Texas’ fragile grid is not ready for the explosive growth of crypto mining

Although energy-hungry Bitcoin mining companies have volunteered to shut down in Texas this week to alleviate the stress of a burning heat wave online, the industry could still trigger more problems along the line if it continues its explosive expansion in the state.

Higher electricity bills and even more carbon dioxide emissions may be on the way for Texans, despite the crypto-mining industry claiming it can stimulate the growth of affordable renewable energy. The problem is the Bitcoin network’s huge demand for power, which is growing faster than the network can reasonably keep up with.

Texas’ energy system is already preparing for the Bitcoin mining industry to continue to grow at a furious pace. The amount of electrical load crypto miners are expected to add to the Texas grid above only the next four years represent almost one third of the network’s current maximum capacity. Crypto-mining is set to increase online demand by as much as 27 gigawatts by 2026, a spokesman for the Electric Reliability Council of Texas (ERCOT) said The Verge in an email. ERCOT is the main network operator in the state, with responsibility for managing the power supply. The spokesman, who responded to ERCOT’s email on media relations, refused to give their name.

Let’s break down why 27 gigawatts is such a big deal. The first thing you need to know is that a single megawatt (MW) can power around 200 homes in times of high demand in Texas. One gigawatt is a thousand megawatts.

On July 12, during the heatwave, the state broke the record. More than 78 gigawatts of electricity were needed to meet peak demand, according to ERCOT. The power grid in Texas can today supply a maximum of approx 92 gigawatt of electricity – and that is only if every source of power generation works perfectly, which is usually not the case. It provides limited respite for most of the state during periods of high demand.

All of this brings us back to the crypto boom in Texas. “There are over 27 gigawatts of crypto load working on interconnection over the next four years,” said the unnamed ERCOT spokesman.

Adding a grid to the grid in a short time frame is “astronomically impossible”, according to Joshua Rhodes, a researcher at the University of Texas at Austin. “There’s no way we could do 27 gigawatts with crypto [in four years] … it would put too much stress on the system too quickly, says Rhodes. “We barely have power plants to cover today,” he says The Verge.

In a very short time, Texas has become a major player in the global Bitcoin mining industry. China banned the practice in 2021, and almost immediately the United States took its place as the largest hub in the world for crypto mining. Many miners set up shop in Texas, initially lured by low energy prices and lax regulation. The state is now home to about a quarter of the Bitcoin mining operations that take place in the United States, according to some estimates.

Large-scale cryptocurrencies mainly look like giant data centers filled with specialized computers that “extract” Bitcoin. The machines usually run around the clock, and solve arithmetic mathematical problems in return for new tokens. These problems become more complex over time, require more computing power and make it a conscious energy efficient process.

Realistically, many of the proposed crypto mining projects that want to connect to the network between now and 2026 will probably not be realized, experts say The Verge. This is the case for new projects in other industries, they say, so they expect the same for crypto mining. On top of that, Bitcoin miners have to contend with the “cryptocurrency winter” that has hit the industry and sent the course of the cryptocurrency to a fall this year.

Rhodes believes that 5 gigawatts is probably a more viable figure in relation to how much energy needs crypto mining can provide the state over the next four years. And even 5 GW is a lot to fit. “We need to speed up the process of building transmission lines significantly,” says Rhodes. It would also make it necessary to build more power plants or wind and solar parks to provide extra energy.

Unfortunately, the cost of expanding all this infrastructure is often passed on to consumers – especially if done on a large scale under a hasty timeline that crypto mining may require. Rising energy prices have already been the consequence of crypto mining in other states. For example, in the state of New York – another major crypto-mining hub – electricity bills have increased by about $ 8 a month for individual customers and $ 12 a month for small businesses, according to a recent analysis by researchers at the University of California, Berkeley and the University of Chicago.

“Large amounts of new demand are never useful for your electricity bill,” said Eric Hittinger, an associate professor at the Rochester Institute of Technology with a background in power system policy. “The more crypto-mining that comes into the state, the higher the population should expect electricity prices to be.”

In the short term, citizens can compete with crypto companies for a limited supply of electricity and face higher prices when greater demand increases prices. In the long term, the increase in new demand for electricity for crypto mining can trigger the massive development of new power sources. Bringing more power sources online to meet demand can ultimately push prices down over time, but there are basically large upfront costs.

These costs can cover the construction of solar energy and wind farms, which power grids need more of for the world to have a chance to get climate change under control. The green opportunity is therefore Many crypto mining companies in the United States say it is good that their hunger for energy can increase the development of power sources. Industry advocates say that crypto mines are the perfect consumers of solar and wind energy, which – depending on the weather – can generate too much electricity for the grid at any one time. Instead of the tools having to ask solar and wind farms to limit energy production because the grid does not yet have enough storage space for it, crypto mines can devour it all so that the renewable energy is not wasted.

Increasing energy demand is generally a driving force for investments in new energy production. But it must happen under very specific circumstances for crypto miners to actually induce enough renewable energy growth to have a positive impact on the environment. Otherwise, pollution will continue to increase with power consumption, according to Rhodes.

It’s basic math. If crypto-mining consumes around 5 gigawatts of electricity in Texas, but only stimulates around 2 gigawatts of clean energy, the industry will still be responsible for the extra pollution created by the excess 3 gigawatts.

To help bring enough clean energy to the grid to actually reduce carbon dioxide emissions in Texas, crypto mining data centers must be willing to shut down for about 15 percent of the year – when wind and solar power production are low. According to an analysis, Rhodes completed last year for the crypto mining company Lancium in his role as managing partner for the consulting firm Ideasmiths.

“It’s a pretty big reservation, when it comes [crypto miners] must be willing to be flexible, says Rhodes. Many mining companies do are proud to be “flexible” customers, who can quickly increase energy consumption quickly up or down, but turning off 15 percent of the year is a big question that goes far beyond what we have seen so far from the industry.

Photo by MARK FELIX / AFP via Getty Images

This week, Bitcoin mining companies have shown some flexibility in deciding to shut down their machines after the state’s network operator began asking Texans to save energy on Monday. The brutal heat wave is testing the grid as residents turn up the air conditioner to cope with three-digit heat. Cryptomining companies have turned off voluntarily, and in total released 1 gigawatt of electricity or about 1 percent of the network’s total capacity.

Being “flexible” in that way is crucial to avoid power outages when peak demand threatens to overwhelm the grid. Texas’ power grid is particularly vulnerable to power outages because it is not connected to other states so that they can share energy, something other states do so that they can fill in for each other if there is a lack of supply somewhere. Texas’ grid is also notoriously fragile. Last year, a brutal cold situation created chaos online and triggered massive, deadly power outages.

While Bitcoin mining companies voluntarily curbed power consumption this week to ease online stress, there were also financial motives behind the move. Spot prices for electricity rise when there is high demand, which makes it less profitable to continue running their machines. Under these conditions, mining companies can actually make more money selling unused electricity than they would in mining (if they have secured power through long-term contracts with energy suppliers), according to Hittinger.

“So it’s not exactly charity, as some people can hit it off,” Hittinger says. Nor is it a new service for the web. Historically, other industries – from chemical processing to manufacturing – have played similar roles in helping to stabilize the grid by shutting down when necessary. The fact that crypto companies restricted mining in Texas this week is a sign that the industry is able to offer the same service, says Hittinger, if these are the right financial incentives.

“Only in the effort to support the people of Texas, it will always be our priority,” said Alexis Brock, marketing coordinator at Bitcoin mining company Riot Blockchain, when asked if the company plans to continue saving energy in times of high demand in the future. Riot operates what it claims is the largest Bitcoin mining facility in North America in Rockdale, Texas, and it has been completely shut down for at least 10 hours a day for several days in the past week.

It has not resolved concerns that Jackie Sawicky has about another massive crypto mine Riot plans to build in Navarro County, Texas, where she lives. “We do NOT want this huge strain on our already fragile infrastructure,” it said in a petition Sawicky started to stop construction. When completed, the new plant is expected to have the capacity to use 1 gigawatt of power.

“They’re talking about stabilizing the grid,” Sawicky said The Verge. “And it’s so annoying to me that they can claim something like that when they put an incredible burden online.”