Texas ERCOT response to lawmakers’ concerns about Bitcoin mining is still in the works

WASHINGTON – ERCOT said this week it is still working on a response to inquiries from members of Congress about whether its approach to cryptomining puts undue strain on the state’s power grid, rips off taxpayers and contributes to climate-damaging pollution.

Sen. Elizabeth Warren, D-Mass., raised the concerns and asked for detailed information about the Electric Reliability Council of Texas’ handling of cryptomining in an Oct. 12 letter signed by two other Senate Democrats and several House Democrats, including Rep. Eel. Green from Houston.

Warren asked ERCOT’s new CEO Pablo Vegas to provide an answer by Monday.

“ERCOT is still working on a response and will publish when it is ready,” according to a statement late Monday from the state’s main grid operator. “No more updates at this time.”

A September report from the White House Office of Science and Technology Policy cited estimates that the total global electricity use for cryptoassets is more than the total annual use of many individual countries, such as Argentina.

Warren and the other lawmakers who signed the letter highlighted these numbers and indicated that the amount of electricity consumed by crypto mining is likely to grow.

“All of this energy use results in significant amounts of carbon emissions and other negative impacts on air quality,” the lawmakers wrote.

They suggested that mining has been lured to Texas by relatively cheap electricity prices and lax regulations.

“Given the impacts of cryptomining on the climate, the web, and for taxpayers, ERCOT’s support of this industry is irresponsible and deeply concerning,” they wrote.

They warned of the threat of disruption from extreme weather, pointing to both recent summer heat waves and the February 2021 winter storm that caused crippling blackouts across the state and left hundreds dead.

Lawmakers also raised concerns about “demand response” programs in which large energy-intensive operations are rewarded for reducing their use when demand is particularly high.

“Simplified, the Bitcoin miners make money from mining operations that produce heavy loads on the electrical grid: and during demand peaks when the profitability of continuing to mine decreases, they collect subsidies in the form of demand response payments when they shut down their mining operation and do nothing,” wrote Warren and her colleagues.

According to the White House report, high temperatures on July 11 resulted in high demand for electricity and prompted ERCOT to declare a grid emergency event. Bitcoin miners responded by reducing power consumption.

“Throughout July 2022, a single publicly traded Bitcoin miner operating a facility in Texas earned $9.5 million from the Texas Grid Demand Response Program, which was more than the value of the 318 bitcoins the facility produced in the same month,” according to the report.

Warren’s letter asked ERCOT a series of questions requesting information, such as how much electricity is used for crypto mining in the state and how many tons of carbon dioxide emissions have resulted from this use.

The letter asked about expectations for the future expansion of crypto mining in the state, as well as any plans ERCOT has in place to manage the increase and protect consumers from higher costs.

The letter writers also want to know details about any mitigation agreements ERCOT has with the mining companies and whether they have any estimates or models of how mining affects local families and businesses.

At a press conference shortly after the lawmakers sent the letter, Vegas said he looked forward to responding and referred to “some perspectives implied in that letter that were not accurate.”

In particular, Vegas pushed back on the idea of ​​Texas giving any special subsidy to crypto miners. He said the miners can benefit from certain programs in the same way as any other major energy consumer, from steel refiners to car manufacturers.

“They have the same right to do that as anyone else,” he said. “They don’t get any special subsidy to do it . . . So we look forward to answering the questions and explaining how we serve these types of businesses here.”

In an interview, Texas Blockchain Council President Lee Bratcher made similar points, saying that miners are simply well-positioned to use such programs due to the nature of their operations — and that’s a good thing.

He characterized miners as heroes rather than villains when it comes to both strengthening the grid’s reliability and tackling climate change.

Bratcher noted that grid management is difficult in part because demand can vary greatly based on the time of day. Cryptomining can help because it represents flexible demand that can be reduced immediately when needed, acting as a “demand-side battery,” he said.

Renewable energy developers are also fans of crypto mining because it can help budget work on renewable projects, he said.

Crypto operations result in the efficient use of energy that would otherwise likely be wasted, he said.

“Mining uses a lot of electricity, but it uses the kind of electricity we want it to consume,” he said. “They’re not going to Houston, Texas, where the power supply is low and the demand is high. They’re going to go to West Texas or Central Texas where there’s a surplus and not a lot of people using it.”

In a statement this week, Bratcher said the strength and health of the state’s grid is important to the industry and that it has a good working relationship with ERCOT.

“With her home state facing high energy prices and low supplies of essential fuels like diesel and heating oil heading into winter, we recommend Senator Warren focus her efforts closer to home,” Bratcher said.