Worried that crypto miners are straining the Texas power grid? Some US senators are

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How the arrest this week of notorious crypto scoundrel Sam Bankman-Fried of FTX for fraud will affect the campaign by state leaders to make Texas the crypto capital of the world.

It won’t, says Lee Bratcher, president of the Texas Blockchain Council. The FTX fraud has certainly damaged the reputation of the crypto industry, but most of the economic activity in Texas is tied to bitcoin mining or digital asset startups building apps and commercial solutions.

The Texas campaign attracts companies that use thousands of computers to mine cryptocurrency. SBF, on the other hand, was a leader on the financial front where the selling, buying, and trading of cryptocurrency occurs.

As a consumer, are you worried that new crypto mining companies coming to Texas will put a strain on the power grid and cause outages and higher costs on your monthly bill?

The watchdog can’t tell you what’s going to happen because we’re in uncharted waters. Everyone invents it as they go along.

Also, it doesn’t seem like anyone in the state government is giving much thought to the growth of the industry. There are now about 30 crypto data centers across the state, and no one knows exactly how it will work.

If you haven’t been paying attention to the emergence of Crypto World in Texas, saddle up. I will give you an example of a state of unpreparedness.

In October, several US senators and congressmen wrote a very negative but brilliant letter exposing states’ unpreparedness to accept energy-hungry miners into our fragile state grid. Texas is not connected to national grids, so there were no major backups.

The senators questioned ERCOT President and CEO Pablo Vegas in a letter about the annual electricity consumption rate used by Texas miners. Vegas responded in a letter that it did not know because ERCOT cannot positively identify all crypto-mining customers in the region.

Asked about carbon dioxide emissions resulting from the use of crypto energy, ERCOT responded that ERCOT does not track generator emissions or other environmental data.

When asked if the costs associated with miners would be passed on to consumers, ERCOT replied that it does not analyze this.

And finally, to the fair questions of whether the presence of miners will increase electricity bills for families and businesses, and what can ERCOT do to ensure that consumers do not bear the costs of competing with electricity consumption. energy of crypto miners, ERCOT responded: ERCOT does not conduct such assessments.

[You can download ERCOTs full response here.]

Note to academics: if ERCOT, which is a chief regulator in the world of crypto mining, does not investigate these issues, I hope you can. But it won’t be easy because the state allows most parts of deals involving factory openings to be protected by secrecy.

At Denton, for example, which leases land at its city-owned power plant to Core Scientific for mining, Ive reported that as part of the deal, neither party can issue press releases or talk about the project in public. So I did.

The modern day gold rush

In some ways, it’s a digital gold rush a la 1849.

Texas saw an opening to attract this new industry after the Chinese government asked foreign mining companies to leave. China wants its own crypto system.

Mining companies are drawn to Texas because of low energy costs in rural areas and the idea that the industry here won’t be burdened with excessive regulation.

Bratcher says current Texas miners use 2-3% of the Texas network. This could increase to 3% to 4% in the next two years, he estimates. He coined the phrase Texas is bitcoin country.

In the letter to ERCOT, signed by U.S. Senator Elizabeth Warren, D-Mass., and four other members of Congress, heads of state are challenged to prove that miners won’t break the network. It’s a legitimate question.

The harshest part of the letter states, given the impact of crypto mining on the climate, the network, and taxpayers, ERCOT’s support of this industry is irresponsible and of grave concern.

Our network, which was supposed to be minutes from a collapse during the February 2021 freeze, must be challenged like never before.

The Houston Chronicle reported earlier this year that crypto miners here will use as much energy by next year as needed to power the entire city of Houston.

Energy expert Ed Hirs says he thinks the industry’s reliance on the Texas grid will eventually drive up prices for consumers.

Bratcher told me that if that happened, the addition to an electric bill would be minimal, measured in pennies.

Currently, mining companies participate in voluntary shutdowns during emergency events when Texans are asked to save. Many businesses actually make money during shutdowns because they put power back on the grid and get reimbursed.

During the summer heat wave, 95% of businesses closed, Bratcher told me. It’s not because they feel charitable. This is because electricity costs are too high. Additionally, some companies may be paid to help strengthen the network.

The best-known case to date involves Riot Blockchain, which said it made more money shutting down during the July heatwave than mining. The company said it received $9.5 million in power credits with ERCOT by reselling backup power at a premium price. During that same month, the company made a profit of $5.6 million selling bitcoin.

Warren says these deals between the companies and ERCOT ultimately come at the expense of taxpayers.

How do you solve this dilemma if it results in a weakened network? First, we need to know what is going on. So be careful. Stay informed. And like I said, saddle up.

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