Plans to create an Australian "Blockchain Valley" with cheap fossil energy have been met with a stony reception from blockchain insiders.

Abraham Cambridge, founder and CEO of The Sun Exchange, a blockchain-based marketplace for solar PV equipment, said a plan by Australian tech firm IOT Group to restart a coal-fired plant for blockchain company energy supplies is not sustainable. 

“Blockchain, being one of today’s most forward-thinking industries, should not be looking backwards at coal to meet energy needs,” Cambridge said. “Instead, we should focus on deploying more clean energy capacity.”

Using green energy for blockchain business development was more sustainable and also made more economic sense, he said. “A well-placed solar energy plant now produces electricity at lower cost than fossil fuels,” he claimed. 

Earlier this month, IOT Group announced a partnership with Hunter Energy, an independent power producer in Hunter Valley, New South Wales. The two companies said they planned to restart Redbank Power Station, a 151-megawatt coal plant, with the aim of feeding some of the energy directly into power-hungry blockchain applications. 

Bypassing the utility grid would help cut the price of electricity from an average residential rate of AUD$0.28 (USD $0.21) per kilowatt-hour to just AUD $0.08 (USD $0.06) per kilowatt-hour in daytime and AUD $0.05 (USD $0.04) at night, IOT Group said. 

This, in turn, might help Australia attract blockchain companies that have been wary of locating in the country because of its high electricity costs. “Power at wholesale cost would make blockchain-related operations attractive in Australia,” said IOT Group in a press note.

The question is whether those operations will still be attractive if the power comes from fossil-fuel sources.

Until recently, mining for Bitcoin, the biggest blockchain application in the world, has centered on China precisely because its massive coal-fired generation capacity afforded low energy costs.

But blockchain’s energy use, and accompanying carbon footprint, is coming under increasing scrutiny.

This month, platform developer Energy Web Foundation said the architecture it is developing for energy blockchain companies would use a proof-of-authority consensus validation process instead of proof-of-work, which is the cause of bitcoin’s massive waste of electricity

And developers of Ethereum, the world’s second cryptocurrency after Bitcoin, have long been mulling a switch to another validation process, called proof-of-stake, which would also significantly reduce energy use. 

These developments could allow blockchain firms to be choosier about energy supplies when the Hunter Energy plant restart is complete, within roughly a year. 

While the Hunter Energy website emphasizes the company is keen to move soon to cleaner generation sources, including solar PV and battery storage, it is unclear how the move away from coal would be funded and when exactly it might take place.

Despite these misgivings, the IOT Group’s plans were widely reported around the world. Most reports failed to mention that both the Redbank power station and IOT Group have somewhat checkered pasts, however.

Redbank was commissioned in 2001 with a groundbreaking design enabling it to run off coal tailings that would have otherwise been discarded. Concerns about high emissions from the technology brought strong opposition from Greenpeace Australia. 

In 2007, the carbon emissions database Carbon Monitoring for Action calculated that Redbank was emitting more greenhouse gases than any other power plant in Australia. The plant’s owner delisted from the Australian Securities Exchange (ASX) in 2016.

ASX-listed IOT Group, meanwhile, was originally conceived as a high-tech venture touting gadgets such as a pocket-sized flying camera called AirSelfie and a shopping app called Runa. However, the Australian Financial Review last year reported that “it has since been beset by disputes and ongoing scrutiny from the ASX and investors about its ability to keep trading.”

In September 2016, the company sacked its founder, Simon Kantor, in the midst of a legal spat. Last August, the company also lost its chairman, executive director and two non-executive directors, cutting its top team to just three people. 

By October 2017, IOT Group had to allay fears that it was about to run out of cash. As of March this year the company’s shares were trading at a 52-week low.

If the company is hoping to benefit from a high-profile blockchain announcement, though, investors will be sorely disappointed. Since news of the Hunter Energy partnership went out, IOT Group’s shares have dropped to less than a cent apiece, their lowest level ever.