Fred Thiel, CEO of Marathon Digital, claimed that cryptocurrency miners participating in a demand response program helped avoid a blackout in Texas this year. The mining facility acts “like a capacitor,” he said, echoing the metaphor of a battery, keeping the grid steady.
Enthusiasm for the plan from Abbott and other cryptocurrency enthusiasts has been punctured by academics who claim that even the basic premise is flawed. The idea of using giant cryptocurrency mines to control energy demand is based on “a misunderstanding and misrepresentation of the electric grid and how it works,” said Adrian Shelley, an energy policy expert and chapter director of the consumer advocacy group Public Citizen. While crypto mining farms are unique in their ability to shut down for short periods of time (unlike factories, which can take hours to shut down), Shelley said the rationale for putting extra stress on the grid in the first place is full of loopholes. Abbott’s office did not respond to a request for comment.
According to Shelley, it “doesn’t make sense” to pay miners to relieve the strain they themselves put on the grid. Also, when demand surges, much of the purchasing power that miners get directly from the grid can drop, since in that case mining is no longer profitable due to rising energy prices.
There are already millions of consumers connected to the grid who would happily turn off power in exchange for financial compensation without adding additional stress to the grid or causing price increases, Hirs said. At the direction of the Texas Public Utilities Commission, Texas’ utility regulator, ERCOT launched a pilot program earlier this month to investigate how ordinary people can help support grid reliability — but Hirs said This should have happened years ago.
The influx of cryptocurrency miners to Texas has also caught the attention of lawmakers. In a letter to ERCOT, a group of U.S. politicians led by U.S. Senator Elizabeth Warren (D-Mass.) expressed concern that cryptocurrency mining would “increase the strain on the state’s power grid.” Shelley shares the concern: “The grid can’t handle all the demand,” he said.
In a reply to the letter, ERCOT explained that it would not allow new mining facilities to start if there was a risk of destabilizing the grid. But the operator also said it was not responsible for forecasting the impact of mining on energy prices for consumers.
Doug Lewin, president of Stoic Energy, a Texas-based energy consultancy, worries about another question: What happens if miners decide not to shut down their machines? While bitcoin is priced at $17,000 per coin (down 63% this year), miners can profit by shutting down. But if prices rise, a tipping point is reached where continued mining becomes the more profitable option.
Some mining companies, such as Marathon, are contractually obliged to shut down at times of peak demand. But if others choose not to, they will compete with consumer demand and increase the risk of outages, said Lewin, who believes regulation is needed to mitigate this worst-case scenario.
Bratcher of the Texas Blockchain Council said he expects ERCOT to require all miners to sign an agreement requiring them to cease operations if their power reserves fall below 3GW. But at the same time, he claims, the price of Bitcoin would have to rise 10x for the profit motive to collapse.
Despite opposition and questionable logic under Governor Abbott’s leadership, the message is clear:”Texas is open to crypto businesses.Despite the headwinds, Bratcher said the mining industry in Texas is still growing and ERCOT intends to move ahead with plans to connect more facilities to the grid. But as winter begins to bite, the bitcoin battery experiment may soon be embraced The ultimate stress test: Shelley said the “dire” scale of Abbott’s plan would have the opposite effect than intended, increasing the chances that Texas will be plunged into darkness again.
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