Even though energy-hungry Bitcoin mining companies have volunteered to power down in Texas this week to alleviate the stress placed on the grid by a searing heatwave, the industry could still trigger more problems down the line if it continues its explosive expansion in the state.
Higher electricity bills and even more carbon dioxide emissions could be on the way for Texans, despite crypto mining industry claims that it can spur the growth of affordable renewable energy. The problem is the Bitcoin network’s enormous demand for electricity, which is spiking faster than the grid can reasonably keep up with.
Texas’ energy system is already bracing for the Bitcoin mining industry to keep growing at breakneck speed. The amount of electrical load crypto miners are expected to add to the Texas grid over just the next four years represents nearly a third of the grid’s current maximum capacity. Crypto mining is set to increase demand on the grid by a whopping 27 gigawatts by 2026, a spokesperson for the Electric Reliability Council of Texas (ERCOT) told The Verge in an email. ERCOT is the main grid operator in the state, in charge of managing its power supply. The spokesperson, replying from ERCOT’s media relations email, refused to provide their name.
Texas’ energy system is already bracing for the Bitcoin mining industry to keep growing at breakneck speed
Let’s break down why 27 gigawatts is such a big deal. The first thing to know is that a single megawatt (MW) can power about 200 homes during times of high demand in Texas. A gigawatt is one thousand megawatts.
On July 12th, during the heatwave, the state hit a record. More than 78 gigawatts of electricity were needed to meet peak demand, according to ERCOT. The power grid in Texas can currently supply a maximum of about 92 gigawatts of electricity — and that’s only if every source of power generation is working perfectly, which usually isn’t the case. That leaves limited breathing room for most of the state during periods of high demand.
All of that brings us back to the crypto boom in Texas. “There are over 27 gigawatts of crypto load that is working on interconnecting over the next four years,” the unnamed ERCOT spokesperson said.
That’s an “astronomically impossible” load to add to the grid in that short timeframe, according to Joshua Rhodes, a research associate at the University of Texas at Austin. “There’s no way we could do 27 gigawatts of crypto [in four years] … that would put too much stress on the system too fast,” says Rhodes. “We barely have the power plants to cover today,” he tells The Verge.
“Astronomically impossible”
In very little time, Texas has become a major player in the global Bitcoin mining industry. China banned the practice in 2021, and almost immediately, the US took its spot as the biggest hub in the world for crypto mining. Many miners set up shop in Texas, initially enticed by low energy prices and lax regulation. The state is now home to about a quarter of Bitcoin mining that takes place in the US, by some estimates.
Large-scale crypto mines essentially look like giant data centers filled with specialized computers that “mine” Bitcoin. The machines typically run around the clock, solving computational math problems in return for new tokens. Those problems become more complex over time, requiring more computing power and making it a deliberately energy-inefficient process.
Realistically, many of the proposed crypto mining projects that want to connect to the grid between now and 2026 will likely not materialize, experts tell The Verge. That’s the case for new projects in other industries, they say, so they expects the same for crypto mining. On top of that, Bitcoin miners have to contend with the “crypto winter” that’s battered the industry and sent the price of the cryptocurrency plunging this year.
Rhodes thinks 5 gigawatts is probably a more viable number in terms of how much energy demand crypto mining might bring to the state over the next four years. And even 5 GW is a lot to accommodate. “We would have to speed up significantly the process of building transmission lines,” Rhodes says. It would also necessitate building out more power plants or wind and solar farms to provide the additional energy.
Unfortunately, the costs for building out all this infrastructure are often passed on to consumers — particularly if it’s done at a huge scale under a rushed timeline as crypto mining might demand. Rising energy prices have already been the consequence of crypto mining operations in other states. For instance, in upstate New York — another major crypto mining hub — electricity bills have increased by about $8 monthly for individual customers and $12 monthly for small businesses, according to an analysis last year by researchers at the University of California, Berkeley and the University of Chicago.
“Large amounts of new demand are never helpful for your electricity bill,” says Eric Hittinger, an associate professor at Rochester Institute of Technology with a background in electricity system policy. “The more crypto mining that comes into the state, the higher the residents should expect the electricity prices to become.”
“Large amounts of new demand are never helpful for your electricity bill”
In the short term, residents might compete with crypto companies for a limited supply of electricity and face higher rates when greater demand raises prices. In the long term, the spike in new electricity demand for crypto mining could spark the massive build-out of new power sources. Bringing more power sources online to meet demand could ultimately push prices back down over time, but there are initially big upfront costs.
Those costs might cover the construction of solar and wind farms, which power grids do need more of for the world to have a fighting chance at getting climate change under control. That green possibility is why many crypto mining companies in the US say it’s a good thing that their hunger for energy can boost the development of power sources. Industry advocates say crypto mines are the perfect consumers for solar and wind energy, which — depending on the weather — might generate too much electricity for the grid at any one time. Instead of utilities having to ask solar and wind farms to curtail their energy generation because grids don’t yet have enough storage for it, crypto mines can gobble it all up so the renewable energy doesn’t go to waste.
Increasing energy demand is generally a driver for investment in new energy generation. But it would have to happen under very specific circumstances for crypto miners to actually induce enough renewable energy growth to have a positive impact on the environment. Otherwise, pollution would continue to rise with electricity consumption, according to Rhodes.
It’s basic math. If crypto mining gobbles up about 5 gigawatts of electricity in Texas but only incentivizes about 2 gigawatts of clean energy, then the industry is still going to be responsible for the extra pollution created by that excess 3 gigawatts.
In order to help bring enough clean energy online to actually reduce carbon dioxide emissions in Texas, crypto mining data centers would have to be willing to power down for about 15 percent of the year — whenever wind and solar power generation are low. That’s according to an analysis Rhodes completed last year for the crypto mining company Lancium in his role as a managing partner for the consulting firm Ideasmiths.
“That’s a pretty big caveat, in terms of [crypto miners] have to be willing to be flexible,” Rhodes says. Many mining companies do pride themselves as being “flexible” customers, able to quickly ramp their energy consumption up or down quickly, but powering down for 15 percent of the year is a big ask that goes far above what we’ve seen so far from the industry.
A worker installs a new row of Bitcoin mining machines at the Whinstone US Bitcoin mining facility in Rockdale, Texas, on October 9th, 2021.
Photo by MARK FELIX / AFP via Getty Images
This week, Bitcoin mining companies have shown some flexibility by deciding to shut off their machines after the state’s grid operator started asking Texans to conserve energy on Monday. The brutal heatwave is testing the grid as residents turn up their air conditioning to cope with triple-digit heat. Cryptomining companies have powered down voluntarily, collectively freeing up 1 gigawatt of electricity or about 1 percent of the grid’s total capacity.
Being “flexible” like that is crucial to avoid power outages whenever peak demand threatens to overwhelm the grid. Texas’ power grid is especially vulnerable to outages because it doesn’t interconnect to other states so that they can share energy, which other states do so they can fill in for each other if there’s a shortfall in supply somewhere. Texas’ grid is also notoriously fragile. Last year, a brutal cold snap wrought havoc on the grid and triggered massive, deadly blackouts.
While Bitcoin mining companies voluntarily curbed their power use this week to ease stress on the grid, there were also financial motives behind the move. Spot prices for electricity rise when there’s peak demand, making it less profitable to keep running their machines. Under those conditions, mining companies might actually make more money selling the unused electricity than they would by mining (if they’ve secured the electricity through long-term contracts with energy providers), according to Hittinger.
“It’s not exactly charity”
“So it’s not exactly charity, as some people might frame it,” Hittinger says. Nor is it a new service for the grid. Historically, other industries — from chemical processing to manufacturing — have played similar roles in helping to stabilize the grid by powering down when needed. That crypto companies curtailed mining in Texas this week is a sign that the industry is capable of providing the same service, Hittinger says, if there are the right economic incentives.
“Just in efforts to support the citizens of Texas, that’s always going to be our priority,” says Alexis Brock, marketing coordinator at Bitcoin mining company Riot Blockchain, when asked whether the company planned to continue conserving energy during times of peak demand in the future. Riot operates what it claims is the largest Bitcoin mining facility in North America in Rockdale, Texas, and it powered off completely for at least 10 hours a day for several days over the past week.
That hasn’t eased concerns that Jackie Sawicky has about another massive crypto mine Riot plans to build in Navarro County, Texas, where she lives. “We do NOT want this enormous burden on our already fragile infrastructure,” reads a petition Sawicky started to stop its construction. Once completed, the new facility is expected to have the capacity to use 1 gigawatt of electricity.
“They talk about stabilizing the grid,” Sawicky says to The Verge. “And it is so infuriating to me that they can claim something like that when they’re putting an incredible burden on the grid.”
Source by www.theverge.com
