Last Updated: 13 July 2022
The US state of Texas is positioning itself as a safe haven for bitcoin miners. Many companies have moved to Texas from all over the world to mine bitcoins, but the question is whether this is the right choice. The energy grid is not that stable, and with temperatures rising, the state has asked companies to use as little energy as possible.
Voluntarily saving energy
Yesterday, the Electric Reliability Council of Texas (ERCOT) asked Texas companies to voluntarily conserve electricity due to extreme temperatures. For example, 38 degrees are predicted in Texas today. Several bitcoin mining companies have responded by temporarily halting their operations.
At Argo, we are doing our part to help stabilize the Texas grid. Our Helios facility will curtail its power in Dickens County this afternoon in order to help conserve electricity due to the current heat wave.#Texas #ARB $ARBK #BTC https://t.co/cDHC8SR51t
— Argo (@ArgoBlockchain) July 11, 2022
Argo Blockchain said on Twitter that it would curtail power to its Helios facility in Dickens County in response to ERCOT’s call.
“We are doing our part to help stabilize the Texas grid,” the company said.
Chad Everett, executive director of Riot Blockchain, said the company had already taken its miners offline at 8 a.m. Saturday morning.
On Saturday at 8:00 am, Rockdale curtailed all of the power to help the grid battle this extreme heat. The power remained off till 10:00 pm.
— GigaChad (@chadeverett) July 10, 2022
“Rockdale curtailed all power to help the network fight this extreme heat. The power remained off until 10 p.m,” Everett wrote on Twitter.
Both Riot and Argo are also currently opening new mining farms in Texas. Another mining company called “Core Scientific” has also shut down all their mining machines in Texas “until further notice” to “provide assistance to people in Texas.”
Bitcoin is flexible
Although this is voluntary, there are agreements in place. Many bitcoin miners in Texas have made agreements with ERCOT to shut down during peak energy demand times. This may sound like a negative thing, but this flexibility is to be commended. This is why Greg Abbott, the governor of Texas, is pushing for more bitcoin miners in his state.
Miners can easily switch their devices on and off, and with the politically driven discussion around bitcoin’s energy consumption, this is a strong asset to have.
You can explain this as an advantage of how bitcoin works, but you can also see this whole story as a weakness of the Texas power grid, especially compared to other states in the same country.
Texas disconnected from rest of US
Most states in the US are connected to power grids that stretch across state (and sometimes even international) lines. But Texas is an energy island: it operates an electricity grid that is largely disconnected from the rest of the country. Depending on who you ask, this has its advantages and disadvantages.
Because the Texas grid is disconnected from the rest of the country, it is not subject to national regulation, like grids that cross state lines. But it also means that Texas cannot borrow power from other states when its power infrastructure fails, as in the winter of February 2021, when power was out for days across the state and hundreds died.
Now that the summer peak is underway, air conditioners will be on full blast across Texas. ERCOT says it is not only the increased demand for electricity that is causing danger, but also the fact that far less power is being produced from wind turbines than in the past.
Peak times as a revenue model
The energy market in Texas is also unique in the United States. According to Mose Buchele of the podcast “The Disconnect: Power, Politics and the Texas Blackout,” the energy market is left entirely to demand and less to supply. In other states, power plants are paid to standby when demand for energy is low, but that is not the case in Texas. In theory, this should make for a more efficient energy market, but it also means that there is too little power available at peak times.
The price of energy changes during these peaks, and these power plants’ revenue model also depends on a few of these moments per year. During that horror winter in February 2021, when the state had no power for days on end, some residents still had power. But they had to pay dearly for it.
The sky-high electricity bills for some residents of the state amounted to 5000 dollars (over 4100 euros). One state resident was presented with a bill of 16,000 dollars (over 13,000 euros) for electricity use for one week. Normally, they pay about 12 cents per kilowatt hour in Texas, but the price rose to 9 dollars per kilowatt hour.
Small dip hash rate
In early June, a new heat wave hit Texas, causing power consumption for that month to break a record of 72,785 megawatts. ERCOT’s prediction is that the demand for power could reach 80,000 megawatts, so it is quite possible that Texas bitcoin companies will turn off their machines more often this summer.
For now, there has been a slight dip in the overall computing power of the bitcoin network (hash rate), but nothing to worry about.