• Supply difficulties in Texas – electricity costs are rising
• Large energy consumers must register and obtain approval from the authorities
• Miners make more money from shutdown than from mining
Texas Energy Crisis – Electricity Costs Soar
Texas has a fragile power grid that is struggling to meet rising peak electricity demands. And so problems have often occurred in the past – so far mainly in winter during cold fronts. But this year there are problems with heat waves. According to electrek, an early heat wave in May brought six power plants in Texas to a standstill and in July Texas was hit again by a heat wave. The result was numerous power outages and a rapid increase in energy prices.
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While the usually moderate electricity costs had previously made mining in Texas quite lucrative, miners were suddenly faced with significantly higher electricity costs due to the supply difficulties caused by the heat waves. In addition, this year’s crypto crash is eroding the profits miners are making from selling mined cryptocurrencies.
Bitcoin miners awaiting approval
As CoinDesk reports, the state’s grid operator, the Electric Reliability Council of Texas (Ercot), is attempting to balance the state’s electricity demand and supply. In March, Ercot’s Large Flexible Load Task Force (LFLTF) announced a “tentative” process for large energy consumers to connect to the grid. According to the Texas law firm Vinson & Elkis, Ercot requires large energy consumers to register and obtain approval from the authorities before they can be connected to the electricity grid – this is likely to slow down the process. Steve Kinard, director of bitcoin mining analytics at industry body Texas Blockchain Council (TBC), noted that fewer projects have been powered each month since the process was introduced.
According to Kinard, there are currently 1.5 gigawatts (GW) of active mining projects in Texas. A representative told CoinDesk that Ercot estimates that 33 GW worth of bitcoin mining projects are now awaiting permits, up from 27 GW in mid-July. According to Kinard, TBC estimates that around 5 GW mining will be expanded by the end of next year – beyond that it is too difficult to predict.
A spokesman for Houston-based data center energy management company Lancium said the approval process is a “prudent measure to ensure grid stability until the LFLTF completes its work,” according to CoinDesk. According to the Lancium representative, the LFLTF is “working with a broad group of stakeholders to develop proposed rules on how these loads can best be used to reduce the load on the grid during times of stress,” the Lancium representative said.
However, some companies are disappointed by the slowdown in approvals. “While many companies have been successful in establishing large-scale operations in Texas, some companies have not received as much power as they initially anticipated, leaving them in a difficult position,” said CoinDesk Ethan Vera, of mining services firm Luxor Technologies. again. “We continue to see distressed sales of transformers, PDUs (Power Distribution Units) and other equipment that miners are unable to use due to power constraints.”
Texas remains friendly to miners, however
As CoinDesk reports, Kinard says the council remains friendly to miners despite the new process and the associated slower approvals, and there is no indication that they are no longer trying to attract more miners to Texas. Thinking differently about bitcoin miners, the task force included a series of questions aimed at specifically identifying bitcoin mining consumption in a white paper on reporting large loads and resources that was presented in August. Based on the miners’ responses, the task force can calculate the miners’ break-even price, taking into account network metrics and how they are responding to energy market signals, in order to plan appropriate resources for each quarter.
Miners make more money from shutdown than from mining
And so the grid works with the miners to ensure there is enough power for essential services. As a result, the mining companies stop digging that has become unprofitable and shut down their networks. According to Steve Kinard, about a gigawatt was shut down by the miners to support the power grid during the summer heat waves. The energy saved, which the miners previously bought at lower prices, can then be sold back to the grid at a higher price, earning more than they would have earned from mining the digital coins. According to Bloomberg, the mining company Riot Blockchain made $9.5 million in July 2022 by shutting down its mining facilities – more than from mining new bitcoins.
According to CoinDesk, a spokesman for data center energy management company Lancium said these voluntary measures would bring several benefits, “including a more reliable, flexible power grid, economic incentives for mining companies, and further decarbonization of the power grid through additional renewable developments.”
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