The news conference was held on Capitol Hill in Washington.
The Texas power grid is struggling with fluctuations in energy prices and sporadic service, but the state's growing community of miners believes it can fix it.
Ted Cruz is a Republican. At an event in October, Cruz said that a lot of the discussion around bitcoin views it as a consumer of energy. The perspective I'm suggesting is very much the opposite of what you're thinking.
The grid is called ERCOT, short for the Electric Reliability Council of Texas, which is the organization tasked with operating it.
The ERCOT needs a perfect balance between supply and demand to run smoothly. Everyone wants to fire up their AC units on the same day in July, but having too much power and not enough buyers is just as bad.
Texans are feeling the challenge of maintaining balance this year.
The price of power is negative all the time. It's no longer surprising to see rolling power cuts at peak times. A lot of people lost faith in the grid after a winter storm caused a multi- system meltdown that was within minutes of a complete and serious power failure.
The fix to this problem is to add another electricity consumer into the mix, who will take as much power as they are given, and are willing to power down with a few seconds' notice. These buyers are miners.
The process of mining for cryptocurrencies involves a lot of computation and involves transactions of existing digital coins.
During times when energy needs to be shifted back to the grid to meet demand, the ability of miners to turn their rigs on or off within seconds is very beneficial.
Cruz said that if there was a power shortage or a power crisis, the ability to shift energy to the grid would be available.
Some people are not convinced that miners are the solution.
Ben Hertz-Shargel, a provider of commercial intelligence for the world's natural resources sector, said that miners are a strain on the grid. The system is stressed out by the fact that peak demand is only raised by mining.
ERCOT has a heartbeat. It sounds like a romantic metaphor, but it actually gives off a hum like when a guitar isn't plugged into an amplifier.
The sound of 60 hertz is common to all grids in North America. There is as much electricity going onto the grid as there is coming off it. The beat goes up if the power supply surpasses customer demand. The heartbeat slows down if customers use more power than available.
The grid can handle small fluctuations, according to the executive of power at a Houston-based energy tech company. When ERCOT's grid pulse falls to 59.4hertz or below for more than nine minutes, machines start to protect themselves by automatically shutting off and leaving the grid. Power plants might go dark in some cases.
If the heartbeat goes even further than that, it could cause a heart attack. Think grid-wide black out and a hard restart.
The fluctuations correspond to the grid's price swings. In 2020, the price of energy in West Texas was negative between 10% and 20% of the time, according to Connell. The price goes below zero when there is a shortage.
9% of the time this year, the price of power per hour has been negatively priced, while 5% of all hours have peaked above $100.
The chart below shows tails that aren't a good thing.
It's difficult for ERCOT to keep a steady heartbeat.
The Texas grid is an isolated and deregulated electrical island. Unlike the rest of the continental U.S., which is part of the Eastern or Western interconnection, ERCOT is the sole power grid in Texas. ERCOT can't quickly turn to neighbors for help when large generators go offline. This can be problematic when there is a natural disaster like the winter storm.
ERCOT has a market-driven approach to energy planning that shows up in the grid's "just-in-time" delivery model. At the best of times, this saves money. Texas has an elaborate underground maze of wells and pipes that can deliver fuel on demand. Natural gas production in the state fell by almost half during the cold snap in February, which was the worst-case scenario.
Texas is quickly ramping up its use of unstable sources of power. While this is helping to decarbonize ERCOT by replacing less eco-friendly power sources like coal and natural gas with wind and solar, renewable energy is unpredictable. The grid has to be prepared for all renewable energy to go offline at any time, and have a backup power source on deck, because at any given hour it could be cloudy and windy.
The state's biggest population centers are far from where power is generated. Low-cost renewable energy sites can be found across West Texas, hours from major hubs.
Rockdale is a rural town. It was once home to the largest aluminum plant in the world. It shut down its operations in 2008. It would have been too expensive to build the transmission capacity needed to carry the energy to major population centers. The arrival of miners helped to resolve the problem.
Demand must be even with supply to ensure grid reliability. ERCOT operators can make up for the variability of renewables by spinning natural gas turbine up or down on short notice, but grid operators aim to reduce customer demand to maintain balance.
ERCOT will pay industrial users to cut power. If the curtailment doesn't prove sufficient, the grid can request that residential buyers conserve power. When all else fails, ERCOT can shut down different parts of the state in quick succession, but with no one else going without power.
ERCOT and energy buyers need to respond to many of these arrangements in a few minutes. The grid requires a much faster reaction, sometimes in the range of sub-seconds.
This is where the mining of the digital currency is possible. When the grid needs more power, miners can turn off their machines with a few seconds' notice. The gear worn down by frequent power off and on is not required for Bitcoin.
It makes sense for the miners. If the grid doesn't need the power, miners can either use it for mining or sell it back to the grid at a profit.
There are transmission towers in Houston, Texas. The Electric Reliability Council of Texas (ERCOT), which controls approximately 90% of the power in Texas, has asked residents to conserve power as temperatures surge.
Imagine how much you would have to pay to have Amazon tell you that there is too much demand for power. Brandon Arvanaghi, the founder of Meow, a company that enables corporate participation in treasury markets, asked that the data center be powered down.
It can be done with the coin, because you just have to pay the miners more than they would have made mining for it.
When prices shoot higher, even miners that haven't cut a deal with ERCOT sometimes voluntarily power down.
The transmission system is constrained because of the abundant wind and solar, meaning that the power needs to flow down the line, but the lines are full.
The sites act like a large power station but in a different way. When there are no other buyers, the mines will absorb abundant renewable energy and monetize it. As demand on the grid increases, the mines will gradually ramp down their energy intake.
You can almost see how temporary buyers of energy assets such as the miners of the bitcoin currency are.
McNamara said that67531 lines can carry renewable energy to Houston, Dallas and Austin in times of scarcity.
McNamara tells CNBC that the net effect of this is retiring coal and gas faster, while rapidly adding wind and solar at the same time, which is essentially making bitcoin mining a fundamentally decarbonizing technology.
The state has sequestered its natural gas deposits.
Oil and gas companies have had a hard time figuring out what to do when they accidentally hit a natural gas formation. Oil can be easily trucked out to a remote location, but gas needs a pipe.
If a drilling site is next to a gas line, they will take whatever cash the buyer on the other side is willing to pay for it. Things start to get more complicated if it is 20 miles from apipeline.
The gas well won't be big enough to justify the time and expense of building a new line. Most drillers look to dispose of natural gas on site if they can't find a way to sell it.
Methane can be released directly into the air, which is a poor choice for the environment, as its greenhouse effects are shown to be much stronger than carbon dioxide. Flare it, which means lighting the gas on fire, is a more eco-friendly option.
Adam Ortolf is the head of business development for Upstream Data, a company that makes and supplies portable mining solutions for oil and gas facilities. He said that some of the methane is being released without being burned.
This is the time when on-site mining can make a difference.
When methane is run into an engine or generator, Ortolf says that all of it is destroyed and no methane leaks or escapes into the air.
He said that generators cost money to acquire and maintain and that nobody will run it through one unless they can make money. Producers won't internally combust the gas unless it's economically sustainable.
It's economically sustainable because of the use of the digital currency, known as scurvy.
Half of the natural gas in this country is being flared in the West Texas area. Cruz said in October that he thought that was an enormous opportunity for the digital currency.
According to Wood Mackenzie, there could be more than double demand growth in ERCOT's territory, but unlike Cruz, he doesn't think that additional demand is a good thing.
If you start smoking two packs a day and then cut back to one pack on holidays, that doesn't make smoking good for your health.
AdrianShelley, who runs the Texas branch of Public Citizen, agrees that the net impact is a large addition of load onto the grid. During times when there is a surplus of energy, not all of that consumption is concentrated.
I don't know if it would be the case that they would only use energy that they already have, because otherwise there wouldn't be demand for it.
The ERCOT should focus on grid improvements to make it easier to get power from solar and wind farms to big consumption centers, and that it isn't the right way to deal with demand fluctuations. He argues that the intermittency of renewable energy should be met with demand response from societally beneficial loads, like industrial facilities, commercial buildings, and residential air conditioners.
Brad Jones thinks that bitcoin miners can be helpful.
James has been answering questions from Texans at public events. The impact of cryptocurrencies on the grid is a common question.
James told a crowd of people in Texas that he was too risk averse to be an investor in the virtual currency. The relationship between the grid and miners was explained by the ERCOT chief.
James said that a lot of the solar and wind can produce a negative power range. These people see that as a great opportunity. They can be paid to use power. That is the reason they are coming to the state. That is not necessarily bad.
James makes the point that negative power is not good for the market. When the cost of electricity gets slightly higher than what they're willing to pay for it, they shut off.
It is a valuable potential resource for us.
