Row Erupts Over Texas’ Bold Bitcoin Battery Plan
Fred Thiel, CEO of Marathon Digital, claims that crypto miners participating in demand response schemes have helped avert blackouts in Texas this year. Mining facilities acted “like a capacitor,” he says, echoing the battery metaphor, keeping the grid on an even keel.
Enthusiasm for the plan from Abbott and other crypto enthusiasts has been punctured by academics who argue even the basic premise is flawed. The idea of using huge crypto mines to control energy demand is based on “misunderstandings and misrepresentations of the grid and how it works,” said Adrian Shelley, an energy policy expert and branch director of the consumer advocacy group Public Citizen. Although crypto mines are unique in their ability to shut down at short notice (unlike a factory, which can take hours to shut down), Shelley says the case for putting the extra load on the network is fundamentally flawed. Abbott’s office did not respond to a request for comment.
Shelley argues that it “doesn’t make sense” to pay miners to alleviate the load they themselves put on the network. In addition, much of the miners’ purchasing power taken directly from the grid will likely decline as demand increases, as mining is no longer profitable under these conditions due to the increase in energy prices.
Hirs says there are millions of consumers already connected to the grid who would be happy to turn off their electricity in exchange for financial compensation, without adding extra load to the grid or causing a price increase. Under direction from the Public Utility Commission of Texas, the state utility regulator, ERCOT launched a pilot program earlier this month to explore how ordinary people can help support grid reliability — but Hirs says this should have happened years ago.
The flood of crypto miners arriving in Texas has also attracted the attention of lawmakers. In a letter addressed to ERCOT, a group of US politicians led by US Senator Elizabeth Warren (D-Massachusetts) expressed fears that crypto mining will “add to the stress on the state’s power grid”. Shelley shares the same concern: “There’s no way the web can handle all that demand,” he says.
In its response to the letter, ERCOT explained that it will not allow new mining facilities to turn on if there is a risk of destabilizing the grid. But the operator also said it is not about predicting the impact of mining on energy prices for consumers.
Doug Lewin, president of Stoic Energy, a Texas-based energy consulting company, is concerned about another problem: What happens if miners decide not to shut down their machines? While the price of bitcoin is at $17,000 per coin (down 63 percent this year), miners will profit from shutting down. However, if the price were to rise, a tipping point would be reached where continuing to mine becomes the more lucrative option.
Some mining companies, such as Marathon, are contractually obligated to shut down when demand increases. But if others choose not to, they will compete with consumer demand and increase the risk of a blackout, says Lewin, who argues that regulation is needed to mitigate this worst-case scenario.
Bratcher of the Texas Blockchain Council says he expects ERCOT to ask all miners to sign agreements requiring them to cease operations if power reserves fall below 3GW. But in the meantime, he claims, the price of bitcoin would have to rise tenfold for the profit motive to collapse.
Despite objections – and questionable logic – under Governor Abbott, the message is clear: “Texas is open to crypto business.” And despite the headwinds, Bratcher says the Texas mining industry is still growing and ERCOT intends to move forward with plans to bring more facilities online. But as winter begins to bite, the Bitcoin battery experiment may soon face the ultimate stress test. Shelley says the “frightening” scale of Abbott’s plans will have the opposite of the desired effect, increasing the chance of Texas falling back into the dark.