Crypto mining deals are a risky game for Texas’ grid

Texas’ power grid is struggling to meet the needs of residents in times of extreme heat and cold caused by climate change. During a cold spell, the network notoriously failed in February last year, and millions went without power for several days.

Not enough has happened to fix the problems that caused these outages since. Bills have passed to address problems with the grid, but many argue that much more needs to be done. The Texas grid operator recently warned residents that extreme heat could soon cause power outages.

Still, recently cryptocurrency mining has become a significant industry in Texas as Texas politicians have sought to cure the tech industry. The highly energy-intensive practice reportedly exacerbates these problems by using limited energy resources.

According to Columbia University, Bitcoin mining “currently uses an estimated 150 terawatt-hours of electricity annually – more than the entire country of Argentina” worldwide. Texas has dozens of mining operations, which strain the power grid.

“Bitcoin mining uses quite a lot of energy. In Texas, it uses about 1 to 2 percent of our energy consumption, depending on the time of day,” Joshua Rhodes, a researcher at the University of Texas at Austin, told Popular Science. It’s projected to grow significantly over the next 5 to 10 years at a very rapid pace — beyond what I think the grid can actually support.”

Rhodes says there are about 1,000 megawatts of Bitcoin mining in Texas that they are aware of — enough energy to power about 200,000 homes during a period of high demand. If extreme weather pushes the grid to its limits, he says, crypto mining could get in the way of residents being able to keep the lights on. Just a few weeks ago, the weather was so hot that crypto miners were asked to go offline to prepare for inevitable usage spikes.

[Related: Crypto companies are getting into carbon credits. But can they actually help the climate?]

Texas has courted technology companies, Rhodes says, attracted by the state’s low energy prices. Rhodes does not feel that the politicians in power in Texas are very interested in dealing with the fact that crypto mining is negatively affecting the web, he adds. Texas Senator Ted Cruz has suggested that crypto mining keeps the grid more stable because they can simply turn it on and off as needed to support demand from fluctuating too much.

Katie Paul, director of the Tech Transparency Project, tells Popular Science that politicians in Texas have engaged in unethical practices with these crypto companies. In July, her organization released a report that found these politicians gave these crypto companies “sweetheart” energy deals.

The report says that crypto companies such as Whinstone, Core Scientific, Argo Blockchain and Lancium receive long-term energy contracts that provide them with “cheap wholesale energy.” These companies can then sell back to the grid at massive markups whenever they want. They can buy the energy at a low price through these contracts, and in times of high demand they can switch off and sell the energy they would have used back to the grid. These contracts can last as long as a decade. “These complex deals, brokered in secret with little public scrutiny, could cost Texans hundreds of millions of dollars,” the report said.

“Unfortunately, every time these crypto miners shut down, it’s presented in the media as a positive thing that these crypto companies have done to help the web,” says Paul. “In reality, they’re actually profiting off of these deals that Texans had no buy-in on or were even made aware of until recently.”

Because crypto companies can sell energy back at exorbitant prices, Paul says that means the average Texan will see their energy bills go up. These deals are very profitable for crypto companies, but harmful for Texas residents.

If the fact that crypto mining pushes the grid to its limits during extreme weather events and extreme weather is only going to become more common goes unaddressed, Texas could soon be facing more deadly power outages. Crypto mining is only expected to grow and the grid may not be able to keep up.