So, are we like gonna roll up the red carpet we laid out for these guys a couple of years ago?
Texas is now home to 10 of 34 large Bitcoin mines.
During cold spells or heat waves, Texans are commonly called on to conserve power. For example, in August 2023, the state’s grid operator issued eight conservation requests, asking the public to reduce electricity use to help prevent an emergency in which rolling blackouts could be required. Increasingly, Texas lawmakers are worried that energy-hungry mines will make it harder to keep the lights on across the state.
“They’re going to put our grid at risk because of the power they’re drawing,” said state Sen. José Menéndez, D-San Antonio, at a public hearing on June 12.
For more than six hours, senators on the Business and Commerce Committee pressed grid operators, public utility commissioners and representatives from industries, including manufacturing, oil and gas and cryptocurrency. Chief among legislators’ concerns was the massive growth in energy demand on the state’s main electrical grid, which is estimated to go from a peak demand of about 85,000 megawatts last year to 150,000 megawatts in 2030, according to estimates from the Electric Reliability Council of Texas.
Following the hearing, in a post on social media, Lt. Gov. Dan Patrick declared, “it can’t be the Wild Wild West of data centers and crypto miners crashing our grid and turning the lights off.”
Currently, cryptocurrency mining — mostly for Bitcoin — can draw up to 2,600 megawatts of power from the grid operated by the Electric Reliability Council of Texas, ERCOT’s senior vice president, Woody Rickerson, told senators. That’s about the same amount of power used by the city of Austin, and another 2,600 megawatts of mining is already approved to connect to the grid. Even more Bitcoin mines are expected to come to Texas in the near future.
ERCOT estimates that as much as 43,600 megawatts of additional electricity demand will be added to the grid by 2027 from facilities classified as “Large Flexible Loads” requiring more than 75 megawatts. In a statement to Inside Climate News, ERCOT said, “currently, the crypto mining industry represents the largest share of large flexible loads seeking to interconnect to the ERCOT System.” Data centers for artificial intelligence and facilities for producing hydrogen from water through electrolysis also make up part of the large flexible loads.
To meet the major growth in demand, driven in large part by Bitcoin mining, Texas is turning to natural gas power plants, with taxpayers providing the down payment. In 2023, the Texas Legislature passed a loan program, later approved by voters as ballot Proposition 7, to give low-interest loans to companies to build or expand power plants. At first, the Texas Energy Fund will have $10 billion to award, after receiving more than $39 billion in requests.
One of the companies applying for a loan is Constellation Energy, which owns the Wolf Hollow II power plant in Granbury. Constellation has an agreement with Marathon Digital, allowing Marathon to rent space next to the power plant for Bitcoin mining and purchase power directly from Wolf Hollow II.
Marathon has a capacity to use up to 300 megawatts of power, and Constellation wants to add additional turbines onto Wolf Hollow II capable of generating that much power.
In an application to the Texas Commission on Environmental Quality, Constellation said the power plant expansion would include eight turbines, and it applied for air permits to release more than 796,000 additional tons of carbon dioxide per year. Such massive greenhouse gas emissions have made cryptocurrency mining the focus of intense opposition by climate activists.
The deal between Marathon and Constellation, known as a power purchase agreement, is part of what makes Bitcoin mines major players in the Texas energy market — not simply consumers of power. In most agreements, crypto facilities lock in a relatively low rate to purchase electricity “behind the meter,” so the supply does not enter the ERCOT market. But Bitcoin mining companies can later decide to sell that power to the rest of the grid through the ERCOT market, rather than powering their computers.
For example, Riot Platforms operates two of the largest existing Bitcoin facilities in the world, both located in Texas. The New York Times reported last year that Riot Platforms’ operation in Rockdale was the most power-intensive Bitcoin mining operation in the country, using “about the same amount of electricity as the nearest 300,000 homes.”
One of the facilities has been able to pay as low as 2.5 cents per kilowatt-hour of electricity, while the average price across Texas in 2022 was more than 10 cents.
In August 2023, when energy prices were high amid scorching summer days, Riot Platforms made $24.2 million from reselling power purchased through their private agreements onto the wholesale energy market, almost tripling the $8.6 million the company made that month mining and selling Bitcoin.
“They can game the system in a few different ways for their profit,” said Mandy DeRoche, an attorney at the nonprofit Earthjustice, who has worked on cases involving crypto mines across the country.
Separately, Bitcoin companies can participate in demand response programs, in which the companies allow ERCOT operators to control the energy load of the facility and lower their usage to compensate for sudden outages or periods of high demand elsewhere on the grid. These situations arise most often during extreme weather. Companies get paid a premium by ERCOT for participating in demand response, and they get paid an additional fee each time their energy load is controlled through the program. Riot Platforms made $7.2 million from these programs in August 2023, according to a monthly earnings report.
“Texas has set up a system which allows crypto mining to be significantly advantaged,” said state Sen. Charles Schwertner (R-Georgetown), the chairman of the Business and Commerce Committee.
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See here, here, here, and here for some background; that third link covers the energy market arbitrage issue. This Nick Anderson cartoon is a good refresher on the situation. It’s not an accident that we’re surrounded by Bitcoin miners in Texas. We have taken significant steps to lure them here, and they have established a foothold. The Republican solution to ensuring that the grid didn’t collapse into a pile of dust as a result of this was to put up public money for building more natural gas power plants. Are we really changing course here? It’s been the Republicans who were the biggest cheerleaders of this. Forgive my cynicism, but that’s not how this normally works.
On a side note, the story leads off with a report about all the noise that the mines generate and how annoyed people in places like Hunt County are by this. That’s a local and state issue, and people should be yelling at their County Commissioners and State Reps about it, but those lines aren’t always clear, which leads me to note that one Ted Cruz is a big Bitcoin fan. Maybe this is something Colin Allred can bash him over? You never know what might move some votes. Just a thought.