Bitcoin miners promised Texans that data centers consuming enormous amounts of energy to generate an imaginary currency would save the electric grid, but instead, they are costing Texans more than $1.8 billion a year in higher electric bills, according to a top energy analysis firm.
The new report adds to a growing body of evidence that cryptocurrency generators exploit the fragile wholesale market operated by the Electric Reliability Council of Texas. Our electric bills will only go up, Wood Mackenzie warned last month, unless state officials step in.
Bitcoin mining in Texas uses at least 1,787 megawatts of electricity — or 2.2% of ERCOT’s baseload — researchers calculated, confirming a report by the New York Times. On a low-demand day when temperatures are cool, wholesale electricity prices are $5 a megawatt-hour higher “due to the need for more and more expensive generators to be dispatched” for crypto mining.
Overall, mining drives up prices by $1.8 billion annually, or 4.7%, researchers concluded.
“These figures are conservative, accounting only for mining during ‘blue sky’ hours when prices are under $15 a megawatt-hour,” the report said. “Bitcoin mining is likely to have stronger impacts on the grid over time as the number of larger and more power-hungry mining facilities is likely to grow.”
Gov. Greg Abbott and U.S. Sen. Ted Cruz have touted crypto mining as a solution to the ERCOT grid’s reliability problems.
Crypto miners, which use energy-intensive computer servers to generate tokens such as bitcoin, have flocked to Texas for cheap electricity after China banned them. Most of the time, Texas has among the nation’s most affordable wholesale electricity rates.
Advocates say miners make the peaks and valleys in electricity pricing smaller.
“Bitcoin miners do increase prices overnight and in times of low demand because they soak up low-cost power when consumers don’t need it,” Lee Bratcher, president of the Texas Blockchain Council, told me. “Bitcoin miners do not increase prices during times of high demand because, as the data shows, they turn off before prices hit their breakeven, which is around $100 per megawatt-hour right now.”
Critics complain new mines are going up faster than ERCOT can add new low-cost generation. The higher demand during temperate periods raises prices for everyone by keeping older and more polluting power plants operating. Generators are not investing in cleaner and more efficient power sources because peak periods are less profitable.
Most miners also drive up costs by demanding multimillion-dollar payments to turn off.
Riot Platforms, a bitcoin miner in Rockdale, took in $31.7 million in August alone for curtailing demand, overshadowing the $8.6 million net proceeds from producing bitcoin that month. The Riot mine consumes enough electricity for 300,000 homes.
“August was a landmark month for Riot in showcasing the benefits of our unique power strategy,” Jason Les, the company’s CEO, said in a statement. This year was the second in a row where Riot made more money from demand response in August than producing tokens.
ERCOT does not pay residential or small business consumers to save electricity, but sent emails and text messages this summer begging for conservation.
Most of the other 30 miners in Texas make money from reducing demand, but few reveal those profits. ERCOT does not release data on specific companies; WoodMac reached its conclusions by examining localized ERCOT pricing data.
Republican state Sens. Lois Kolkhorst, Donna Campbell and Robert Nichols sponsored Senate Bill 1751 earlier this year to force crypto miners to register with ERCOT and would have limited their participation in paid demand response programs. The bill passed the Senate unanimously, but the House never took it up.
ERCOT is required to serve any large facility that safely hooks up to the grid, whether there is enough power to support it or not. Texas summer demand jumped 8% this year, far faster than officials anticipated.
Some analysts predict crypto miners could grow electricity demand by 50% over the next few years, far faster than generators can build new power plants.
ERCOT proposed a new rule in August requiring companies that need large amounts of electricity to apply before connecting. The companies would also have to declare whether they could curtail demand when needed. Industry groups, however, are trying to kill the proposal.
Texas needs a law to ensure a stable electric grid and prevent bitcoin companies from gaming the wholesale market for profit. Anything less, and our electric grid will keep teetering in extreme weather.
Chris Tomlinson, named 2021 columnist of the year by the Texas Managing Editors, writes commentary about money, politics and life in Texas. Sign up for his “Tomlinson’s Take” newsletter at HoustonChronicle.com/TomlinsonNewsletter or Expressnews.com/TomlinsonNewsletter.
