Texas ‘crypto rush’ causes concern in Washington
Texas is a “deregulated safe harbor” for digital asset mining companies, according to an Oct. 12 letter written by Sen. Elizabeth Warren and six of her legislative colleagues.
Addressed to Pablo Vegas, executive director of the Electric Reliability Council of Texas (ERCOT), the letter raises lawmakers’ concerns that ERCOT is “aggressively courting crypto miners, who are attracted to the state’s cheap power and laissez-faire regulation.”
The letter, signed by three senators and four congressmen, also cites concerns about the active lobbying of government by the Texas Blockchain Council.
Citing numerous articles, studies and research, the lawmakers question the impact of increased mining on climate change and the stability of the energy grid, as well as questioning the subsidies ERCOT provides to mining companies for digital assets to reduce their operations during periods of high periods. demand.
Haven for digital assets
Some estimates suggest that Texas is now home to about a quarter of all US “crypto” mining and potentially 14% of mining computing power worldwide, a number that could rise to 20% next year.
The state has actively encouraged investment from industry in recent years, playing on its reputation for low taxes, abundant land and crucially cheap power. This venture has borne fruit, with around 30 operations starting up in the state over the past decade and more expressing interest in joining them.
The influx of digital asset mining has naturally put a strain on the grid, and lawmakers cite an April 27 Bloomberg article suggesting that digital asset miners are expected to increase electricity demand by up to 6 gigawatts by mid-2023, “enough electricity to power around 1.2 million homes”.
Record temperatures and record usage
Warren and co.’s letter comes after a summer with several record highs for energy use in Texas, including an all-time high in July.
“We hit 80 gigawatts for the first time,” Dan Woodfin, ERCOT’s VP of system operations, said Oct. 18 at a Vegas public meeting. “The new all-time high was set on July 20, and we also set new weekend highs”.
This is especially worrisome given that extreme weather events, exacerbated by climate change, have already driven up electricity use, straining Texas’ power system. The recent July 2022 heatwave, when the grid coincidentally reached an all-time high, is one example, while at the other end of the temperature scale, the February 2021 winter storm saw the grid collapse, leading to blackouts that left 246 people dead.
The environmental impact of this “laissez-faire” approach to mining digital assets was a central theme of the letter, which cites, for example, that “the energy used to mine Bitcoin and Ethereum in 2021 resulted in nearly 80 million tons of carbon dioxide emissions,” a figure taken from a ForexSuggest.com report.
The effects of digital asset mining on climate change are widely debated and also vary by asset, with some more environmentally friendly than others, but there is consensus on the huge energy costs involved and the drain it takes on the grid.
Riot Blockchain
For example, the letter names Riot Blockchain, the owner of a 750 MW facility in Rockdale, as one of the businesses engaged in block reward mining in Texas.
Riot Blockchain said in July of this year that it had made about $9.5 million by shutting down operations and selling power back to the grid, a figure lawmakers pointed out was more than the $5.6 million the company earned that month from selling BTC.
With those numbers fresh in mind, the news in late October — after the lawmakers’ letter was sent — that Riot Blockchain has officially broken ground on a 1 GW expansion project in Corsicana, Navarro County, must serve as further proof to Warren and her colleagues of a increasingly urgent need for answers.
The key questions
The lawmakers concluded the letter with a specific list of questions for ERCOT CEO Pablo Vegas:
- For the year 2022 to date, and for each of the previous five full calendar years, what has been the annual electricity consumption used for ‘cryptomining’ in Texas, and how many tons of carbon dioxide emissions have resulted from this energy use?
- How do crypto mining companies plan to scale their operations in Texas? How much load will this add to the grid and what plans does ERCOT have in place to handle this increased demand? What plans does ERCOT have to reduce such costs to consumers?
- With which “crypto mining” companies do you have power purchase and/or curtailment agreements? How much have you paid each of these companies to reduce energy use, and how many times? And what is the average cost of electricity for consumers during these periods of paid curtailment?
- Does ERCOT have any estimates or models regarding the impacts of ‘crypto mining’ on energy costs for local families and businesses? If so, what do these estimates or models show?
Vegas has yet to publicly respond to the questions, but on Oct. 25 it announced the hiring of Robert Black as ERCOT’s new vice president of public affairs, calling on it to “work closely with state leaders and electric market participants, while ensuring we clearly communicate with audience” – so perhaps the answers will come more soon.
See: BSV Global Blockchain Convention panel, Blockchain mining and energy innovation
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