Introduction The retransmission of television signals to subscribers of cable, telephone company (telco), and satellite services has been governed in part by the Satellite Television Extension and Localism Act Reauthorization Act of 2014 (STELA Reauthorization Act; P.L. 113-200 ). Some provisions of this law, which amended the Copyright Act of 1976 and the Communications Act of 1934, were set to expire at the end of 2019. As described in " Legislation ," with the enactment of the Satellite Television Community Protection and Promotion Act of 2019, and the Television Viewer Protection Act of 2019 (Titles XI and X of Division P, respectively, of the Further Consolidated Appropriations Act, 2020 P.L. 116-94 ), Congress permanently extended certain Copyright Act and Communications Act provisions that affect direct broadcast satellite service to viewers in rural areas; limited the ability of separately owned broadcast stations to jointly negotiate with cable and satellite operators over the retransmission of television signals; and affirmed the role of the Federal Communications Commission (FCC) in resolving disputes that could potentially interrupt television service to subscribers of cable, telephone, and satellite services. In addition, Congress amended the Copyright Act to restrict the number of households eligible to receive non-local broadcast television signals via satellite distributors, and encouraged DIRECTV, a satellite operator, to retransmit local broadcast television signals, where available, in all local television markets. Congress amended the Communications Act to permit small video programming service distributors to negotiate collectively with large broadcast station groups, and increase transparency in bills for new customers of video distribution services. To provide context for the current debate, this report provides background information about how households receive television programming, how the television industry operates, and how the Copyright and Communications Acts determine what programs viewers receive. After describing the now-repealed provisions of the copyright act, the report summarizes the provisions of the Copyright and Communications Act enacted by Congress in 2019. Finally, it addresses the relationship between the new provisions and FCC media ownership rules, which the FCC amended in December 2019. Background A household may receive broadcast television programming through one or more of three methods: 1. by using an individual antenna that receives broadcast signals directly over the air from television stations; 2. by subscribing to a multichannel video programming distributor (MVPD), such as a cable or satellite provider or a telco, which brings the retransmitted signals of broadcast stations to a home through a copper wire, a fiber-optic cable, or a satellite dish installed on the premises; or 3. by using a high-speed internet (broadband) connection. A household may subscribe to a streaming service either that includes broadcast television programming on an on-demand basis, or as a package of prescheduled programming, that is, a "virtual MVPD" (vMVPD). As Figure 1 indicates, the total number of U.S. households subscribing to an MVPD has declined over the past 10 years. In 2010, about 104.2 million households subscribed to an MVPD, compared with about 87.4 million households in 2019. In place of MVPDs, an increasing number of households rely on video provided over broadband connections (including vMVPDs) or via over-the-air broadcast transmission. Currently, two direct broadcast satellite providersâDIRECTV and DISHâoffer video service to most of the land area and population of the United States. As of June 2019, DIRECTV had approximately 17.4 million U.S. subscribers, while DISH had approximately 9.5 million U.S. subscribers. Both have lost subscribers since September 2014, when DIRECTV had approximately 20.2 million U.S. subscribers and DISH had approximately 14.0 million U.S. subscribers. Broadcast Television Markets Federal Communications Commission Licensing and Localism The FCC licenses broadcast television station owners for eight-year terms to use the public airwaves, or spectrum, in exchange for operating stations in "the public interest, convenience and necessity," pursuant to Section 310(d) of the Communications Act. In 1952, the FCC formally allocated television broadcast frequencies among local communities. The basic purpose of the allocation plan was to provide as many communities as possible with sufficient spectrum to permit one or more local television stations "to serve as media for local self-expression." Television Communities vs. Local Television Markets Until the mid-1960s, the television audience research firm the Nielsen Company restricted its measurement of television station viewership to the major metropolitan areas that were the first to have broadcast television stations. Among other factors, the station considers the estimated number of viewers it attracts with programs when determining the prices that it can charge advertisers. Thus, station viewership plays a significant role in a station's ability to generate revenue. After hearings in the House of Representatives produced accusations that stations licensed to large cities were pressuring the rating services not to measure audiences of stations licensed to smaller cities, Nielsen began to assign each U.S. county to a unique geographic television market in which Nielsen could measure viewing habits. Nielsen's construct, known as Designated Market Areas (DMAs), has been widely used to define local television markets since the late 1960s. The definitions of DMAs are important in determining which television broadcast signals an MVPD subscriber may watch. Nielsen generally assigns each county to one of 210 DMAs based on the predominance of viewing of broadcast television stations in that county. In addition, Nielsen assigns each broadcast television station to a DMA. Nielsen bases each station's DMA on the home county of its FCC community of license. Stations seek to have their signals reach as many people as possible living within their DMAs. They generally have little incentive to reach viewers living outside their DMAs, as they are typically unable to charge advertisers for access to those viewers. Broadcast stations' contractual agreements with television networks and other suppliers of programming generally give them the exclusive rights to air that programming within their DMAs. Advertisers use DMAs to measure television audiences and to plan and purchase advertising from stations to target viewers within those geographic regions. Retransmission of Broadcast Signals via MVPDs Figure 2 illustrates the relationships among viewers; broadcast television stations; cable, telco, and satellite operators; cable and broadcast networks; and owners of television programming content. Related Communications Laws Generally, subscribers to cable, telco, and satellite services may receive television stations located within their DMAs as part of their video packages. Whether or not subscribers do so, however, depends in part on the decisions of broadcast stations to require these services to retransmit their signals or to opt instead to negotiate for compensation. In addition, satellite operators may choose not to provide any local broadcast service in a particular DMA. The Communications Act gives broadcast stations and satellite operators the rights to make these choices. Must Carry; Carry One, Carry All Every three years, commercial broadcast television stations may choose to require cable, telco, and satellite operators to retransmit their signals. By statute, a cable operator or telco must carry the signals of all television stations seeking "must carry" status and assigned to the DMA in which the cable operator is located. Satellite operators are required to carry the signals of all stations assigned to a DMA that seek must carry status to viewers in that DMA, if they choose to carry the signal of at least one local television station in the market. Policymakers often call this provision "carry one, carry all." The applicability of these provisions to telcos is uncertain. Due in part to the carry one, carry all provision, DIRECTV has opted not to retransmit any local broadcast television stations in 12 DMAs. They are Alpena, MI; Bowling Green, KY; Caspar-Riverton, WY; Cheyenne, WY/Scottsbluff, NE; Grand Junction, CO; Glendive, MT; Helena, MT; North Platte, NE; Ottumwa, IA; Presque Isle, ME; San Angelo, TX; and Victoria, TX. Retransmission Consent In lieu of choosing must carry status, commercial broadcasting stations may opt to seek compensation from cable, telco, and satellite operators for carriage of their signals in exchange for granting retransmission consent. In contrast to the must carry laws, which differ for cable and satellite operators, the retransmission consent laws apply to all MVPDs. If a broadcast station opts for retransmission consent negotiations, MVPDs must negotiate with it for the right to retransmit its signal within the station's DMA. In addition, cable operators may negotiate with the station for consent to retransmit the station's signals outside of the station's DMA. However, the contracts that broadcast stations have with program suppliers, such as television networks, may limit the stations' ability to consent to the retransmission of their signals outside of their markets. Most television broadcast stations are part of a portfolio owned by broadcast station groups. Most cable systems are part of multiple-system operations owned by corporations. Negotiations over retransmission consent generally occur at the corporate level, rather than between an individual station and a local cable system. Greater competition among MVPDs has increased the negotiating advantage of broadcast television stations since 1993, when they first had the right to engage in retransmission consent negotiations. At that time, large MVPDs refused to pay broadcast stations directly for retransmission rights. Instead, several broadcast networks negotiated on behalf of their affiliates for alternative forms of compensation. The networks sought carriage of new cable networks owned by their parent companies, and split the proceeds they received from the cable networks with the affiliates. As satellite operators and telcos entered the market in competition with cable operators, broadcast stations could encourage the cable subscribers to switch, and vice versa. Broadcast stations began to demand cash in exchange for carriage. As Figure 3 indicates, the total amount of retransmission fees paid by MVPDs has increased from $0.21 billion in 2006 to $12.38 billion in 2019. The 2019 totals include fees paid by vMVPDs, which did not exist in 2006. Related Copyright Laws Generally, copyright owners have the exclusive legal right to "perform" publicly their works, and, as is the case with online distribution of their programs, to license their works to distributors in marketplace negotiations. The Copyright Act limits these rights for owners of programming contained in retransmitted broadcast television signals. The Copyright Act guarantees MVPDs the right to perform publicly the copyrighted broadcast television programming, as long as they abide by FCC regulations and pay royalties to content owners at rates set and administered by the government. In some instances, MVPDs need not pay content owners at all, because Congress set a rate of $0. The Copyright Act contains three statutory copyright licenses governing the retransmission of local and distant television broadcast station signals. Local signals are broadcast signals retransmitted by MVPDs within the local market of the subscriber ("local-into-local service"). Distant signals are broadcast signals imported by MVPDs from outside a subscriber's local area. 1. The cable statutory license, codified in Section 111, permits cable operators to retransmit both local and distant television station signals. This license relies in part on former and current FCC rules and regulations as the basis upon which a cable operator may transmit distant broadcast signals. 2. The local satellite statutory license, codified in Section 122, permits satellite operators to retransmit local signals on a royalty-free basis. To use this license, satellite operators must comply with the rules, regulations, and authorizations established by the FCC governing the carriage of local television signals. 3. The distant satellite statutory license, codified in Section 119, permits satellite operators to retransmit distant broadcast television signals. Congress has renewed this provision in five-year intervals. In 2004, Congress inserted a "no distant if local" provision, which prohibits satellite operators from importing distant signals into television markets where viewers can receive the signals of broadcast network affiliates over the air. Under the statutory license, cable, telco, and satellite operators make royalty payments every six months to the U.S. Copyright Office, an agency of the Library of Congress. The head of this office, the Register of Copyrights, places the money in an escrow account and maintains the "Statement of Account" that each operator files. Congress has charged the Copyright Royalty Board (CRB), which is composed of three administrative judges appointed by the Librarian of Congress, with distributing the royalties to copyright claimants. It also has the task of adjusting the rates at five-year intervals, and annually in response to inflation. For additional information about these licenses, see CRS Report R44473, What's on Television? The Intersection of Communications and Copyright Policies , by Dana A. Scherer. Through a series of laws ( Table 1 ) enacted over the last 30 years, Congress created new sections or modified existing sections of the Copyright Act and the Communications Act to regulate the satellite retransmission of broadcast television and to encourage competition between satellite and cable operators. Congress began the process with the enactment of the Satellite Home Viewer Act of 1988 (SHVA; P.L. 100-667 ), revised it further in several laws leading to the Satellite Television Extension and Localism Act (STELA) of 2010 ( P.L. 111-175 ), and amended the process again with the enactment of the STELA Reauthorization Act of 2014. Most recently, the enactment the Satellite Television Community Protection and Promotion Act of 2019, and the Television Viewer Protection Act of 2019, (Titles XI and X of Division P, respectively, of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 ) permanently extended some legal provisions governing retransmission of distant network broadcast signals, while repealing others. Expiring Provision of Copyright Act Certain provisions in the STELA Reauthorization Act were set to expire on December 31, 2019. The copyright provision set to expire was Section 119 of the Copyright Act (17 U.S.C. Â§119). This section enables satellite operators to obtain rights to copyrighted programming carried by distant broadcast network affiliates, superstations, and other independent stations. Under this regime, the satellite operators submit a statement of account and pay a statutorily determined royalty fee to the U.S. Copyright Office on a semiannual basis, avoiding the transactions costs of negotiating with each individual copyright holder. A satellite operator is allowed to retransmit the signals of up to two distant stations affiliated with a network (ABC, CBS, FOX, NBC, or PBS) to a subset of subscribing households that are deemed "unserved" with respect to that network. The "unserved household" limitation does not apply to the retransmission of superstations (see Table 1 , note a). Pursuant to Section 119, satellite operators may retransmit superstations to commercial establishments as well as households. Section 119 specified five different categories of unserved households: 1. a household located too far from a broadcast station's transmitter to receive signals using an antenna; [Section 119(d)(10)(A)] 2. a household that received written consent from a local network affiliate to receive a distant signal; [Section 119(d)(10)(B)] 3. a household thatâeven if it could receive a local broadcast signal over the airânevertheless received a satellite retransmission of a distant signal on October 31, 1999, or whose satellite provider terminated the distant signal retransmission after July 11, 1998, and before October 31, 1999, pursuant to court injunction; [Section 119(d)(10)(C)] 4. operators of recreational vehicles and commercial trucks who complied with certain documentation requirements; [Section 119(d)(10)(D)] 5. a household that received delivery of distant network signals via C-band before October 31, 1999. [Section 119(d)(10)(E)] In 2010, Congress provided an incentive for DISH to offer local-into-local service in all 210 markets with the enactment of STELA. Revenues Collected by Copyright Office As Table 2 indicates, between 2014 and 2019 the amount of Section 119 royalties collected by the Copyright Office declined by 89%. According to the Register of Copyrights, the decline is due in part to the drop in the number of distant network stations carried and the conversion of non-network superstations, such as WGN, to cable networks. In addition, as Figure 1 indicates, the total number of households subscribing to satellite television declined from about 34.4 million in 2014 to 27.3 million in 2019. Expiring Provisions of Communications Act Several provisions of the Communications Act were also set to expire at the end of 2019. Some of those provisions cross-reference Section 119 of the Copyright Act. Cross-References to Section 119 of Copyright Act Section 325(b)(2)(B) and (C) of the Communications Act [47 U.S.C. Â§325(b)(2)(B)-(C)] permit a satellite operator to retransmit distant broadcast signals of stations without first seeking retransmission consent from those stations, if the satellite operator is retransmitting the signals pursuant to Section 119 of the Copyright Act. Section 338(a)(3) of the Communications Act [47 U.S.C. Â§338(a)(3)] states that a low-power station whose signals are retransmitted by a satellite operator pursuant to Section 119 of the Copyright Act [17 U.S.C. Â§119(a)(14)] is not entitled to must carry rights. Section 339(a)(1)(A) of the Communications Act (47 U.S.C. Â§339) permits satellite operators to retransmit the signals of a maximum of two affiliates of the same network in single day to households located outside of those stations' DMAs, subject to Section 119 of the Copyright Act. Section 339(a)(1)(B) states that satellite operators may retransmit local broadcast signals under 17 U.S.C. Â§122 in addition to any distant signals they may retransmit under Section 119 of the Copyright Act. Section 339(a)(2)(A) discusses rules for retransmitting broadcast station signals to satellite subscribers meeting the "unserved household" definition under Section 119 of the Copyright Act [17 U.S.C. Â§119(d)(10)(C)]. Section 339(a)(2)(D) and (c)(4)(A), in describing households eligible to receive distant signals, cross-reference the "unserved household" definition under 17 U.S.C. Â§119(d)(10)(A). Section 339(a)(2)(G) states that "this paragraph shall not affect the ability to receive secondary transmissions ... as an unserved household under section 119(a)(12) of title 17, United States Code." Section 339(c)(2) describes the process under which a household may seek a local affiliate's permission to receive a distant signal, and therefore qualify as an "unserved household" under Section 119 of the Copyright Act [17 U.S.C. Â§119(d)(10)(B)]. Section 340(3)(2) of the Communications Act [47 U.S.C. Â§340] states that a satellite operator that retransmits a distant broadcast signal pursuant to 17 U.S.C. Â§119 need not comply with FCC regulations that would otherwise require the satellite operator to black out certain programs of that station. Section 342 of the Communications Act [47 U.S.C. Â§342] cross-references Section 119 of the Copyright Act [17 U.S.C. Â§119(g)(3)(A)(iii)], and describes the process through which DISH may obtain a certification from that FCC demonstrating that it is providing local-into-local service in all 210 DMAs. Under 17 U.S.C. Â§119(g)(3), upon presenting this certification, among other documents, to the Florida district court that had enjoined DISH from using the Section 119 license, DISH would be eligible to use it. (See " Expiring Provision of Copyright Act .") Good Faith Requirements for Retransmission Consent Negotiations Section 325(b)(3)(C) of the Communications Act (47 U.S.C. Â§325(b)(3)(C)) prohibits broadcast stations from engaging in exclusive contracts for carriage. This section also requires both broadcast stations and MVPDs to negotiate retransmission in "good faith," subject to marketplace conditions. Moreover, according to this section, the coordination of negotiations among separately owned television broadcast stations within the same DMA is a per se violation of the good faith standards. The FCC implements the good faith negotiation statutory provisions through a two-part framework. First, the FCC has a list of nine good faith negotiation standards. The FCC considers a violation of any of these standards to be a per se breach of the good faith negotiation obligation. Second, the FCC may determine that based on the "totality of circumstances," a party has failed to negotiate retransmission consent in good faith. Under this standard, a party may present facts to the FCC that, given the totality of circumstances, reflect an absence of a sincere desire to reach an agreement that is acceptable to both parties and thus constitute a failure to negotiate in good faith. Complaints Regarding Good Faith Standard Violations Over the last 13 years, both broadcast television station owners and MVPDs have filed complaints with the FCC that their counterparty has failed to negotiate in good faith. In some instances, the FCC has found that the complaint lacked validity. In 2016, the FCC reached a consent decree with Sinclair Broadcast Group after completing an investigation. In other instances, the FCC has monitored retransmission consent negotiations even when a party has not filed a complaint. In some cases, stations and/or MVPDs withdraw complaints from the FCC after reaching retransmission consent agreements. In November 2019, the FCC found that seven different station group owners had violated the per se good faith negotiation standards with respect to AT&T, and directed the parties to commence good faith negotiation. Good Faith Provisions and FCC Media Ownership Rules Section 325(b)(3)(C)(iv) directs the FCC to adopt rules that prohibit the coordination of negotiations among separately owned television broadcast stations within the same DMA. Unlike the good faith provisions of the Communications Act, the prohibition on coordination is permanent. Additionally, the FCC has adopted a rule declaring such behavior a per se violation of its good faith negotiation standards. In a related matter, the FCC's rules regarding both the number of stations one entity may own within a DMA and the attribution of that ownership have been in flux. The FCC's ownership rules generally prohibit one company from owning two of the top four ranked stations (usually, stations affiliated with the ABC, CBS, FOX, and NBC networks) within the same DMA. In 2016, the FCC adopted rules specifying that if one television station sells more than 15% of the weekly advertising time on a competing local broadcast television station, it would consider the stations to be under common ownership or control, for the purposes of enforcing its local media ownership rule. In 2017, however, the FCC eliminated this rule as part of a reconsideration of its 2016 decision. In September 2019, the U.S. Court of Appeals for the Third Circuit vacated and remanded the FCC's 2017 reconsideration. On November 29, 2019, the court vacated, as of that date, the rule changes adopted by the FCC in 2017. The FCC issued an order in December 2019 that amended its rules to reflect the court's mandate and clarify which rules remain in effect. The FCC has not publicly stated whether it will seek review of the Third Circuit's decision by the U.S. Supreme Court. Likewise, the FCC has not publicly stated how it will proceed with media ownership rulemaking it initiated in 2018, in light of the court's ruling. Legislation in 2019 On December 20, 2019, President Donald J. Trump signed the Satellite Television Community Protection and Promotion Act of 2019, and the Television Viewer Protection Act of 2019 (Titles XI and X of Division P, respectively, of the Further Consolidated Appropriations Act, 2020, P.L. 116-94 ). These laws amended both the Copyright and Communications Acts. Copyright Act Revisions Title XI of P.L. 116-94 permanently extends Section 119 of the Copyright Act, but limits the scope of "unserved households" eligible to receive the distant signals to two categories of households. The first category includes operators of recreational vehicles and commercial trucks who have complied with certain documentation requirements. The second category, added by the act, includes households in "short markets" in the definition of "unserved household." The act defines a short market as a local market in which programming of one or more of the four most widely viewed television networks nationwide is not offered on either the primary stream or multicast stream transmitted by any network station in that market, or is temporarily or permanently unavailable as a result of an act of god or other force majeure event beyond the control of the carrier. The act also amends the Copyright Act to condition the eligibility of satellite operators to retransmit distant signals via a compulsory copyright license to unserved households on whether or not they retransmit local television signals in all 210 DMAs. After May 31, 2020, satellite subscribers who fall within the two categories of unserved households described above are no longer eligible to receive distant signals pursuant to the compulsory copyright license unless their satellite operator provides local-into-local service. Likewise, the other four categories of households described in " Expiring Provision of Copyright Act " are no longer able to receive distant signals pursuant to the compulsory license after May 31, 2020, or until their satellite operator provides local service in all 210 markets, whichever is earlier. The act also specifies that satellite operators will not lose access to the distant compulsory license if their failure to deliver local signals in all 210 markets is due to a retransmission consent impasse. As described in " Must Carry; Carry One, Carry All ," DISH currently does so, but DIRECTV does not. Communications Act Revisions Title X of the act permanently extends portions of the Communications Act set to expire at the end of 2019, while amending others. The following provisions that had been set to expire at the end of 2019 are now permanent: A satellite operator may retransmit broadcast station signals outside of the station's local markets without retransmission consent from those stations, if the operator is retransmitting the signals pursuant to Section 119 of the Copyright Act. Broadcast stations may not enter into exclusive contracts with MVPDs. Broadcast stations and MVPDs must negotiate retransmission consent in "good faith." In the event any party accuses another of failing to negotiate in good faith, the accusing party may petition the FCC to mediate. Joint retransmission consent negotiations by separately owned broadcast stations within the same market constitutes failure to negotiate in good faith. In addition, Title X amended the Communications Act to state that a qualified "MVPD buying group" representing smaller cable, telco, and/or satellite operators may negotiate retransmission consent with large broadcast station group owners without violating the good faith requirement. The buying group may represent only cable, telco, or satellite operators with 500,000 or fewer subscribers nationally. The broadcast station owner with whom the qualified MVPD group negotiates retransmission consent must reach more than 20% of the "national audience." This amendment takes effect no later than March 19, 2020, that is, 90 days after the enactment of P.L. 116-94 . Relationship to FCC Media Ownership Rules Local Ownership Rules As described in " Good Faith Provisions and FCC Media Ownership Rules ," on December 20, 2019, the FCC reinstated the media and ownership rules it had adopted in 2016. Under the reinstated rules, a single company may not own more than one station in a DMA unless eight independently owned stations remain (eight voices test). In addition, stations that jointly sell 15% or more of one another's advertising time count as "owned" for the purposes of the FCC's ownership rules. This means that non-top-four stations may not jointly negotiate with a separately owned top-four affiliate that sells its advertising time, if common ownership would violate the FCC's eight voices test. Likewise, two non-top four stations may not jointly negotiate retransmission consent in the same market if common ownership would violate the FCC's eight voices test. National Ownership Rules The FCC, in measuring the national reach of a broadcast station owner, discounts the number of television households reached within a DMA by a station operating in the Ultra High Frequency (UHF) band by half. In some instances, a station group may reach 20% or fewer households nationally with the "UHF discount," but more than 20% of U.S. households absent the discount. According to estimates from the research firm BIA Advisory Services, as of May 2019, the two companies falling in this category were NBC Universal and Gray Television. Thus, a qualified MVPD buying group could not negotiate with NBC Universal or Gray Television unless the FCC repeals the UHF discount. In some markets, a television company may effectively operate stations under joint sales agreements or shared services agreements without having them count toward the national ownership limit. Thus, depending on how the FCC interprets the good faith provisions, an MVPD with fewer than 500,000 subscribers nationwide might not be able to use a qualified buying group to negotiate for retransmission of stations operated by a company that reaches 20% or more of U.S. households nationwide. It is far less common for a company to operate third-party stations in a market in which it does not own a station than in a market in which it does own a station. There are 93 DMAs in which a third party operates at least one station and owns at least one station. In contrast, there are five DMAs in which a third party operates at least one station but does not own any stations. Nonetheless, as Congress advises the FCC on the implementation of this good faith provision, the role of third-party owners in retransmission consent negotiations remains an issue that may be considered.


Introduction The rise in popularity of cryptocurrencies and the underlying blockchain technology presents both challenges and opportunities to the energy sector. Cryptocurrencies, such as Bitcoin, are sometimes referred to as virtual currency , a term that can also refer to a broader class of electronic money. A blockchain is a digital ledger that enables parties to agree on the current ownership and distribution of assets in order to conduct new business. When applied to cryptocurrencies, the blockchain allows the validation of transactions to occur by a decentralized network of computers. As cryptocurrencies (such as Bitcoin, the cryptocurrency with the largest market capitalization) have increased in popularity, the energy demand to support cryptocurrency mining activities has also increased. The state of Washington, by some estimates, hosted 15%-30% of all Bitcoin mining operations globally in 2018. When such increases in energy demand for cryptocurrency mining occur at a local level, the resulting peak loads may increase customers' electricity rates depending on pricing structure. However, not all cryptocurrencies require energy-intensive operations. Outside of cryptocurrencies, opportunities arising from blockchain technologies could include facilitating energy and financial transactions on a smart grid. This report explains how cryptocurrency is "mined," where mining activity is concentrated, how some states and utilities are responding to localized increases in energy demand from Bitcoin mining facilities, and potential considerations for Congress. Considerations for Congress include potential policy options to address energy conservation and energy efficiency standards as well as options for blockchain technology in the energy sector. This report is part of a suite of CRS products on cryptocurrencies and the underlying technology, distributed ledger technology, and blockchain (see textbox below). Blockchain and Cryptocurrencies Blockchain provides a means of transacting among parties who may not otherwise trust one another. Blockchain networks allow for individuals engaging in transactions to also be the ones to validate them. Cryptocurrencies such as Bitcoin, Ether, Alpha Coin, and Papyrus provide a means of validating transactions in a decentralized network that is outside of an intermediary, such as a bank for financial transactions or a title company for a real estate transaction. This validation can be done in bulk and at relatively high speeds, making cryptocurrency an attractive avenue for certain financial transactions. Cryptocurrencies are built to allow the exchange of some digital asset of value (the cryptocurrency) for a good or service. Bitcoin is the most popular cryptocurrency, garnering the largest market share, and Bitcoin arguably initiated the interest in blockchain technology. Blockchain uses a combination of technologies to work. These technologies include encryption and peer-to-peer (P2P) networks. Transactions are added to a blockchain in an addition-only manner. Once added, a transaction cannot be altered, providing a layer of security and transparency. Transactions are grouped together to form a tranche , or "block." Blocks are added to a blockchain in a manner that links it to the previous block, so any change data in a previous block makes that change known to users immediately as they try to add a new block. Encryption is used to ensure that parties trading assets on a blockchain have rights to that asset, and that data held in the blockchain is tamper resistant. P2P networks are used to distribute information across participating users without a central authority acting as an arbiter of that information. Cryptocurrency Mining There are three primary approaches to gaining ownership of Bitcoin: purchase Bitcoin directly by exchanging conventional money and a paying an exchange fee; earn Bitcoin in return for a product or service; or create Bitcoin through mining . Bitcoin and other cryptocurrencies each implement their own blockchain: mining is the creation and publication of a new block in a blockchain. Early cryptocurrency platforms, like Bitcoin, required the use of mining to validate transactions. In blockchain platforms generally, minersâthose seeking to add a block to a blockchainâare incentivized to improve their value in that blockchain through either a monetary, reputational, or stake award, for example. New blocks may be added to a blockchain through a variety of methods. For Bitcoin, new blocks are added to the blockchain through proof-of-work (PoW). Under PoW, miners are presented a difficult computational problem, or puzzle. PoW identifies a numeric value (called a nonce), which is used to generate an authenticator (hash value). Hash values are used to ensure the integrity of data, in this case, that a block of data in the blockchain has not been modified. Hashes are determined by submitting the data through an algorithm that will output a string of characters. By inserting the nonce into the algorithm, miners seek to change the hash value. The problem Bitcoin miners are trying to solve is the creation of a hash value for a given block which begins with a certain number of zeros. They add data to the block through changing the nonce in order to change the hash value and discover the solution. Identifying these valid nonces and hashes is computationally intensive, and the essence of mining. The security properties of hash algorithms are such that a miner tests nonces until a valid hash is found for a block. Generally, by solving the problem or puzzle, miners win the opportunity to post the next block and possibly gain a reward for doing so. In the case of Bitcoin, miners who create and publish new blocks in the blockchain are rewarded with Bitcoin. Once the problem is solved and a valid hash is identified, the miner announces it to the community using P2P networking. Other users can validate the solution immediatelyâwithout going through the resource-intensive computation process. Once the majority of the community of users validates and confirms the block, it is added to the chain. Miners are held to a strict set of rules that maintain the overall market structure. There are a limited number of Bitcoin to be mined, which creates a value attributed to scarcity. For Bitcoin, new blocks are published every 10 minutes. As the rewards for published blocks halve every 210,000 blocks, the reward of new Bitcoin diminishes roughly every four years (e.g., the reward of 50 Bitcoins per block in 2008 was reduced to 25 in 2012). On October 31, 2018, block 548173 rewarded the miner with 12.5 Bitcoins plus approximately 0.2 Bitcoins in transaction fees. On the date that block was generated, trading for 1 Bitcoin closed at approximately $6,343; as of July 29, 2019, trading for 1 Bitcoin closed at approximately $9,507. Bitcoin is rewarded on a first-come, first-served basis, meaning whoever solves and publishes the solution first is rewarded with Bitcoin. Miners throughout the network compete against each other in a race to be the first to resolve the PoW and earn the reward. The competition often is a criticism of the PoW system, as there are many more miners expending energy for these "useless" calculations than the one miner that wins the race and correctly resolves the PoW. Mining Technology The technology used by miners has advanced over time. Early miners were able to earn Bitcoin relatively easily with affordable equipment. Bitcoin could initially be mined on a central processing unit (CPU) such as a personal laptop or desktop computer. As interest in Bitcoin mining increased, miners discovered that graphic cards could more efficiently run hashing algorithms and aid in mining. Field Programmable Gate Arrays (FPGAs) then replaced graphic cards, as the circuits in an FPGA could be configured and programmed by users after manufacturing. Application-specific integrated circuits (ASICs) have replaced these and graphic cards. ASICs are designed for a particular useâsuch as Bitcoin mining. As more sophisticated equipment has been adopted, miners have also moved away from working individually to working in larger groups. Many miners have determined it is more cost efficient to join "mining pools" that help disperse the energy and equipment costs (and the profits) and increase the speed or likelihood of a successful transaction. ASICs used for Bitcoin mining are usually housed in thermally-regulated data centers with access to low-cost electricity. While these developments have transformed Bitcoin mining into a more consolidated industry, they have not resolved the energy consumption issue or the computational "waste," as different Bitcoin mining pools still must compete against one another using the PoW method. How Much Energy Is Consumed from Bitcoin and Other Cryptocurrency Mining? Cryptocurrency mining requires energy to (1) operate the devices computing the calculations required to maintain the integrity of the blockchain and (2) thermally regulate the devices for optimal operation. A node, or computing system, on the blockchain may be composed of an individual user or a group of users that have pooled resources; as such, the exact number of connected devices on the network is unknown. Devices have different hashratesâthe number of calculations (or hash functions) performed on the network per secondâand have different power requirements. Devices with greater hashrates can perform more calculations in the same amount of time than devices with lesser hashrates. For example, "a hashrate of 14 terahashes [14 trillion attempted mining solutions] per second can either come from a single Antminer S9 running on just 1,372 W [Watts], or more than half a million Sony Playstation-3 devices running on 40 MW [megawattsâmillion Watts]." There are four main factors that contribute to energy consumption of cryptocurrency mining: 1. hardware computing power; 2. network hashrate; 3. the difficulty; and 4. the thermal regulation for the hardware. These factors, some of which also interact with the price of Bitcoin, can alter the energy intensity of mining. For instance, in December 2017, the price of Bitcoin rose creating an influx of mining. As the mining network grew, the difficulty and hashrate increased. Miners sought out more powerful equipment as the competition increased, which consumed more energy. Several studies have examined the energy consumption of cryptocurrencies. While technology advancements in devices used for Bitcoin mining have led to increases in the hashrates of mining devices (i.e., improved device efficiency), the network hashrate has also increased as the popularity of Bitcoin increased. According to one recent estimate, as of "mid-March 2018, about 26 quintillion hashing operations are performed every second and non-stop by the Bitcoin network." Estimating the power consumption of the global Bitcoin network depends upon the efficiency of different hardware, the number of machines in use, and the cooling requirements for large-scale mining facilities. Table 1 presents various estimates for the power required by the Bitcoin network. Generally, these estimates use hashrates and miner hashing efficiencies to determine energy consumption. One study relied upon hardware data derived from initial public offering (IPO) filings to estimate power consumption. Fewer studies have examined power requirements for other cryptocurrencies (Bitcoin is the largest cryptocurrency platform in both currency in circulation and transactions processed), although those studies have found comparatively lower power requirements than for Bitcoin. Global power requirement estimates for Bitcoin have increased within the last five years. For comparison, the largest estimate of 7,670 MW in Table 1 is nearly 1% of U.S. electricity generating capacity (or approximately 0.1% of global electricity generating capacity). Opinions differ on whether future growth in Bitcoin will significantly impact energy consumption and subsequent carbon dioxide (CO 2 ) emissions. Some argue that sustainability concerns due to energy consumption are misplaced, and that the competitiveness of Bitcoin mining means that only miners with the most competitive mining hardware and the lowest electricity costs will persist over time. Further, this could lead to fewer miners using energy inefficient hardware, as they may no longer be able to compete effectively. Some anticipate that energy demands will diminish as the reward incentive shifts from discovering new Bitcoin to earning revenue through transaction fees. As a result, some would argue that the energy consumption from mining Bitcoin is a temporary issue. Others recognize the volatility of cryptocurrency markets but observe that network hashrates of several cryptocurrencies have trended upward suggesting that energy consumption (and subsequent CO 2 emissions) will increase. However, these estimates do not include energy required for cooling systems and other operations and maintenance activities associated with cryptocurrency mining. One study on projections of Bitcoin growth considered the potential effects on global CO 2 emissions should Bitcoin eventually replace other cashless transactions. The study found that the associated energy consumption of Bitcoin usage could potentially produce enough CO 2 emissions to lead to a 2 o C increase in global mean average within 30 years. These projections assume that the global portfolio of fuel types (and subsequent CO 2 emissions) used to generate electricity remains fixed according to portfolio profiles from 2014 and does not consider that, in many cases, Bitcoin is often mined in areas with plentiful and affordable renewable energy. Further, the projections do not consider any potential effects of a collapse of Bitcoin prices on hashrates or energy consumption, and whether the capital invested in Bitcoin mining could be used for other cryptocurrencies or for other purposes. Projections of continued growth in energy consumption led some to call for reform in the cryptocurrency industry. Others argue that continued reliance on fossil-fuel-based electricity is the important issue and not the energy intensity of Bitcoin. What Is the Cryptocurrency Industry Doing to Reduce Energy Consumption? As the Bitcoin network's energy consumption grows, some have questioned whether the PoW algorithm is sustainable. One option to reduce cryptocurrency energy consumption is to shift to alternative protocols for validating transfers. Currently, PoW is the most widely used. However, other protocols, such as Proof-of-Stake (PoS) and Proof-of-Authority (PoA) could potentially accomplish validations more energy efficiently. Many other alternative algorithms exist. Each algorithm presents trade-offs; for example, some algorithmic attributes facilitate scalability and others facilitate speed of transactions. The potential application of blockchain technology to the energy sector (and other sectors) will depend upon the ability for these technologies to provide transparent, secure, scalable, and timely transaction validation. The technical differences and their applicability are discussed in the Appendix . Where Is Bitcoin Mined? Several factors contribute to ideal mining locations and include energy costs, regulations, and technology. Often the energy costs are affected by geographical characteristics like proximity to hydroelectric power or lower ambient temperature that reduces the need for cooling. Local and national governments around the world have responded differently to the growth of Bitcoin: some are actively developing cryptocurrency industries, some are restricting cryptocurrencies, and some are regulating cryptocurrencies in an effort to balance financial innovation and risk management. According to a study in 2017, nearly three-quarters of all major mining pools are based in either China (58%) or in the United States (16%). Some countries and regions where significant cryptocurrency mining activities have been identified include Australia, Canada, Georgia, Russia, and Sweden, as shown in Figure 1 . China has taken steps to regulate and tax the trading of Bitcoin, and has even proposed implementing a ban on mining. As of April 2019, it was reported that the National Development and Reform Commission, deemed mining as a "wasteful and hazardous" activity. China's share of major mining pools may change substantially in response to regulations and policy actions. In 2013, the Chinese government reportedly restricted Chinese banks from using cryptocurrencies as currency, citing concerns about money laundering and a threat to financial stability. In September 2017, Beijing declared that initial coin offerings (ICO) were illegal and that all mainland cryptocurrency exchanges be shut down. In January 2018, China's Leading Group of Internet Financial Risks Remediation submitted a request to local governments to regulate electricity, taxes, and land use for mining companies, and "guide the orderly exit of such companies from the Bitcoin mining business." Since the implementation of these regulatory measures, Bitcoin trading with the Chinese yuan has reportedly dropped from 90% of global Bitcoin trading to under 1%. However, as illustrated in Figure 1 , China, despite changes in regulation, remained a popular location for mining in 2018, partly due to the comparatively low cost of energy. The generation sources that provide low cost electricity to cryptocurrency miners in China vary regionally. In some regions, the electricity likely is provided from fossil fuel sources; for example, in Inner Mongolia where cryptocurrency miners have been active, thermal power represents 63% of the electric capacity. Cryptocurrency Mining and Utilities: Domestic and International Examples Cryptocurrency mining includes costs associated with equipment, facilities, labor, and electricity. Mining pool companies around the world therefore seek cheap, reliable electricity. While many mining pools are still in China, some have been able to utilize closed industrial facilities in the United States that can provide abundant electricity at affordable rates. As miners are not typically bound by geographic location, locations with favorable electricity rates and policies may encourage operations. Conversely, locations with restrictive regulations or high electricity prices may discourage mining operations. In the United States, the sale of electricity is governed by a patchwork of federal, state, and local regulations. For the sale of electricity, the states generally have regulatory jurisdiction over retail electricity transactions, though federal and municipal authorities may also play a role. State approaches to regulation vary considerably. States and cities that are dealing with an influx of cryptocurrency mining because of affordable electricity rates are instituting local laws as issues arise. Examples of such approachesâboth domestic and internationalâalong with the more general benefits and challenges associated with developing a cryptocurrency mining industry are delineated through the selected examples below. New York State The state of New York and the city of Plattsburgh (NY) have developed various policies in response to growth in energy demand by cryptocurrency mining activities. In December 2018, New York State approved Assembly Bill A8783B, creating a new digital currency task force. This task force will include a team of technology experts, investors, and academics all appointed by the Governor, the state Senate, and the Assembly. The task force intends to produce a report in 2020 that includes a discussion of "the energy consumption necessary for cryptocurrency mining operations and other policy considerations related thereto." The task force law does not include any specific measures regarding licensing, but New York State already requires a license for cryptocurrency businesses, known as a "Bitlicense." Introduced in 2014, fewer than 20 licenses have been granted as of January 2019. The Bitlicense is intended to subject crypto mining companies to anti-money laundering and counterterrorism standards, as well as require background checks on all employees. Plattsburgh, NY Plattsburgh's 20,000 residents reportedly have electricity rates below $0.05 per kilowatt-hour (kWh) year-round (as compared to the U.S. average retail price of about $0.10/kWh). Inexpensive electricity for Plattsburgh is generated from the New York Power Authority's (NYPA's) hydroelectric facility on the St. Lawrence River. Plattsburgh has an agreement with the NYPA to buy 104 MW of power at any time to serve its customers. This has exceeded electricity demand requirements for Plattsburgh, even with several industrial facilities in operation. Plattsburgh has faced a number of challenges balancing the promise and pitfalls of cryptocurrency mining. Bitcoin mining companies were attracted to the abundant and cheap electricity, with two cryptocurrency mining businesses reportedly operating in Plattsburgh in 2017. As Plattsburgh residents primarily rely on electricity for home heating, during a particularly cold winter in early 2018, electricity rates increased as the 104 MW of power from the hydropower facility was reportedly exceeded, and electric power had to be purchased from other sources at higher rates. During January and February of 2018, cryptocurrency mining operations were recorded as responsible for approximately 10% of the local power demand. The cost of purchasing additional power to meet the increased demand were proportionally distributed among all customer classes. The costs of purchasing additional power combined with increased energy use in response to cold weather resulted in residential electricity bills that were reportedly up to $300 higher than usual. According to the New York Public Service Commission, the two cryptocurrency companies operating in Plattsburgh at the time contributed to an increase of nearly $10 to monthly electricity bills in January 2018 for residential customers. In March 2018, the city of Plattsburgh also instituted an 18-month moratorium on any new cryptocurrency mining operationsâa first in the United States. Also in March 2018, the New York Public Service Commission ruled that municipal power authorities could issue a tariff on high-density-load customersâincluding cryptocurrency companiesâ"that do not qualify for economic development assistance and have a maximum demand exceeding 300 kW and a load density that exceeds 250 kWh per square foot per year." Additionally, Plattsburgh began addressing fire safety concerns, heat management, and overall nuisance associated with cryptocurrency mining by passing local laws. None of the new laws specifically address energy consumption, or noise, which is a concern for some local residents. Massena, NY In December 2017, Coinmint, a crypto mining company, looking to expand operations, went to Massena, NY (90 miles west of Plattsburgh) and signed a lease to convert a retired Alcoa aluminum plant into a cryptocurrency mining facility. Coinmint reportedly requested from NYPA 15 MW of subsidized power that would in turn lead to 150 jobs and $700 million in local investment. The proposal required the approval of NYPA's board of trustees and was added to their January 2018 agenda for consideration. However, in March 2018, following consideration of the Coinmint proposal, the NYPA board of trustees approved a moratorium on allocating economic development assistance in the form of subsidized power to high-density-load operations until NYPA could analyze all possible impacts. The New York State Public Service Commission approved, in July 2018, new electricity rates for the Massena Electric Department to allow high-density load customersâsuch as cryptocurrency companiesâto be eligible for service under an individual service agreement. This is the second ruling by the commission on cryptocurrency rates. Washington State By some estimates, the state of Washington hosted 15%-30% of all Bitcoin mining operations globally in 2018. Like New York, Washington has affordable, reliable hydropower. Along the Columbia River in a region known as the Mid-Columbia Basin, five hydroelectric dams reportedly generate nearly six times as much power as the residents and local businesses can utilize. These hydroelectric facilities typically export the surplus electricity to larger electricity demand markets, such as Seattle or Los Angeles, which helps to keep the costs of electricity relatively low for local consumers at about $0.025/kWh (as compared to the U.S. average retail price of about $0.10/kWh). Since 2012, the Mid-Columbia Basin has reportedly attracted Bitcoin mining companies because of low-priced electricity, and the resulting growth in energy demand has challenged the cost structure of several of the region's public utility districts (PUDs). Several PUDs imposed a moratorium on new applications for mining operations. The moratorium was issued as public utilities are required to hear and rule on applications for future power contracts. If the applications for mining operations continued to be approved, the contracts could have outpaced the public utilities' original projections and planning for demand increases. For example, in Douglas Countyâwhere the bulk of the new mining projects are occurringâa new 84-MW substation that was previously expected to provide enough capacity to serve the area for the next 30 to 50 years under a normal population growth scenario was fully subscribed in less than a year. In response, the PUDs will have to find alternatives for meeting the growing demand, such as purchasing power on the open market. In addition, there are concerns over the cost of upgrading new infrastructure, including substations and transmission lines, and who would bare those costs. PUDs in the region are also challenged by "rogue" miners, those that set up server equipment in homes without any proper licensing, permits, or infrastructure upgrades. These servers have a larger demand for energy than the infrastructure in a residential community is designed to provide. It is relatively easy for the PUDs to locate rogue miners given the abnormal increase in power demand; once identified, the miners are required to obtain the proper equipment and permits but may simply move operations to another unpermitted location. Other PUDs in the region are adapting to increased interest in mining operations. In December 2018, Chelan County PUD approved a new rate for blockchain operations starting April 2019 and lifted a moratorium. While some are concerned that Bitcoin mining operations and related infrastructure could eventually lead to utility stranded assets, others see Bitcoin as a stepping block to a larger possibly more prosperous endeavorâresearching alternative uses for blockchain technology. The Department of Commerce for Douglas County intends to build a "blockchain innovation campus," which the county states could both assuage concerns over the volatility of the Bitcoin market and be an investment in the future diversification of the local economy. This approach, however, is not entirely without risk. For example, Giga Watt, a Bitcoin mining firm, declared bankruptcy in 2018, owing creditors nearly $7 million, $310,000 of which is owed to Douglas County Public Utility District. International Case Studies Due to the decentralized nature of cryptocurrency mining, miners are not typically bound by geographic location. These characteristics typically impact mining profits and contribute to selecting the ideal location for operations. While some countries may have favorable energy costs, they may have restrictive regulations (e.g., China). Below are a few international locations that have garnered the attention of cryptocurrency miners. Canada Canada generates affordable (albeit not the cheapest) hydroelectric power. Further, Canada has the added benefit of being in a cold weather climate, which can reduce overall cooling costs. In 2016, approximately 58% of total electricity generation in Canada was from hydropower resources. Canadian electricity providers generate 13 terawatt hours (TWh) more electricity than their domestic consumers need. Due to this excess in electricity some providers have offered incentives for miners. In January 2018, the public utility Hydro-Quebec offered electricity at a rate of $0.0394/kWh to cryptocurrency miners. Miners responded, and by February 2018, Hydro-Quebec has received around 100 inquiries. Based on these inquiries, 10 TWh of the surplus would have been obligated to mining. Hydro-Quebec did not expect the high degree of new demand (reportedly several thousand megawatts worth of project proposals) for electricity and in March 2018 ceased processing requests until guidelines are developed. In response to concerns with the sharp increase in electricity demand, Hydro-Quebec commissioned a study on the economic benefits of cryptocurrency mining. In May 2018, the study estimated that direct job creation for cryptocurrency mining ranges from 1.2 jobs per MW of a 20 MW operation to 0.4 jobs per MW for a 250 MW operation. Data centers, by comparison, can create between 5 and 25 jobs per MW. By June 2018, Hydro-Quebec announced it would triple the price it originally offered to new applicants for cryptocurrency mining operations (although the utility indicated this is a temporary adjustment until a final determination is made). Meanwhile towns across the Quebec Province have placed moratoriums on new mining operations citing energy demand, size, and noise concerns. Georgia Georgia has positioned itself as an attractive location for Bitcoin mining operations. In Georgia, mining company Bitfury's electricity rates reportedly range from around $0.05/kWh to $0.06/kWh. Georgia's low price of electricity can be attributed to large hydropower resources. In 2016, hydropower accounted for 81% of the total electricity generated. The low cost of electricity, plus a favorable regulatory environment, makes Georgia a favorable location for Bitcoin mining operations. In 2015, the government of Georgia offered Bitfury a $10 million dollar loan to mine in Georgia. The government expanded a power plant to provide electricity to Bitfury's cryptocurrency mining facility at no additional cost. Local Bitcoin miners, however, are having a difficult time competing with Bitfury. Smaller local mining pools were not offered similar incentives and have been struggling to mine in a low-price environment. Furthermore, some locals criticize the government for providing Bitfury incentives. The Georgian government has created tax-free zones for mining activities and electricity. Without a tax regime in place for mining, some Georgian lawmakers claim that Georgians are losing possible tax revenue. Iran Iran also has relatively cheap electricity making it attractive to mining operations. Iran's electricity mix is dominated by natural gas. According to the U.S. Energy Information Administration, Iran is the third largest producer of dry natural gas in the world at nearly 9.5 trillion cubic feet (Tcf) in 2017 and most of it (6.9 Tcf) was consumed domestically. In addition, Iran subsidizes electricity produced from fossil fuels. According to International Energy Agency data from July 23, 2019, subsidies for electricity were valued at $16.6 billion in 2018. With energy subsidies, average electricity prices in Iran are reportedly around $0.006/kWh, far cheaper than even in China. Despite the low price of electricity in Iran, miners face other challenges, such as U.S. sanctions. The decentralized and pseudonymous nature of Bitcoin transactions may make financial sanctions imposed on governments and individuals difficult to enforce. However, Bitcoin transactions are publicly recorded on its digital ledger. According to the U.S. Department of the Treasury Under Secretary for Terrorism and Financial Intelligence, We are publishing digital currency addresses to identify illicit actors operating in the digital currency space. Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies and weaknesses in cyber and [Anti-Money Laundering and Countering the Financing of Terrorism] AML/CFT safeguards to further their nefarious objectives. Since the reintroduction of U.S. sanctions, the Iranian government has recognized a potential role for cryptocurrencies. In January 2019, the Central Bank of Iran presented a draft of new cryptocurrency regulation. Digital currencies, not backed by the Central Bank, will be restricted as a form of payment inside Iran. The draft framework, however, would authorize rial-backed cryptocurrency use, ICOs, mining, and other crypto-related activities. These draft regulations and the possible negative consequences from the United States may keep some miners from relocating to Iran, despite the low cost of electricity. Iranian state media reported that Tadvin Electricity Company saw an increase in energy demand of 7% due to cryptocurrency mining activities in June 2018. In response, Iran's Power Ministry is reportedly considering enforcing special tariffs on cryptocurrency miners. The Iranian Cabinet reportedly ratified a bill in August 2019 that introduces new rules for the cryptocurrency market in Iran. The regulations reportedly stipulate that mining cryptocurrencies would be allowed in Iran if certain conditions are met. Conditions reportedly include receiving approval from Iran's Ministry of Industry and conducting mining activities outside of provincial centers (with exceptions for Tehran and Esfahan where additional restrictions may apply). Blockchain Technology Potential for the Energy Sector Blockchain is a method of quickly validating transactions and of record keeping for large quantities of data. Some blockchains and cryptocurrencies do not operate through a decentralized, permission-less network like Bitcoin. Within the energy sector, a number of opportunities for blockchain technology have been proposed. These opportunities include smart contracts, distributed energy resource record keeping, and ownership records. One of the more easily transferrable options for blockchain is trading Renewable Energy Credits (RECs). Using blockchain to trade RECs could provide customers the ability to purchase RECs without the need for a centralized entity to verify transactions. In October 2018, a subsidiary of the PJM Interconnection LLCâa regional transmission organization that operates an electric transmission system serving part of the Eastern Interconnection electricity grid âannounced plans for testing blockchain technology to trade RECs. Other more advanced utilizations for blockchain in the energy sector could be highly disruptive. For example, there is increasing interest in net metering and a transactional grid (i.e., where producers of distributed energy resources, such as rooftop solar, can sell the electricity to nearby consumers). Prototype projects have relied upon blockchain technology among other peer-to-peer approaches to facilitate renewable energy transactions at the local level. Other peer-to-peer efforts include managing virtual power plant operations and enabling those who do not own renewable energy systems to pay for a portion of the energy generation of a host's system in exchange for a reduction on their utility bills (e.g., renters paying for a portion of an apartment building's rooftop solar system). If such applications are found to be practical and economical, blockchain technology could alter the manner in which electricity customers and producers interact. Traditionally electric utilities are vertically integrated. Blockchain could disrupt this convention by unbundling energy services along a distributed energy system. For instance, a customer could directly purchase excess electricity produced from their neighbor's solar panels instead of purchasing electricity from the utility. On the one hand, this could result in a more transparent and efficient system. Blockchain could encourage more competition among generators and more flexibility and choice for consumers. On the other hand, unbundling energy services could lead to concerns over distribution control to accommodate the decentralization. Furthermore, storing vast quantities of data about critical infrastructure on distributed ledgers may introduce additional cybersecurity concerns. The sale of electricity via blockchains that are independent of a conventional utility framework may be subject to significant legal interpretation, and potentially represents the intersection of various federal and state statutes and regulations. Jurisdiction over the sale of electricity from a distributed energy resource or electric vehicle charging station hinges upon its definition as either a retail transaction or a sale for resale. Retail transactions are generally defined by the Federal Energy Regulatory Commission (FERC) as "sales made directly to the customer that consumes the energy product," whereas sales for resale are defined as "a type of wholesale sales covering energy supplied to other electric utilities, cooperatives, municipalities, and Federal and state electric agencies for resale to ultimate consumers." States typically regulate retail electricity transactions, while FERC has jurisdiction over the transmission and wholesale sales of electricity in interstate commerce. One survey by the Electric Power Research Institute, collected data on the potential barriers and advantages of blockchain in utilities. Of those surveyed, utilities in the United States were in early pilot stages or in the research phase, while some utilities in Europe had been using blockchain for over a year. Respondents identified opportunities and challenges to investment in blockchain technology with 77% of respondents identifying concerns that the energy industry "lacks appropriate standards." Options for Congress to Address Cryptocurrency's Energy Consumption In addition to state and local policy efforts that seek to mitigate the regional effects of growth in cryptocurrency mining, there are options that could be adopted by the federal government to improve the energy efficiency of mining operations. Further, as the financial and energy sectors, among others, explore adopting blockchain, Congress may consider options to curb the energy intensity of the technology. Minimum Energy Conservation Standards An approach to reducing the energy consumption of cryptocurrencies could include the establishment of minimum energy conservation standards for the equipment engaged in mining activities or the cooling equipment that maintains efficient mining operations. The Department of Energy (DOE) administers national energy efficiency standards for appliances and other equipment. DOE maintains federal energy efficiency standards as authorized under the Energy Policy and Conservation Act ( P.L. 94-163 , 42 U.S.C. Â§Â§6201-6422) as amended. DOE's Appliance and Equipment Standards program sets minimum energy efficiency standards for approximately 60 commercial product categories. There are no national standards for computer products. In 2012, DOE issued a request for information regarding miscellaneous residential and commercial electrical equipment, and in 2014 issued a proposed determination of coverage for computers and battery backup systems. Some view voluntary and market-driven approaches as more appropriate for computer technology than minimum energy conservation standards. Others state the importance of public and private sector collaboration in developing energy efficiency standards that are "ambitious and achievable." Congress may consider whether minimum national energy efficiency standards that address cryptocurrency mining should be established. Such standards could focus on the specific technology used by cryptocurrency minersâASICsâor could focus on computer and battery backup systems as defined within DOE's proposed determination. DOE published energy conservation standards and test procedures for computer room air conditioners (CRACs) on May 16, 2012. According to the final rule, a CRAC is defined as: A basic model of commercial package air conditioning and heating equipment (packaged or split) that is: (1) Used in computer rooms, data processing rooms, or other information technology cooling applications; (2) rated for sensible coefficient of performance (SCOP) and tested in accordance with 10 CFR 431.96, and (3) not a covered consumer product under 42 U.S.C. 6291(1)â(2) and 6292. A computer room air conditioner may be provided with, or have as available options, an integrated humidifier, temperature, and/or humidity control of the supplied air, and reheating function. DOE established 30 different equipment classes for CRAC and set minimum requirements for each class. Initial compliance dates of October 29, 2012, or October 29, 2013, were established, depending upon the equipment class. DOE is required to review test procedures for covered products at least once every seven years. The frequency requirement for reviewing energy efficiency standards of covered products is no later than six years after issuance of a final rule. DOE issued a request for information regarding test procedures for CRACs on July 25, 2017. Voluntary Energy Efficiency Standards In addition to minimum national energy efficiency standards issued by DOE, the U.S. Environmental Protection Agency (EPA) and DOE jointly administer the voluntary ENERGY STAR labeling program for energy-efficient products, homes, buildings, and manufacturing plants. ENERGY STAR has standards for miscellaneous residential and commercial electrical equipmentâincluding computers and displays. ENERGY STAR also has specifications for enterprise servers, data storage equipment, small network equipment, large network equipment, and uninterruptible power supplies. Congress may consider whether ENERGY STAR specifications for cryptocurrency mining technology are needed, or whether existing specifications for equipment used in data centers are appropriate. Data Center Energy Efficiency Standards Congress may also choose to consider the creation or adoption of energy efficiency standards for data centers used by mining companies. Verifiable information on cryptocurrency mining power usage is limited and based on what is voluntarily reported. Under these circumstances, it is reported that as cryptocurrency mining centralizes and professionalizes, mining facilities are taking on characteristics (e.g., power and cooling needs) that are similar to other large computing facilities, such as data centers. One option for improving the energy efficiency of Bitcoin mining could be to establish energy efficiency standards for data centers or large computing facilities. According to DOE, data centers are energy-intensive compared to other building types. DOE estimates that data centers account for approximately 2% of total U.S. electricity use. In 2014, data centers in the United States consumed an estimated 70 billion kWh, and are projected to consume approximately 73 billion kWh in 2020. The growth in cloud computing services has led to commitments by some data-centric companies to power data centers with renewable energy. Although there are no national efficiency requirements for data centers, the federal government has taken steps to improve the efficiency of its own data centers. In 2010, the Federal Data Center Consolidation Initiative (DCCI) was established. The Federal Information Technology Acquisition Reform Act (FITARA, P.L. 113-291 ) was enacted on December 19, 2014, to establish a long-term framework through which federal IT investments could be tracked, assessed, and managed, to significantly reduce wasteful spending and improve project outcomes. The DCCI was superseded by the Data Center Optimization Initiative (DCOI) in 2016. The DCCI established and the DCOI maintains requirements for agencies to develop and report on strategies "to consolidate inefficient infrastructure, optimize existing facilities, improve security posture, achieve cost savings, and transition to more efficient infrastructure." The DCOI also included energy efficiency goals for data centers: 1. Existing tiered data centers to achieve and maintain a power usage effectiveness (PUE) of less than 1.5 by September 30, 2018, and 2. New data centers must be designed and maintain a PUE no greater than 1.4, and are encouraged to achieve a PUE no greater than 1.2. For the PUE metric, the DCOI references Executive Order (E.O.) 13693 and the implementation instructions. E.O. 13693 was revoked by and replaced with E.O. 13834, which does not discuss data centers. The implementation instructions for E.O. 13834 state that "data centers are energy intensive operations that contribute to agency energy and water use and costs," and encourage agencies "to implement practices that promote energy efficient management of servers and Federal data centers," and "to install sub-meters, including advanced energy meters, in data centers where cost effective and beneficial for tracking energy performance and improving energy management." The authorization of the DCOI was extended until October 1, 2020, by the FITARA Enhancement Act of 2017 ( P.L. 115-88 ). Congress may choose to consider whether federal data center PUE requirements should be extended to certain types of data centers outside the federal government. For Bitcoin mining facilities, reportedly little is known about their operations, including power usage effectiveness. Options for Federal Regulation of Blockchain Technology for Distributed Energy Rules and regulations governing the retail sale of electricity generally originate with a state public utility commission. An electric utility is defined in federal law as any person, state, or federal agency "which sells electric energy." Definitions may be found in Public Utility Regulatory Policies, 16 U.S.C. Section 2602. This definition could potentially be interpreted that generators of electricity that make energy trades using blockchain technology are electric utilities by virtue of the fact that they sell electricity, and are therefore subject to all laws, requirements, and regulations pertaining to electric utilities. Congress may choose to consider extending or clarifying FERC's role regulating blockchain technology use in the energy sector. While blockchain could be implemented as a means to validate peer-to-peer distributed electricity trading, these transactions could potentially still be subject to FERC oversight as engaging in a sale for resale. Applications of blockchain technology in the energy sector have been limited in scope to date; wide-scale adoption of blockchain technologies could pose additional vulnerabilities to grid operations. FERC may also have a role in considering whether the existing grid infrastructure is capable of handling more power movement at high speeds in response to blockchain users' transactions. Other potential issues could include data privacy, interoperability of technology solutions, and market structure. FERC has not issued guidance or announced standards associated with blockchain technologies. Within this context, utilities and industry groups may interpret the lack of guidance as a signal to continue business as usual. Appendix. Select Algorithmic Approaches to Crypto-Mining As the Bitcoin network's energy consumption grows, some have questioned whether the proof-of-work (PoW) algorithm that is used by Bitcoin is sustainable. Many alternative algorithms exist. PoW and two approaches that are conceptually less energy intensiveâproof-of-stake and proof-of-authorityâare discussed below and illustrated in Figure A-1 . Proof-of-Work Under proof-of-work (PoW), miners are presented a difficult computational problem, or puzzle. PoW identifies a numeric value (called a nonce), which is used to generate an authenticator (hash value). The hash value ensures a user that the block of data sent has not changed. Hashes are determined by submitting the data through an algorithm that will output a string of characters. By inserting the nonce into the algorithm, miners seek to change the hash value. Identifying these valid nonces and hashes is computationally intensive, and the essence of mining. The security properties of hash algorithms are such that a miner tests nonces until a valid hash is found for a block. Generally, by solving the problem or puzzle, miners win the opportunity to post the next block and possibly receive a reward for doing so. In the case of Bitcoin, miners who create and publish new blocks in the blockchain are rewarded with Bitcoin. Once the problem is solved and a valid hash is identified, the miner announces it to the community. Other users can validate the solution immediatelyâwithout going through the resource-intensive computation processâby having transparent access to the entire history of the blockchain's transaction ledger. Once the majority of the community validates and confirms the block, the next block can be added to the chain. Proof-of-Stake Proof-of-stake (PoS) depends on the community's actual stake in the currency instead of consuming energy in a race to be the first to solve computations. The more currency a "forger" (i.e., the PoS term in lieu of the PoW term "miner") holds, the more transactions can be validated. This method skips the energy-intense hashing race. All of the currency is already created, and the amount is stagnant. Forgers earn currency through transaction fees for building a new block (and thereby validating a transaction). A new block is determined by the level of stake (e.g., wealth) a forger has invested in the cryptocurrency. Thus, forgers put their own cryptocurrency investment at risk and therefore would likely only build a block for valid transactions. If a forger added a block to the blockchain based on an invalid transaction, it would risk losing its stake. Potential energy reductions from use of PoS are leading to changes in some major cryptocurrencies. Ethereumâa platform that uses a cryptocurrency called Etherâplans to move to a PoS system and is currently working on the remaining challenges, such as scaling a PoS system and maintaining a decentralized system. The Ethereum network expects to go through several upgrade phases in order to fully transition to PoS. The timeline for this transition has not yet been revealed, but this new solution upgrade, known as Serenity, was announced at DevCon 4. The Serenity upgrade would utilize a new PoS algorithm called "Casper" that is intended to overcome some of the drawbacks (e.g., centralizing a traditionally decentralized currency) of a PoS community. Proof-of-Authority Proof-of-authority (PoA) is another method of validating transactions in a blockchain. Like much of the terminology associated with blockchain, there is not a formal definition of PoA, and the definition may differ from one group to another, depending on the purpose of the blockchain platform. One understanding of PoAâas it relates to cryptocurrencyâhas validators curating their own reputation in order to achieve payout. Validators earn their reputation by running software to put transactions into blocks that require a link to properly identify that validator. This method places every person in the network on equal footingâeveryone only has one identity. An alternative understanding of PoA, among the supply chain industry, uses a blockchain network to track logistics transparently. PoA provides a level of scalability and security within private networks that PoS or PoW cannot. Limitations of PoS, PoA, and PoW PoS, PoA, and PoW algorithms have limitations. While PoS and PoA both reduce energy consumption levels and require far less sophisticated equipment, they both create a more controlling and limited environment. PoW requires community decisionmaking. PoS and PoA are more individualistic. This could undermine the concept of the decentralized nature of the distributed ledger system design, which is one of the fundamental principles in cryptocurrency. Cryptocurrency was developed to move away from the centralized power of the banking system and move toward a decentralized network. The Ethereum upgrade is intended to integrate several new aspects and is expected to achieve a more decentralized system even when compared with PoS. Ethereum's "Phase Zero" of the PoS specification was frozen on June 30, 2019, with the formal launch targeted for January 3, 2020. PoW is also vulnerable to attacks. PoW blockchains publish new blocks to the longest available chain. Although difficult to accomplish, a malicious actor could devote overwhelming computational resources to rewriting a blockchainâdeveloping different transactions with different nonce and hash values. This is known as the "51% attack." At a point where their chain is the longest, the malicious actor could publish the blockchain, and the system would accept it as the valid one. By rewriting the chain, the malicious actor would reestablish the distribution of resources (i.e., which accounts have Bitcoin and how much the account holds). This would require substantial energy consumption, space, equipment, and money, and would all have to be done covertly to avoid being caught. While this may appear to be difficult to execute, PoW algorithms are not invulnerable.