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

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Record heat across Texas has pushed the fragile power grid to the brink. But extreme temperatures do something else in Famous Pro-Business Country: Stirring up opposition to the power-hungry crypto miners who flocked there in search of low-cost power and an unregulated position.

Ten industrial-scale crypto miners now draw from the Texas power grid, according to its monitor, the Texas Electrical Reliability Council. ERCOT, as it is known, declined to say how much power miners currently consume, but Trudy Webster, a spokesman for the council, said that miners’ consumption is expected to reach 18 gigawatts in the coming years. The current grid capacity is about 80 gigawatts, but it is also expected to grow.

Bitcoin miners deploy thousands of high-powered computers to solve complex mathematical equations; when they succeed, Miners Earn Bitcoin. according to University of Cambridge Electricity Consumption Index Bitcoin.

Since China shut down crypto operations, the United States in general, and Texas in particular, have become favorite places for the industry. Lee Bratcher, founder of the Texas Blockchain Council, a lobby group, estimated that there are now 40 crypto companies operating in the state, including 10 large, double the number just two years ago..

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

The use of crypto-energy miners is putting an ‘almost unprecedented burden’ on the Texas grid, according to Ben Hertz-Shargill.And the Global head of Grid Edge, a unit of energy consultancy Wood Mackenzie. He told NBC News that mining is “pushing the system closer to dangerous system peaks at all times.” “It is completely unnecessary and money-consuming material resources, time and money that should decarbonize and strengthen the network.”

The Texas Network has been under pressure before. During Winter Storm Urey in February 2021, for example, energy demand exceeded supply; More than 200 people died, most of them from hypothermia. Unlike other electricity systems, the Texas grid does not connect to the grids of other states; This means that it cannot get power from other areas in an emergency.

Hertz-Shargel said that due to the high demand for electricity, crypto miners are raising costs for other energy consumers. And on the Texas grid, miners can get paid to cut power during periods of peak demand, like the one that hit the state recently. Miners and other industrial customers who follow these types of arrangements receive revenue for not using electricity; The costs of this revenue are transferred to other electricity customers.

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Power lines for a bitcoin mining depot in Rockdale, Texas.Marc Felix/AFP via Getty Images

Texas electricity rates are lower than many other states, which is a huge temptation for crypto miners. According to the US Energy Information AdministrationTexas customers paid an average of 8.36 cents a kilowatt-hour in 2020 versus the national average of 10.59 cents. the prices significantly increased In recent months everywhere.

But experts say the Texas network holds relatively few surplus reserves. Earlier this month, in the midst of a heat wave, ERCOT has asked customers to restrict usePowered miners. In a press release, ERCOT said it issues such notifications “when projected reserves fall below 2,300 megawatts.” [megawatts] for 30 minutes or more.”

ERCOT, non-profit company Which answers to the Texas Public Utilities Commission and the state legislature, has changed its operations since Uri, in an effort to make Texas’ unregulated network more reliable. But bitcoin miners drawn into the country due to lower energy costs and deregulation added significant energy demand.

Bratcher and the miners he represents say they offer three advantages to Texas. And because they can turn off their electricity use during periods of high demand, they can help stabilize the grid and curb runaway energy prices. “Energy pricing is set at peak and miners are specifically trying to shut down during peak periods,” he said. In addition, crypto miners’ demand for 24/7 electricity could provide an incentive for wind and solar developers to bring more green energy to the grid while new jobs and tax revenue “add to the scale of human prosperity in the communities where the mines are located.” Bratcher said.

However, there are still pockets of opposition. More than 800 people have signed a petition against a new bitcoin mining facility to be built near Corsicana, Texas, by Riot Blockchain Inc. She pointed to the high costs of electricity and water associated with the plant. The operation will become the largest bitcoin mining facility in the United States when completed, Riot says.

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

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

Jackie Swicky, a small business owner, organizes an opposition riot facility. “There are more than 7,000 people in poverty and 8,000 seniors living on a stable income here,” she told NBC News. “We cannot afford the increased costs of water and electricity.”

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 operations in Rockdale, Texas have benefited its community.

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

“We are a fantastic company with nearly 500 employees and we have health insurance, 401(k)s, profit sharing,” Harris told NBC News. “You rarely find an organization that comes into rural Texas and changes people’s lives.”

Distinguished by Harris Sawicky and her group, Concerned Citizens of the Province of Navarro, as “creating a false narrative of the facts” about Riot’s new facility. Regarding water use, Harris said, “We don’t get a deal. We pay the market price. Corsicana — they have tons of water.”

But Sawicky says the environmental impact of the Corsicana facility is unknown. “Texas has been deregulated — a lot of other states would have at least mandated an environmental impact study,” she said.

Some in Congress agree that more information is needed about the environmental impact of crypto miners nationwide. In mid-July, Senator Elizabeth Warren, a Democrat from Massachusetts, and five of his congressional colleagues wrote a letter EPA and DOE require crypto miners to disclose energy use and environmental impact data.

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

“The energy consumption of crypto installations 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 seeing an influx of crypto companies, raising concerns about the state’s unreliable electricity market and the potential for cryptocurrency to add to the strain on the state’s power grid.”

In addition to the price hikes that consumers are facing due to increased demand from bitcoin miners, another cost could arise, at least in Texas. Under contracts that some bitcoin miners have with ERCOT, they get paid to shut down at times of peak demand. This means that they receive money from other price-payers for not using electricity; Other industrial users have such arrangements as well.

During peak periods, miners could also resell the electricity they would have used to the grid. Because their contracts can allow them to purchase energy at a low cost, reselling energy when demand is high can generate significant financial benefits in the form of credits for future use. These contracts are common among industrial users of electricity.

These contracts are usually not public, however, and they leave residents in the dark about their terms and how they might affect other price payers.

said Katie Paul, director of the Tech Transparency Project, a nonprofit organization focused on large technology companies. just posted In-Depth Report On cryptomining in Texas.

One contract was publicly detailed in Securities and Exchange Commission filings; It was shocked by the publicly traded Riot Blockchain extending into 2030. A June investor presentation from Riot said that its net cost of electricity during the first quarter ending March 2022 was 2.9 cents per kilowatt-hourMuch less than the resident customers pay. Jason Leigh, CEO of Riot, said: Recent Q&A session posted on YouTube. Riot’s regulatory filings showed that during the last quarter ending March 31, Riot booked $2.5 million in power sales to the grid.

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Jason Leigh, CEO of Riot Blockchain. Eva Marie Ozkategui/Bloomberg via Getty Images

Records show that in periods of peak demand, energy sales to the grid can be much larger. After winter storm Urey, for example, Riot said its giant Rockdale facility would receive $125.1 million in credits for power it sold to the grid.

Andrew Dessler, professor of atmospheric sciences at Texas A&M University, said electric customers across the state would cover these credits. “Texas payers will pay less each month for decades,” Dessler said. “It pisses me off so much.”

Due to the bitcoin price drop in recent months, Riot Blockchain stock is down, dropping 74% since November. The company said in a recent filing that it expects to benefit from the consolidation in the bitcoin mining business. Riot says average bitcoin mining cost is $13,600; Bitcoin is trading around $23,000.

However, Grid Edge’s Hertz-Shargel credits the costs that crypto business imposes on taxpayers and the environment, including emissions. “When you have more load in the system, you have higher real-time energy prices,” he said. “Over time, these costs are included in the costs borne by the taxpayer.”

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