Riot Blockchain got more power credit than Bitcoin

At least one major bitcoin mining operation in Texas that didn’t actually mine much bitcoin during this season record heat raked in millions of dollars in profits – more than they would have if they just continued mining without any shutdowns. This is thanks to power purchase agreements entered into with the local grid, which allow them to sell electricity they previously bought back to the supplier for a handsome sum.

Riot Blockchain itself announced it had earned an estimated $9.5 million in power credits thanks to the many times it shut down its mining rigs. This was even more than the amount the company earned from selling bitcoin that month. The company’s page said it sold 275 bitcoins, with net proceeds equivalent to just $5.6 million. This is compared to last year when the company said it produced 444 bitcoins, worth about $16 million just before the price of BTC really spiked towards the end of 2021.

This net profit has proven that even despite the downturn in the crypto market and disruptions in mining, these companies are still intent on continuing their incredibly power-intensive operations. Digiconomist bitcoin energy graph shows that kilowatt hours per year peaked at the beginning of June, but then tanked through June/July. That line is starting to go up again, and even in a depleted state, it’s still well above the US bitcoin energy consumption back in March 2021.

The Electric Reliability Council of Texas — AKA ERCOT — had asked the companies to routinely switch off to save electricity throughout July. Riot and its massive 750 megawatt bitcoin mining facility in Rockdale, Texas reduced power several times during times of high demand. Of course, many of the dozens of large-scale bitcoin mining as well cut the activity during the last month in order not to over-stress often overtaxed gridbut Riot remains the largest token miner in the Lone Star State.

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The amount of bitcoin produced during the last month was 318, 28% less than the same month last year. Although the companies publicly agreed to shutdowns to preserve the grid, they also avoided scaling electricity prices during peak loads.

ERCOT provides power purchase agreements which is usually called for one year, but Lee Bratcher, the president of the Texas Blockchain Council, told Gizmodo in a phone interview that only a handful of the largest bitcoin miners actually have these PPAs. Those that do, like Riot, can take advantage of the need to limit power, while other miners simply have to get by.

The Texas Blockchain Council networks and promotes the many crypto mining in the state. Bratcher called these PPAs “a good deal” for ERCOT, since it can recover power needed for the rest of the grid during peak hours.

At the same time, the massive draw of these mining operations is only expected to increase. Texas’ grid system has said that Texas crypto miners will stake a claim of six gigawatts on the grid by next year. Congressional Democrats have warned the seven largest mining rigs in the US draw electricity equivalent to all the houses in the city of Houston. These crypto miners are only expected to get bigger over time.

Bratcher said most of the Texas mining operations voluntarily shut down operations once it was located the price of power on ERCOT’s grid broke above $180 or higher per megawatt hour, which would initially result in a net negative cost of mining their bitcoin. Shutdowns initially brought costs and revenues to zero, but the lost opportunity cost for many of these companies was in the hundreds of thousands or even millions, depending on the fluctuating price of crypto versus the total cost of power.

So will this happen again? After everything, the National Oceanic and Atmospheric Administration expects more above average heat in August. Texas is one of the most likely places where temperatures could rise above historical averages, including triple-digit heat. In the release, Riot CEO Jason Les said his company has “consistently and proactively pursued affordable, large-scale access to power under its long-term fixed-rate power contracts.”

Bratcher said most of these deals would essentially allow companies like Riot to continue selling back unused power if demand for power increases to the point where it makes sense to shut down. So even if we get even more extreme heat (as climate scientists have said is increasingly likely) which does not necessarily stop the crypto miners from digging for digital gold.