While Texans this year sweated out the hottest August ever recorded and paid budget-crushing electricity bills to cool their homes, at least one Bitcoin mining company made millions in extra profits when the state’s electric grid nearly ran out of juice.
In the crypto world, “mining” isn’t done in rock formations with headlamps and pick axes, but in warehouses stacked with powerful computers. These computers are used to guess a sequence of letters and numbers in order to “mine” a crypto coin worth tens of thousands of dollars. These miners typically make quintillions– billions of billions –of guesses per second, generating so much heat from the computers that the warehouses employ enormous fans or air conditioning units to keep them cool. One energy research firm, Wood Mackenzie, estimates that the energy-intensive Bitcoin mining process raises electricity costs for Texans by $1.8 billion per year.
Yet even as Wall Street has cooled on crypto, these mining companies can still make a killing, especially in Texas’ deregulated energy market. A company named Riot operates two energy-guzzling Bitcoin mining facilities in Rockdale and Corsicana. It is routinely able to bolster its profits by participating in a demand response program in which ERCOT, the state’s grid manager, asks them to commit to shutting down at times of peak demand. The New York Times reported that Riot made $9.3 million from this program in 2022, even though the state only asked companies to lower their usage for a total of 3.5 hours that year.
The oppressive August heat–29 of 31 days in triple digits–presented another windfall opportunity for Riot. In fact, the company made more money in August from the ERCOT market than it did from producing actual Bitcoins. Riot made $24 million that month by selling electricity they bought in advance back to the grid at times of peak demand, making a killing off the inflated electricity rates. They made another $7.4 million from the demand response program by quickly ramping down their energy usage when the grid demand was at its tightest.
At a time when ERCOT is sounding the alarm about not having enough energy supply to get us through the winter, every megawatt consumed should be under the microscope. There’s no reason why cryptocurrency mining companies such as Riot should be allowed to bring our electric grid to the brink of failure and then get paid handsomely to pull back at the last second, particularly when residential consumers are routinely asked to voluntarily reduce our energy usage during times of extreme weather.
The boom in cryptocurrency mining in Texas in the past several years has become an energy sinkhole. A recent New York Times investigation estimated that Riot alone uses enough electricity to power 300,000 homes. Wood Mackenzie estimated that all of the Bitcoin mining operations in Texas use enough energy to power more than 1.2 million homes. Texas Monthly reported last year that ERCOT has a long queue of prospective crypto miners seeking to draw down as much power as the entire Houston metropolitan region uses on a hot summer day.
Many of these mines operate in the shadows. Some are owned and run by Chinese companies, raising national security concerns about cyber attacks against regional grids. The state comptroller’s office acknowledged last year that “it’s hard to say” how many mines exist in the state, in part because, until a new law went into effect in September, they weren’t even legally required to register their operations.
State lawmakers have thus far shown little interest in reining in crypto miners. A bill that would have prohibited digital currency mining facilities from receiving property tax breaks and capped their enrollment in demand response programs failed to get a floor vote in the House after unanimously clearing the Senate. Gov. Greg Abbott, meanwhile, has wholeheartedly embraced crypto mining, declaring two years ago that Texas will be the “crypto leader,” and even signed into law a new tax exemption.
In the absence of legislation, we urge ERCOT and the Public Utility Commission to develop more stringent rules that regulate crypto miners. At least ERCOT is already considering the rule change that would require any new facility that uses an average peak of 75 megawatts to get its approval before connecting to the grid. ERCOT is also proposing to regulate when these large electricity users can turn power on and off. We urge ERCOT to swiftly approve these new rules and send it to the PUC for final approval.
Crypto miners have had a subsidized ride for too long. Texas has enough problems keeping our lights on and air conditioning running already during extreme weather without having to worry about a parade of future Bitcoin miners depleting our resources.
