Others think the state’s strategy of paying Bitcoin miners not to mine when the grid is overloaded is absurd. “The most important thing regulators can do is match assets and liabilities — match supply and demand,” said Ed Hess, an energy researcher at the University of Houston. He said allowing large mining facilities to increase demand on the grid would only “escalate the situation” and trigger further instability as the number of fossil fuel power plants in the state deteriorates.
Hirs claimed that in Texas, cryptocurrency mining is primarily an energy arbitrage business, with profitability dependent on the ability to buy energy in bulk at low prices and sell it back to the grid at high prices when demand is high. Hess said these operations are effectively doubly subsidized by residents, whose taxes both provide the funds to buy energy from miners during peak demand periods and pay miners to participate in demand response. Hirs compared miners to parasites, calling them “tapeworms on the ERCOT grid.”
Before the recent surge in Bitcoin prices, news reports noted that some companies were making more money by shutting down and charging fees than they were by mining Bitcoin when the power grid was under stress. In August 2023, when a heat wave in Texas caused energy demand to surge, Riot said it earned $31.7 million in revenue from participating in a grid stabilization program, while revenue from mining was only about $10 million.
Data haze
Opponents of inviting more mining facilities into Texas are stymied by a lack of data showing the extent of the additional burden on the grid. No one, except the miners themselves, currently knows exactly how much energy is used in mining in the state or the United States as a whole. The EIA said it had “produced an aggregate estimate” but was unable to piece together an accurate picture due to “difficulties in identifying cryptocurrency mining activity among millions of U.S. end users.”
In March 2023, Texas Senators Lois Kolkhorst, Donna Campbell, and Robert Nichols (all Republicans) introduced SB 1751, a bill that would restrict cryptocurrency miners from participating in demand response, revoke certain rebates, and impose Data reporting requirements. The bill passed unanimously in the Senate but died when congressional committees failed to hear it before the end of the session.
The emergency investigation filed by the EIA in January was driven at least in part by U.S. Sen. Elizabeth Warren and was intended to fill a void and “enforce stricter regulations on the power usage of U.S. cryptocurrency miners,” the EIA said. estimate”. But in the face of lawsuits filed by TBC and Riot, it proved to be short-lived.
Critics of the mining industry interpreted the move to suppress the EIA investigation as a cynical attempt to keep it secret. “The last thing a parasite wants you to know is how bad it can get,” Hills said. But the mining industry said it had good reasons to object, as demonstrated by the sympathy of the judge, who said in his ruling that the government’s rationale for expediting the investigation was that rising cryptocurrency prices would spur more mining activity if the weather changed. Destabilizing the grid – “well below” the necessary risk level.