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Tag: Bitcoin Electricity Prices

  • Bitcoin Drop & Eventual Demise to Lower Texas Electric Rates

    Texas was once a promised land for bitcoin miners, a business-friendly state with stable regulations and a seemingly endless energy supply. But the tide has turned.

    Texas has slowed issuance of new permits for crypto miners to connect to the grid. The state is trying to balance its demand and supply of electricity. There’s virtually no place in Texas where you can just plug into the electrical grid. There are a large number of miners waiting to plug into the grid, and because the amount of available electricity has been low lately bitcoin miners have had to build out their own generators and power lines to power up their computers to mine crypto. That will take a while.

    Furthering the pain, Crypto miners have been struggling as the price of bitcoin has slumped and will likely collpase, reducing the miners’ profits and forcing some to sell their mined tokens to cover operating costs.

    Lower Electric Rates From Broken Promises

    While many companies were successful in building out large-scale operations in Texas, some companies did not get as much power as they initially expected. A slowdown in permitting has felt like a broken promise. There continues to be fire sales of transformers, PDUs (power distribution units) and other equipment that the mining farms can’t use due to power constraints.

    A Chinese mining company was planning a 600 MW site in West Texas, and the first phase of the site with a power capacity of 100 MW has been energized. This means electricity is flowing to the mining machines, but the rest is on hold. Is this extra capacaity being added to the grid that is not being used to easy prices? The company had to lay off part of its staff in Texas and a few others left the company in June and July. Other miners with big plans in Texas are Riot Blockchain, Core Scientific, U.S. Bitcoin Corp., and Genesis Mining… will that stick to their development plans in Texas?

    In March, ERCOT, which manages large loads on the grid including those for crypto miners, announced an interim process for large energy consumers to connect to the grid. The state needs to figure out how to manage these flexible loads. Right now the state requires large consumers of energy to register and get approval from authorities before they can connect to the grid, which will slow down the build out process for all. Fewer projects have been able to energize per month since the process was established. Although the approval process is a measure to ensure grid stability until ERCOT completes its work, the delay could cripple crypto miners as prices continue to fall.

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    How big a drop in demand and the electric rate might we see?

    Despite the new, slower procedures, Texas is trying to remain friendly to crypto miners. The state hasn’t overtly said they are no longer looking to attract more mining to the state. ERCOT estimates that 33 gigawatts (GW) worth of bitcoin mining projects planned are waiting for permits, up from 27 GW in mid-July. That volume can be added back to the grid to lower rates. The state expects about 80 GW of peak demand for upcoming summers, compared with 93 GW of energy production based on current and planned resources.

    Lower Demand, Lower Electricity Rates

    As bitcoin miners and crypto miners continue to melt, will the reduction in demand lower Texas’ electric rates?

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  • Bitcoin Mining for Energy Independence?

    Texas Congressman Endorses Bitcoin Mining for ‘Energy Independence’ to Lower Electric Rates

    Bitcoin mining is exploding in Texas. That’s partly because prominent politicians such as Rep. Pete Sessions are courting mining firms.

    The Public Utility Commission of Texas has approved a base rate increase for Southwestern Electric Power Company (American Electric Power). Southwestern Electric Power Company serves 187,500 customers in Northeast Texas and the Texas Panhandle.

    Southwestern Electric Power Company orginally filed its request at the Public Utility Commission of Texas on October 13, 2020. The Public Utility Commission of Texas decision authorized an annual increase of $41.6 million in its order.

    Rep. Pete Sessions, a 12-term Republican congressman from Waco, Texas, is the latest Washington, D.C. politician to publicly embrace Bitcoin.

    He tweeted, “Bitcoin mining will play a critical role in rebuilding energy independence in the USA.” His mini-missive comes three days after Sessions tweeted, in language that mirrors Senator Cynthia Lummis (R-WY), “Bitcoin is aligned with American values and will strengthen the dollar.”

    Texas, once synonymous with oil, is the epicenter of a Bitcoin mining boom. According to data from fall 2021, Texas provides the fourth-highest hashrate of any state, with 14%. But Texas’ influence is likely even higher than that figure, given the large mining facilities that have either begun popping up in the past year or are in the works. For example, Argo purchased 300+ acres in West Texas last spring, while Foundry is partnering with or gobbling up solar and hydroelectric firms in the state.

    Why the Lone Star State?

    “Texas is such a goldilocks zone for bitcoin mining it’s unreal,” tweeted Coin Metrics co-founder Nic Carter over the weekend, citing “supportive policymakers” and the state’s energy infrastructure.

    Sessions is far from the only Texas politician to hail Bitcoin. Senator Ted Cruz has been increasingly aligning himself with cryptocurrency, while Governor Greg Abbott sees Bitcoin mining as a way to stabilize the state’s largely deregulated power grid while taking advantage of its large stores of untapped energy, including natural gas that can be burned but not transported. Texas also has plenty of wind and solar power to go around.

    Texas is such a goldilocks zone for bitcoin mining it’s unreal.

    – Supportive policymakers
    – Energy DNA
    – Most deregulated market, cheap power
    – Islanded grid, has to buy lots of ancillaries
    – Most renewable grid, most negative pricing events

    Texas has the largest net (summer) capacity of any state with 65% more than #2 California, according to the U.S. Energy Information Administration. And its lawmakers want to use that capacity to bring in money from crypto firms.

    “It’s a wonder that there’s mining anywhere else,” tweeted Carter. “Texas is just unreal in terms of mining suitability.”

    Texas now has the perfect opportunity to hone its sales pitch beyond the Bitcoin mining firms it’s been courting to a larger public that is still forming an opinion on cryptocurrency. After Russia invaded Ukraine, the U.S. and allied Western countries levied crippling sanctions against the country. Slight problem, though: Russia supplies an estimated 8% of the world’s oil.

    Therefore, those sanctions, plus voluntary pullouts from companies looking to decrease their exposure to public blowback or inadvertent sanctions violations, has helped push energy prices upward while re-igniting Republican calls for the U.S. to become energy independent.

    In this line of thinking, there’s no need to worry about the consequences of sanctioning Russia if the U.S. doesn’t need the energy it provides (though it can still be hit with higher prices on imports from countries that do).

    Sessions clearly aligns with this view. And he, along with a growing group of Texas pols, is pushing his state to get it done.