Senator Warren leads investigation into Bitcoin’s impact on Texas power grid, ERCOT use of demand response ‘subsidies’

Dive card:

• Seven lawmakers led by Sen. Elizabeth Warren, D-Mass., have asked the Electric Reliability Council of Texas for data on the energy consumption of Bitcoin miners, including the impact cryptomining sector can have on energy costs for local families and businesses.
• Specifically, Warren’s Oct. 12 letter seeks information about Bitcoin miners’ participation in ERCOT demand response programs that pay large consumers to reduce energy consumption during times of grid stress. These “subsidies” to miners “feed back into the worsening climate crisis,” according to the lawmakers.
• Texas could host up to 20% of the world’s cryptomining computing power worldwide by the end of next year, according to some estimates. Miners say their energy use can help keep the network reliable because it is a flexible load that acts as a demand battery.

Diving Insights:

Despite a rapid drop in Bitcoin prices this year, ERCOT officials say interest in connecting to the Texas grid has continued to rise.

As of August, there were 33 GW of crypto mining loads looking to connect to the grid, according to ERCOT. This figure has almost doubled since April, when it was just 17 GW, the grid operator said. Bitcoin ended April trading north of $37,000 and closed August at around $20,000.

While there are dozens of gigawatts of crypto cargo interested in connecting ERCOTthe grid operator noted in an email that there is currently only “an estimated few hundred MW in operation.”

The number is growing. “Texas Bitcoin miners bring hundreds of direct jobs and thousands of indirect jobs to rural communities across the state, in addition to paying tens of millions of dollars in state and local taxes,” said the Texas Blockchain Council, which advocates for the industry. an answer to Warren’s letter.

The group said miners in Texas curtailed more than 50,000 MWh in July in response to record heat and power demand on the grid.

Bitcoin mining “sucks up excess power capacity during times of low demand and shuts down on hot summer days when Texans use more energy,” Texas Blockchain Council President Lee Bratcher said in a statement.

Supplying services back to the electrical grid can generate up to 10% of a mine’s income. And ERCOT has confirmed that miners “respond during grid events by quickly reducing their electrical use,” including helping make extra power available during winter storm Uri.

But Warren and the other lawmakers say it’s unfair to ask ratepayers to fund demand response payments to crypto miners, and the incentives to reduce power demand “add to a larger problem of letting consumers, rather than industries with high electricity demand like cryptominers, bear the cost maintenance of the power grid.”

Demand response payments could reach $170 million annually in the coming years, according to the letter. “These subsidies to crypto miners also feed back into the worsening climate crisis,” the lawmakers said.

The letter asked ERCOT to provide data on:

• the electricity consumption of the cryptomining industry in Texas in 2022, including how many tons of carbon dioxide emissions it produced;
• which cryptomining companies have signed power limitation agreements with ERCOT;
• how much miners are paid hourly to reduce their energy consumption;
• and the average cost of electricity to consumers during times when crypto miners are paid to reduce.

“The climate change that cryptomining contributes to will further exacerbate extreme weather, creating a feedback loop where energy demand more often exceeds supply, causing additional strain on electric grids and potentially resulting in more payouts to the same cryptomining companies,” the ERCOT lawmakers said.

ERCOT officials say they have received Warren’s letter and will have a response in the coming weeks.