Texas’ fragile grid isn’t ready for crypto mining’s explosive growth

Even though energy-hungry Bitcoin mining companies have volunteered to power down in Texas this week to alleviate the stress on the grid by a hot spell, the industry could still cause more problems down the line.

Even though the mining industry claims that it can spur the growth of affordable renewable energy, higher electricity bills and more carbon dioxide emissions are on the way for Texans. The problem is that the grid can not keep up with the enormous demand for electricity that is coming in.

The Texas energy system is bracing for the rapid growth of the mining industry of the virtual currency. Over the next four years, the Texas grid is expected to be added by nearly a third of its current maximum capacity. A spokesman for the Electric Reliability Council of Texas said in an email that demand on the grid will increase by 27 gigawatts. The ERCOT runs the state's power supply. The ERCOT spokesman refused to give their name.

Why is 27 gigawatts such a big deal? During times of high demand, a single megawatt can power 200 homes. One thousandmegawatt is a gigawatt.

The state hit a record during the heat. ERCOT said more than 78 gigawatts of electricity were needed. If every source of power generation is working perfectly, the Texas power grid can provide a maximum of 92 gigawatts. It leaves little room for most of the state during periods of high demand.

The boom in Texas is related to thecryptocurrencies. There are 27 gigawatts of load that is being worked on over the next four years according to an ERCOT spokesman.

Joshua Rhodes is a research associate at the University of Texas at Austin. It would be too much stress on the system to do 27 gigawatts of crypt in four years. He says that we barely have the power plants to cover.

Texas has become a major player in the mining industry. After China banned the practice in 2021, the US took over as the world's biggest hub for cryptocurrencies. Many miners set up shop in Texas due to low energy prices. According to some estimates, the state is home to 25% of the US's Bitcoins.

The large-scale miners look like giant data centers filled with specialized computers that are supposed tomine the digital currency. Computational math problems are solved by the machines in return for new token Over time, the problems become more complex and require more computing power to be energy efficient.

According to experts, many of the proposed mining projects that want to connect to the grid between now and 2026 won't happen. They expect the same thing for new projects in other industries. The price of thecryptocurrencies plunged this year due to the "Crypto winter" that battered the industry and made it difficult for miners to make money.

According to Rhodes, 5 gigawatts is a more viable number in terms of how much energy demand there will be over the next four years. It's a lot to accommodate 5GW. It would take a lot of time to build transmission lines. Building out more power plants and wind and solar farms would be required.

The costs for building out all this infrastructure are often passed on to consumers. The rise in energy prices has been caused by the rise in the number ofcryptocurrencies in other states. In upstate New York, electricity bills have increased by about $8 per month for individual customers and $12 per month for small businesses, according to an analysis done by researchers at the University of California, Berkeley and the University of Chicago.

Eric Hittinger is an associate professor at Rochester Institute of Technology with a background in electricity system policy. The higher the residents expect the electricity prices to become, the more they'll be willing to pay for it.

Residents might face higher rates in the short term if they compete for a limited supply of electricity. The build-out of new power sources is likely to be stimulated by the spike in new electricity demand. It is possible to bring more power sources online to meet demand, but there are initial costs.

Those costs might cover the construction of solar and wind farms, which power grids need more of for the world to have a fighting chance at controlling climate change. It's a good thing that a company's hunger for energy can help develop power sources. Depending on the weather, solar and wind energy can generate too much electricity for the grid at any one time. Instead of utilities having to ask solar and wind farms to curtail their energy generation because grids don't have enough storage for it, there's a new way to do it.

Investment in new energy generation is usually driven by increasing energy demand. Under very specific circumstances, it would have to happen in order to have a positive impact on the environment. According to Rhodes, pollution would continue to rise with electricity use.

Basic math is used. The industry is going to be responsible for the pollution created by the excess 3 gigawatts of clean energy if the industry only incentives 2 gigawatts of clean energy.

In order to bring enough clean energy online to actually reduce carbon dioxide emissions in Texas, the data centers have to be willing to power down for 15 percent of the year. In his role as a managing partner for the consulting firm Idea Smiths, Rhodes completed an analysis for the company Lancium, which was in the business of mining cryptocurrencies.

The caveat is that the miners need to be flexible. Powering down for 15 percent of the year is a big ask that goes far beyond what we have seen so far from the industry.

Photo by MARK FELIX / AFP via Getty Images

After the state's grid operator asked Texans to conserve energy on Monday, the companies decided to shut off their machines. Residents are turning up their air conditioning to deal with the heat. About 1 percent of the grid's total capacity has been freed up by the voluntary power downs of cryptocurrencies.

When peak demand threatens to overwhelm the grid, it's important to be flexible. Texas' power grid is vulnerable because it doesn't connect to other states so that they can share energy, which other states do so they can fill in for each other if there's a shortfall in supply somewhere Texas' grid is prone to failure. A brutal cold snap last year caused havoc on the grid.

There were financial reasons behind the voluntary curb on power use by the mining companies. Spot prices for electricity go up when demand goes up. If mining companies secure the electricity through long-term contracts with energy providers, they will make more money selling unused electricity than they will by mining.

Some people may frame it as charity. It is not a new service. Other industries have played similar roles in stabilizing the grid in the past. The industry is capable of providing the same service if there are the right economic incentives.

"Just in efforts to support the citizens of Texas, that's always going to be our priority." Over the past week, Riot's facility in Rockdale, Texas, was powered off for at least 10 hours a day.

There are still concerns about another massive mine that Riot plans to build in Texas, and that hasn't changed. A petition was started by Sawicky to stop the construction. The new facility is expected to have enough electricity to power a million homes.

Sawicky said that they talked about stabilizing the grid. It is so frustrating to me that they can claim that when they are putting so much burden on the grid.

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