Texas Bitcoin Miners Bail As Record Heat Alters Economics

Texas bitcoin miners have halted operations and shifted energy allocations back to the Lone Star State’s power grid as a blistering heatwave and a wilting cryptocurrency price combine to alter the industry’s profit picture.

“Nearly all industrial scale bitcoin mining” operations in Texas have shut down their rigs as of Monday, Bloomberg reported, after the Electric Reliability Council of Texas (ERCOT) appealed to consumers on Sunday night to conserve electricity as heat reached all-time highs.

On Sunday, temperatures climbed as high as 130ºF, and 110ºF is expected today.

The collective move of industrial-level bitcoin miners has already freed up over 1,000 megawatts of electricity, about 1% of the Texas grid, for commercial and retail users, Bloomberg quoted the Texas Blockchain Council as saying.

ERCOT’s forecast shows that demand for energy may surpass supply as Texans blast air conditioning during the heatwave. Crypto miner Core Scientific announced on Twitter it had shut down all its mining servers located in Texas, which account for less than 15% of its footprint.

Texas became a hub for bitcoin miners in the United States after China expelled all industrial-sized operations last year, taking advantage of the state’s cheap land and electricity prices. Crypto mining-friendly policies also made Texas attractive.

Turning off their power may not just be a measure of good faith. With the mining cost at about $16,647.79 per bitcoin
BTC
in the state against a price hovering around the $19,900 mark today, some miners are seeing more profit in halting operations and returning their energy back to the Texas grid than mining bitcoin.

This is largely because bitcoin miners’ flexible loads allow them to pause operations and cede energy to the state’s grid. Indeed, bitcoin miners have entered into demand response contracts with the ERCOT, under which they agree, in exchange for rebates, to shut down power in times of peak power demand.

Riot Blockchain
RIOT
said its Whinstone facility in Rockdale, Texas, curtailed energy consumption for a total of 8,648 megawatt hours in June in a statement. The company is the second-largest publicly traded bitcoin miner, with a market capitalization of $659 million. Riot currently has a 10 year contract to buy all the power it needs in Rockdale at 2.5 cents per kwh, counting a 0.5-cent-pero-kwh discount. This comes from its demand response contract, which also gives them the option to resell all its power back to the grid.

Extreme weather conditions year-round mean that this is not the first time Texas bitcoin miners have halted operations in favor of returning energy back to the grid. During the winter storm known as Uri in February 2021, bitcoin miners reduced their energy demand to zero, ERCOT said in a statement to UtilityDive.

In February of this year, when temperatures in Texas once dropped to freezing, blockchain mining companies also shut down their operations. Riot Blockchain shut down 99% of its operations in order to shift back energy onto the grid.