Fred Thiel, CEO of Marathon Digital, claims that cryptominers participating in demand response programs helped prevent blackouts in Texas this year. Mining facilities worked “like a capacitor,” he says, echoing the metaphor of the battery, which allowed the power grid to balance.
Enthusiasm for the plan from Abbott and other crypto enthusiasts has been pierced by academics who argue that even the premise is flawed. The idea of using massive crypto mines to control energy demand is based on “misunderstandings and misrepresentations of the power grid and how it works,” said Adrian Shelley, an energy policy expert and affiliate director of consumer advocacy group Public Citizen. While crypto mines are unique in their ability to shut down in the short term (unlike a factory, which can take hours to shut down), Shelley says the reason for putting the extra strain on the power grid in the first place is full holes. Abbott’s office did not respond to a request for comment.
Shelley argues it is “nonsensical” to pay miners to relieve the pressure they themselves put on the power grid. In addition, much of the miners’ purchasing power taken directly from the grid is likely to decline when demand peaks, as mining is no longer profitable under these conditions due to the rise in energy prices.
Hirs says there are already millions of consumers connected to the grid who would be happy to cut off their power in exchange for financial compensation, without putting additional strain on the grid or causing a price increase. Commissioned by the Public Utility Commission of Texas, the utility regulatory agency, ERCOT launched a pilot program earlier this month to explore how ordinary people can support the reliability of the power grid, but according to Hirs, this should have been done years ago.
The tidal wave of crypto miners arriving in Texas has also caught the attention of lawmakers. In a letter addressed to ERCOT, a group of U.S. politicians led by U.S. Senator Elizabeth Warren (D-Massachusetts) expressed fears that crypto-mining will “increase strain on the state’s power grid.” Shelley shares the same concern: “The power grid can’t possibly keep up with all that demand,” he says.
In its response to the letter, ERCOT explained that it will not allow new mining rigs to start up if there is a risk of grid destabilization. But the operator also said it does not intend to predict the impact of mining on energy prices for consumers.
Doug Lewin, president of Stoic Energy, a Texas-based energy consultancy, is concerned about another issue: What happens if miners decide not to shut down their machines? While bitcoin’s price stands at $17,000 per coin (down 63 percent this year), miners can benefit by stopping. But 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 close when demand rises. But if others choose not to, they would 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 energy reserves fall below 3 GW. But meanwhile, 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 headwinds, Bratcher says the Texas mining industry is still growing and ERCOT plans to continue with plans to bring more facilities to the grid. But as winter begins to bite, the Bitcoin battery experiment could soon be given the ultimate stress test. Shelley says the “terrifying” scale of Abbott’s plans will have the opposite effect, increasing the likelihood that Texas will again be plunged into obscurity.