texas: low carbon bitcoin? Crypto miners’ green power talk angers Texas locals
But at a recently set up bitcoin mine in West Texas, the computers shut down, with only a trickle of electricity to keep the lights on and the air cool.
With electricity prices reaching $5,000 per megawatt hour on a hot day, it was no longer profitable to run the machines competing to verify blocks of data and win new bitcoins, with energy costs exceeding the value of the cryptocurrency produced during the expensive lunch hours. .
“What we need here is more renewable energy,” said Michael McNamara, CEO and co-founder of Lancium, the bitcoin mining technology company that manages the small facility.
His company aims to support just that, as part of a broader push that could help boost and green the power supply of Texas — which today gets nearly two-thirds of its electricity from fossil fuels — and potentially help change energy-hungry bitcoin’s image as a barrier to climate action.
In this windswept rural community, on the site of a dance hall where legendary Tejano singer Selena used to perform, Lancium is expanding its pilot cryptomining facility, equipped with a software system to manage the electricity that feeds it.
The operation will eventually draw more than 300 megawatts (MW) — enough to power about 60,000 homes — from increasingly abundant wind and solar resources being built in Texas.
Under the plan to build a “green campus” on the site, Lancium will lease space to other companies to house their mining machines, with all equipment able to be shut down quickly when power prices rise and energy is needed elsewhere in the grid.
Bitcoin supporters like McNamara say this feature will make Texas’ grid more resilient — and make their industry a crucial, if unlikely, ally in the fight against climate change and efforts to shift Texas toward a cleaner energy mix.
Many energy transition experts are still not convinced.
Jesse Jenkins, an assistant professor at Princeton University who leads a lab focused on optimizing zero-carbon
said bitcoin miners are more likely to increase demand for fossil fuel power.
When they partner with producers of clean electricity, they tend to crowd out other potential users of that energy, he said.
That could be a problem with demand for green energy expected to increase as companies try to meet net zero emissions targets and as demand for things like electric cars grows.
“They make it slower to decarbonize the web,” Jenkins said of cryptomining.
Over the past year, the industry has come under attack in the US for its environmental impacts
Climate change legislation in New York could ban some forms of cryptomining, while green groups have launched an anti-bitcoin campaign and Democratic senators are investigating the industry’s carbon footprint.
However, Lancium is one of a constellation of market players who say their business has been misunderstood.
Bitcoin machines can soak up excess clean power generation — and provide key revenue for renewable energy developers — on days when the wind blows and the sun shines, but there isn’t enough conventional demand online, they argue.
“We want to make investments in renewable energy … but it takes years,” said Zachary Bradford, CEO of CleanSpark, one of the five largest crypto mining companies in the United States, which is partnering with Lancium on clean-energy bitcoin projects in West Texas .
GOLD RUSH
Crypto miners have flocked to Texas, attracted by a supportive regulatory environment and relatively cheap power.
In West Texas, where the power demand of the rural population often falls short of the region’s available tens of gigawatts of renewable energy—mainly wind power—bitcoin miners are rapidly scaling up.
Just this summer, Argo Blockchain announced a mine requiring up to 200 MW, Aspen Digital revealed plans for two separate facilities for a combined 180 MW, and Cipher Mining set up a 40-MW site, with the potential to add 400 MW.
To build the U.S. grid of the future to power electric cars, trucks, factories and heavy industry, total power capacity could triple by 2050, according to the Department of Energy.
Blake King, a former renewable energy developer who worked as an engineer at the Electric Reliability Council of Texas (ERCOT), which runs the Texas grid, said the cryptocurrency industry could help spur clean energy development.
“With bitcoin mining, you can underwrite new generation capacity, with the bitcoin network being the constant buyer of energy,” said King, who now works as a power market engineer at investment and crypto firm Galaxy Digital.
But in early 2022, financial rating agency Fitch warned utilities that relying on bitcoin miners to buy their power carried significant risk, given the volatility of the cryptocurrency market, which has plummeted this year.
LUCRATIVE OFFERS
In Texas, crypto miners can take advantage of the opportunities to make money thanks to their flexibility to turn off their kit.
For example, Lancium has developed software that helps bitcoin miners reduce their electricity costs by qualifying as a “controllable load resource.”
This is one of a number of Texan programs that reward consumers, electricity generators and battery operators for working with the central grid operator to match supply and demand, and maintain grid stability.
Miners have also signed long-term power deals that give them a fixed low energy cost, but also allow them to sell power back at a higher rate on days of spikes in grid demand, making up the difference.
In July, Riot Blockchain — which operates a 400-MW bitcoin mine in Rockdale, Texas — said it made more money from shutting down its equipment during high demand than from mining crypto.
According to a report by the Tech Transparency Project, an advocacy group, Texas could pay miners up to $170 million annually under these agreements in the coming years.
While the industry says such practices help energy markets work well, they concern many environmental groups.
Jeremy Fisher of the Sierra Club said such incentives are “asking society to double the pay” — both to produce the energy needed to mine bitcoin and then for miners to turn off their machines to ease the network load they contributed to in the first place.
LOCAL MATCHES
In the small Texas town of Corsicana, Riot Blockchain plans to build what could be the world’s largest bitcoin mine.
The plant — which could consume up to 1 gigawatt, enough to power three-quarters of a million American homes — would be built in a now-quiet field abutting the Navarro Switch, a high-voltage transmission line that towers over grasslands and cuts through. surrounding ranches and fields.
The project has generated considerable local debate about the expected huge energy use and wider impact on society.
In a public library in mid-July, Concerned Citizens of Navarro County, a community group formed to oppose the mine, held a meeting to brainstorm ways to block it.
Cryptomining “draws on resources that are already valuable to our area,” said the group’s founder Jackie Sawicky, adding that few in the community would benefit from the project.
She has a number of concerns about the mine: that it will use little local water to cool machinery, that it will increase electricity costs in the region, and that the facility could receive lucrative tax breaks while generating few jobs.
“We can’t afford bitcoin here,” she said.
Sawicky’s group has collected nearly 1,000 signatures on a petition asking city leaders to halt the project, which broke ground in early August.
Riot Blockchain did not respond to emailed questions from the Thomson Reuters Foundation.
But in a letter sent in February to US lawmakers, CEO Jason Les defended the company’s environmental record, citing previous instances when Riot had turned off equipment during periods of online load.
Bitcoin, he argued, would “encourage utilities to invest in new renewable energy sources,” pointing to cases in other states where their facilities ran on clean energy.
Some experts say residents are right to be wary of such projects, especially if they lack plans to use green power.
“Unless miners are co-located with a renewable energy generator, they are likely to increase (fossil fuel) emissions in the short term — and they will increase prices,” said Kyri Baker, an assistant professor at the University of Colorado Boulder. studying the Texas grid.
Household taxpayers — not major industrial players — cover most of the cost of grid maintenance in Texas, a concern as the grid grows in size to supply bitcoin mines.
CHICKEN AND EGGS
According to Cleanspark CEO Bradford, installing bitcoin plants and renewables together suffers from what he calls a “chicken-and-egg problem”, with energy developers keen to ensure miners are committed long-term before they go continue with their own plans.
That means many bitcoin mining operations today rely heavily on existing grid power, more than 60% of which comes from coal and natural gas in Texas, making the state’s surge in bitcoin mining a growing driver of climate-changing emissions.
Few bitcoin operators in Texas have so far been willing to shoulder the costs of building renewable power plants, said a consultant who requested anonymity to discuss sensitive deals.
But King said investing in renewable energy would be a wise move for bitcoin miners planning for the future, as upfront installation costs would be more than offset by cheaper electricity prices over time.
Joshua Rhodes, an energy specialist at the University of Texas at Austin, hired by Lancium to model bitcoin’s impact, showed that a hypothetical development of crypto mining in Texas could increase the reliability of the grid and reduce carbon intensity.
But that would require miners to locate at key nodes around the state and shut down their machines for long periods to allow renewable energy to flow to the grid.
“There is a path to do this right — but I don’t see (the industry) taking that path,” Rhodes said. “I understand why environmentalists are frustrated.”
However, some bitcoin-and-renewables partnerships are emerging, including two projects Lancium says it is nearing completion and a joint venture Cipher announced this month with a wind farm in West Texas.
But Sawicky sees bitcoin’s arrival in Texas as bad news, no matter what kind of energy it uses.
She called it a “ponzi” scheme to enrich remote mining executives and investors while siphoning off the city’s water, electricity and tax dollars.
“I’m building a movement here,” she said, vowing to do her best to block the industry’s expansion in Corsicana’s backyard. “And anger is a renewable resource.”
