How the Texas Grid Can Handle Cryptocurrency Mining

Cryptocurrency miners are seeing the lonely state and its low-cost energy as a way to grow the industry, but Texas’s fragile power grid could give way under pressure.

Cryptocurrency is a decentralized, encrypted digital currency, says Josh Rhodes, an associate researcher at the Webber Energy Group at the University of Texas at Austin, who has been a consultant to bitcoin mining companies statewide. Cryptocurrency is usually created through a process called mining, which involves computers solving increasingly complex mathematical problems. Whatever part of the problem is solved, part of the cryptocurrency is being manufactured, Rhodes explains.

This process consumes a lot of energy, about 3.25 kilowatts per miner, Rhodes explains, roughly the amount consumed by a home air conditioner. The state’s current mines consume hundreds of megawatts, but expansion plans will soon bring that number to thousands, Rhodes said. Cryptocurrency transactions also use a lot of energy, with the average financial exchange consuming more than 1,700 kWh of electricity, almost double the monthly amount used by an average American household.

China, formerly the country with the largest bitcoin mining industry, recently banned cryptocurrency mining and transactions, pushing bitcoin into Texas. “The majority of cryptocurrency mining was in China because they have pretty cheap electricity there,” Rhodes said, adding that it was probably banned because the country didn’t want to give in. control of any of its savings. “Because Texas has one of the cheapest electrics in the world, it looks pretty appealing to bitcoin miners or cryptocurrency miners. “

The state also has an abundance of energy. It is one of the main producers of wind power in the country and has a surplus of cheap solar power.

Texas rulers have also been strong advocates of cryptocurrency. In June, Governor Greg Abbott tweeted ” It happens ! Texas will be the leader in crypto, ”after HEB announced it would be setting up cryptocurrency kiosks in select stores. At a Texas Blockchain summit earlier this month, Senator Ted Cruz said bitcoin mining could play “an important role [in] strengthen and harden the resilience of the network. Texas suffered blackouts in a winter storm in February in which its power grid failed to meet increased demand, leaving more than 4.5 million homes and businesses without power and hundreds of dead.

“Because of the ability of bitcoin mining to instantly turn on or off, if you have a time when you have a blackout or a power crisis, whether it is ‘a freeze or other natural disaster where the power generation capacity decreases,’ Senator Cruz said at the conference. “It creates the ability to instantly move that energy back into the grid. “

Some experts are not so sure. “There is merit in the idea that more flexible demand makes it easier to balance the ups and downs of supply when wind and solar vary, or when coal, gas and power plants. nuclear fail, “Daniel Cohan, associate professor of environmental engineering at Rice University,” told the Dallas Morning News earlier this month. “But just adding a whole new request to the network doesn’t help, or doesn’t fix the gaps. “

Alex de Vries, founder of the Digiconomist site which analyzes the impacts of cryptocurrencies, also estimated that the energy required for bitcoin mining could create problems for the state’s energy infrastructure when it collapsed. interviewed with the Austin American-Statesman. “It’s a huge risk when you look at the Texas grid, which is already pretty low,” Vires said. “You can’t blame bitcoin miners just for this, but they will definitely help. “

Although it can be risky, Cruz’s goal is possible, says Rhodes, but it’s complicated. More demand on the grid could mean less energy for everyone. “However, the higher the demand on the grid should drive more investment in more power plants,” Rhodes said. “If this new load added to the system leads us to build more power plants… those plants would be available to serve other loads like people’s homes. “

Rhodes also found that bitcoin miners should be willing to scale back their operations when demand for electricity increases in the state. Otherwise, it could have a negative impact on the stability of the network. “If new power plants aren’t built because of the mines, market fundamentals would say the price of electricity would go up,” he says.

Some industry experts have expressed environmental concerns due to the likely higher production of carbon dioxide with the use of so much electricity, which is mainly generated by coal. Tesla CEO Elon Musk, who announced his company’s move to the state earlier this month, said in May that he would no longer accept bitcoin as a form of payment for his vehicles due to the environmental impact of digital currency. He has since reversed this statement and even asked his company to invest in bitcoin.

When it comes to reducing environmental impacts, Rhodes says flexibility is key. Increased demand could spur new wind and solar power, which he adds are among the cheapest forms of energy to build, develop in the state to meet new demand and offset emissions. of carbon.

The Texas system has to match supply and demand in real time, which has typically been done by ramping up power plants when demand increases, Rhodes explains. “We usually can’t accelerate things like wind or solar,” he says. “The flexibility allows us to always match supply and demand, but without having to have such a firm capacity, or the ability to move things up and down like our gas and coal thermal fleet. “

When asked if he foresees a potential ban in a state like China, Rhodes said he was not sure that the state government would have the power to achieve this and that this should rather be done at the federal level. Some electrical systems across the country could make it more difficult for mines to connect to the system and use electricity, he adds. “That’s one way you can functionally, I guess, stop it. “

Still, Rhodes sees the popularity of the cryptocurrency in the state continue to grow. “I think more cryptocurrency, more bitcoin mining, is coming to Texas because there is just a lot of interest in it,” he says. “I think there is a lot to come. ”