Texas power grid can barely handle high demand from miners

For a long time, the American state of Texas was seen as the promised mining country: a state with Bitcoin-friendly regulations and a low energy price due to energy surpluses from renewable energy sources. According to Texas Senator Ted Cruz, Bitcoin mining would make the power grid even more robust and offer a solution to the ‘flaring’ problem. However, it now appears that the infrastructure of the power grid can hardly cope with the high demand from the miners. For that reason, the network operator has applied the brakes.

Texas

After China officially banned Bitcoin mining in 2020, Chinese miners en masse looked for a new place to settle. Kazakhstan, Canada and the United States, among others, were popular destinations.

In particular, the state of Texas. The favorable business climate and the low energy price make it an attractive location for miners. Texas is the leader in the United States when it comes to generating electricity from wind energy. If the state were viewed as an independent country, it would be the fifth largest producer of wind energy in the world.

The yield of generating electricity via wind energy is very variable due to the dependence on the weather. At peak times, the state struggles with an energy surplus and wind turbines even have to be turned off in order not to burden the grid even more.

Although the energy generated should be able to supply about 9 million households, this is not possible due to the quality of the transmission network. Most of the windmills are located in the quiet west of the state, far from the busy cities and industry. Because Bitcoin mining is a location-independent process, this could actually strengthen the power grid, according to Texas Senator Ted Cruz.

Mining equipment consumes a lot of power, but can be easily switched off at any time. For example, bitcoin miners can be used as extra reserves that strengthen the robustness of the power grid.

In times of an energy surplus, they are then used to use electricity, thereby reducing the burden on the network. While the miners can make more capacity available during an energy shortage by switching off briefly, Cruz explains.

 

Mining companies such as Riot Blockchain, Core Scientific and Genesis Mining are now established in the state and often have large (expansion) plans. For example, the Chinese mining pool ‘Poolin’, in collaboration with mining rig manufacturer Bitmain, wants to build a facility with a capacity of no less than 600 megawatts.

In addition to wind energy, a lot of methane gas is flared off during oil production in Texas. Methane gas is responsible for a large part of the greenhouse effect and is very environmentally unfriendly. Mining Bitcoin with electricity generated by the methane gas is a realistic solution to this problem. Russian oil company Gazprom, in partnership with mining company Bitriver, has begun reducing its carbon footprint to mine excess gas for bitcoin. Exxonmobile and Vespene energy are busy with similar projects.

Reality

So far only promising reports about Texas and Bitcoin mining, but the reality is different. For example, the state’s grid operator, the Electric Reliability Council of Texas (ERCOT), has temporarily put the issuance of new licenses for miners on hold. A permit is required to connect to the grid and gives permission to obtain a specific use. A disappointment for the established mining companies in the state that have been established precisely because of the low energy price and supply. According to the Texas Blockchain Council (TBC), ERCOT is trying to balance the supply and demand of electricity in the state.

Since the ban in China, the number of mining facilities in Texas has grown enormously, the ERCOT told the TBC. Due to this sudden growth, there is now an imbalance in the supply and demand of electricity in some places in the state.

?ǣAlthough many companies have succeeded in building large-scale mining operations in Texas, some companies are currently receiving less power than initially expected, which puts them in a difficult position at the moment ,?ǥ said Chief Operating Officer at mining firm Luxor, Ethan Vera.

This setback for the miners in Texas comes at an unfortunate time, due to the price drop of bitcoin in recent months, the miners are earning a lot less than before.

In March, the ERCOT announced that the ‘Large Flexible Load Task Force (LFLTF), the department that manages large users of the grid, temporarily wants to allow fewer users to access the power grid. The LFLTF needed time to research how the company could best deal with the amount of flexible energy loads from miners and other users.

“The LFLTF department looks at how flexible large users of the grid affect ERCOT’s maximum load and helps ERCOT to keep the grid operating reliably and efficiently.”

Still, according to Steve Kinard, head of Bitcoin Mining Analytics, this does not mean the end for the mining industry in the US state.

?ǣIt is not that Texas has run out of electricity, but that infrastructure needs to be improved to put the energy to good use. Bitcoin mining is about to enter a phase where it can play a huge role in energy infrastructures ?ǥ , explains Kinard.

Earlier we wrote about Texas Senator Ted Cruz and his plans for Bitcoinming in the state.

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