Bitcoin

Can the fragile Texas power grid handle a cryptomining gold rush?

Record heat in Texas has pushed its fragile power grid to the limit. But extreme temperatures are doing something else in the famously business-friendly state: fomenting opposition to energy-hungry cryptocurrency miners who have flocked there for cheap energy and a deregulatory stance.

Ten industrial-scale cryptocurrency miners are now powered by the texas power grid, according to their supervisor, the texas electrical reliability board. Ercot, as it is known, declined to say how much power miners currently consume, but council spokeswoman Trudi Webster said miners’ consumption is forecast to be 18 gigawatts in the coming years. the current capacity of the network is around 80 gigawatts, but this is also expected to grow.

Reading: Texas to bitcoin vulnerable power grid

bitcoin miners deploy thousands of high powered computers to solve complex mathematical equations; when successful, the miners earn a bitcoin. The annual electricity use attributed to bitcoin mining is roughly equivalent to the consumption of Belgium, according to the Cambridge University Bitcoin Electricity Consumption Index.

since china shut down crypto mining, us. uu. in general, and texas in particular, have become places of choice for the industry. Lee Bratcher, founder of the Blockchain Council of Texas, a lobbying group, estimated that there are now 40 crypto mining companies operating in the state, including the Big 10, twice as many as just two years ago.

A row of Bitcoin mining machines at the Riot Blockchain facility in Rockdale, Texas.

A row of bitcoin mining machines at the Riot Blockchain facility in Rockdale, Texas.Mark Felix / AFP via Getty Images file

The energy crypto miners use puts “an almost unprecedented burden” on the Texas grid, according to Ben Hertz-Shargel, global head of Grid Edge, a unit of Wood Mackenzie, an energy consulting firm. Mining “pushes the system closer to dangerous system peaks at all times,” he told NBC News. “It is completely inessential and consuming physical resources, time and money that should be going to decarbonize and strengthen the grid.”

the texas network has been under pressure before. During winter storm Uri in February 2021, for example, power demand outstripped supply; more than 200 people died, most from hypothermia. Unlike other electrical systems, the Texas grid does not connect to the grids of other states; that means it can’t receive power from other areas in an emergency.

Due to their high demand for electricity, crypto miners drive up costs for other energy consumers, hertz-shargel said. And, on the Texas grid, miners can be paid to go offline during peak demand periods, like the one that recently hit the state. miners and other industrial customers with such arrangements receive revenue for not using electricity; the costs of those revenues are passed on to other electricity customers.

US-CRYPTOCURRENCY-CLIMATE-EMPLOYMENT-CHINA

Power lines for the bitcoin mining warehouses in Rockdale, Texas.Mark Felix / AFP via Getty Images file

Texas electricity rates are lower than many other states’, a big lure for crypto miners. According to the U.S. Energy Information Administration, Texas customers paid on average 8.36 cents per kilowatt hour in 2020 versus the nationwide average of 10.59 cents. Prices have gone up significantly in recent months everywhere.

but the texas network holds relatively few excess reserves, experts say. Earlier this month, in the midst of the heat wave, Ercot asked customers to restrict usage and miners went dark. ercot said in a press release that it issues such notifications “when projected reserves may fall below 2,300 mw [megawatts] for 30 minutes or more.”

See also: El Salvador Angrily Rejects IMF Call to Drop Bitcoin Use | Daily Business Review

ercot, a nonprofit corporation that answers to the texas public utility commission and the state legislature, has shifted its operations from uri, trying to make texas’s unregulated grid more reliable. But bitcoin miners drawn to the state by low energy costs and deregulation have added significant demand for energy.

bratcher and the crypto miners he represents say they bring three benefits to texas. Because they can interrupt your electricity use during periods of high demand, they can help stabilize the grid and rein in runaway energy prices. “The price of energy kicks in on spikes and miners are specifically trying to turn them off during spikes,” he said. furthermore, the 24/7 demand for electricity from crypto miners may provide an incentive for wind and solar power developers to bring more green energy to the grid, while new jobs and income taxes “lead to orders of magnitude of human prosperity in the communities where the mines are established”. up,” Bratcher said.

Still, there are pockets of rejection. More than 800 people have signed a petition against a new bitcoin mining facility to be built near Corsicana, Texas, by Riot Blockchain Inc., citing higher electricity and water costs associated with the plant. The operation will be the largest bitcoin mining facility in the US. uu. when complete, it says riot.

Jackie Sawicky

Jackie Sawicky has organized opposition to the Riot Blockchain facility in Corsicana, Texas.Jackie Sawicky

According to a May 2022 email from a local economic development official, the new Riot facility near Corsicana will consume 1.4 million gallons of water a day and 1 gigawatt of electricity. That’s enough to power 200,000 homes during periods of peak demand. The recent census shows approximately 21,000 “housing units” in Navarro County; the county’s population is around 54,000.

jackie sawicky, a small business owner, is organizing opposition to the riot installations. “There are over 7,000 people in poverty and 8,000 seniors living on fixed incomes here,” she told nbc news. “We can’t afford higher water and electricity costs.”

changing lives in rural texas

chad everett harris is riot’s chief commercial officer, and in an interview with nbc news, harris said the company’s other operation in rockdale, texas, has benefited his community.

According to a 2020 Economic Impact Report commissioned by the Rockdale Municipal Development District, an entity run by area business owners, the facility will deliver an estimated $28.5 million in economic benefits to the community over 10 years. The operation employs “nearly 200 full-time beneficiary employees,” Riot said.

“We’re a large company with almost 500 employees who have health insurance, 401(k)s, profit sharing,” Harris told nbc news. “Rarely do you find an organization that reaches out to rural Texas and changes lives.”

harris characterized sawicky and his group, concerned citizens of navarro county, as “creating a false factual narrative” about the new riot control installations. Regarding the use of water, Harris said: “we are not going to reach an agreement; we are paying the market rate. corsicana, they have tons of water.”

But Sawicky says the environmental impact of the Corsicana facility is unknown. “Texas is so unregulated that many other states would have at least required an environmental impact study,” she said.

Some in Congress agree that more information is needed on the environmental impact of crypto miners across the country. mid july sen. Elizabeth Warren, the Massachusetts Democrat, and five congressional colleagues wrote a letter calling on the Environmental Protection Agency and Department of Energy to require crypto miners to disclose their energy use and environmental impact data.

Bitcoin mining

A worker installs a new row of bitcoin mining machines at the Riot Blockchain facility in 2021.Mark Felix / AFP via Getty Images

See also: 9 Exchanges to Buy Crypto & Bitcoin in New York (2022)

“Cryptomining facilities’ energy consumption is causing significant increases in energy costs for many small businesses and residents,” the lawmakers wrote. “States like Texas with relatively cheap electricity costs are experiencing an influx of cryptomining companies, raising concerns about the state’s unreliable electricity market and the potential for cryptomining to add to the stress on the state’s power grid.”

In addition to price increases faced by consumers due to increased demand from bitcoin miners, another cost may arise, at least in texas. According to the contracts some Bitcoin miners have signed with Ercot, they are paid to shut down during times of peak demand. that means they get money from other taxpayers for not using electricity; other industrial users also have such arrangements.

During peak periods, miners can also resell electricity they would otherwise have used back to the grid. Because their contracts may allow them to buy energy cheaply, resales of energy when demand is high can generate significant financial benefits in the form of credits against future use. such contracts are common among industrial electricity users.

However, these contracts are generally not public, leaving residents in the dark about their terms and how they might be affecting other taxpayers.

“The public has not been given a say in these contracts and the fact that, during a time of great economic fragility, their pocketbooks may be affected,” said Katie Paul, Director of the Technology Transparency Project, a non-profit watchdog. focusing on large technology companies. just published a detailed report on crypto mining in texas.

a contract has been publicly detailed in securities and exchange commission files; was hit by publicly traded blockchain riot that runs through 2030. a riot presentation to investors in June said its net cost of electricity for the first quarter ending march 2022 was 2.9 cents per kilowatt hour, much less what residential customers pay. “That’s one of the lowest power cost deals out there for bitcoin miners,” Riot CEO Jason Les said in a recent question-and-answer session posted on YouTube. During the most recent quarter ending March 31, Riot booked $2.5 million in back-to-grid energy sales, its regulatory filings show.

Key Speakers At Bitcoin 2021 Event

Riot Blockchain CEO Jason Les. Eva Marie Uzcategui / Bloomberg via Getty Images file

In peak demand periods, sales of power back to the grid can be far more substantial, records show. After winter storm Uri, for example, Riot said its giant facility in Rockdale would receive credits worth $125.1 million for the energy it sold back to the grid.

Electric customers across the state will cover those credits, said andrew dessler, a professor of atmospheric sciences at texas a&m university. “Texas taxpayers will pay a little every month for decades,” Dessler said. “It makes me very angry.”

As the price of bitcoin has plummeted in recent months, shares of riot blockchain have declined, falling 74% since November. The company said in a recent filing that it expects to benefit from consolidation in the bitcoin mining business. Riot says that their average cost to mine a bitcoin is $13,600; bitcoin is trading at around $23,000.

Still, the hertz-shargel of the network edge goes back to the costs that crypto mining poses to taxpayers and the environment, including emissions. “When you have more load on the system, you have higher energy prices in real time,” he said. “Over time, those costs become the costs that taxpayers face.”

See also: Bitcoin ban: These are the countries where crypto is restricted or illegal | Euronews

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