in Wenatchee.

“If the policies are too onerous—or if they take too long to develop and implement—this development opportunity will go elsewhere,” Salcido said.

Salcido Enterprises CEO Malachi Salcido in one of his data centers, aka bitcoin mine.
Credit Salcido Enterprises

Salcido said a $100 million expansion he envisions in the Wenatchee Valley will likely be delayed. He said he'll redirect that bitcoin data center investment to another Western state instead, but wouldn’t say where.

"Now we do hope to come back to Chelan County and negotiate the right kind of builds," Salcido said. "Because that's really what they're aiming for."

Previously permitted bitcoin mining projects are proceeding including a development of leased mining pods called Giga Watt and several Salcido projects on Port of Douglas County property across the Columbia River.

The biggest of these current projects will draw 20 megawatts, which at roughly the equivalent of 9,000 average local homes, would be more than enough to power all the households in the city of East Wenatchee.

Industry ups and downs

The price of bitcoin and related digital currencies has fallen by around two-thirds from last year's peak, but interest in the Northwest's cheap electricity from cryptocurrency entrepreneurs has not let up much according to Mid-Columbia utilities.

"We haven’t declared a moratorium on large-load hookups," Grant County Public Utility District spokeswoman Christine Pratt wrote in an email. "We’re still accepting applications for power, but applicants are put on a waiting list until we finish an analysis of our available capacity, rate policies and rate classes. This process is expected to take through the end of the year. We anticipate we’d need to significantly expand our capacity – transmission lines, distribution lines, substations, and more to supply the large demand of cryptocurrency mining without jeopardizing the excellent quality of electric service all our other customers deserve and depend on."

Lately, business representatives have appeared before some of the elected councils or governing boards to plead for more flexibility with the valley’s effective “pause” on new bitcoin operations. Nick Martini of Half Moon Bay, California, told the Chelan County PUD Board last week that the utility’s moratorium on processing new large load hookup applications put his plans to open a small bitcoin mine “in a bad spot.”

“I’d like to go into this experiment and I think do something that will actually be beneficial for Wenatchee, but I’m in a situation where I can’t really win,” Martini said. “I’m asking for the Board to consider a more flexible approach.”

Related issues causing civic leaders misgivings include how to contain unauthorized bitcoin miners in residential zones, where power-hungry mining rigs could potentially overwhelm local circuits or spark fires. The volatility of cryptocurrency valuations, hacking, use of digital currency by criminal enterprises and the uncertainty about whether today’s boom will soon turn to a bust all feed into a go-slow approach.

Salcido said the software technology underlying cryptocurrency, which is called blockchain, is here to stay.