Fred Thiel, CEO of Marathon Digital, claims that crypto miners participating in demand response schemes have helped to stave off blackouts in Texas this year. Mining facilities acted “like a capacitor,” he says, echoing the battery metaphor, allowing the grid to remain on an even keel.
Enthusiasm for the plan from Abbott and other crypto enthusiasts has been punctured by academics who claim 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 operates,” says Adrian Shelley, an energy policy expert and branch director of consumer advocacy group Public Citizen. Although crypto mines are unique in their ability to switch off at short notice (unlike a factory, which may take hours to shut down), Shelley says the case for placing the extra strain on the grid in the first place is full of holes. Abbott’s office did not respond to a request for comment.
Shelley argues it “doesn’t make sense” to pay miners for alleviating the strain they themselves are putting on the grid. In addition, much of the miners’ purchasing power gained directly from the grid is likely to decrease when demand spikes, as mining is no longer profitable under these conditions due to the rise in energy prices.
Hirs says there are millions of consumers already connected to the grid that would happily shut off their power in exchange for financial compensation, without adding additional strain to the grid or causing a price increase. Under the instruction of the Public Utility Commission of Texas, the state utilities regulator, ERCOT launched a pilot program earlier this month to investigate how regular 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 headed 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 grid could handle all that demand,” he says.
In its response to the letter, ERCOT explained it will not allow new mining facilities to power up if there is a risk of destabilizing the grid. But the operator also said it’s not in the business of predicting the impact of mining on the price of energy for consumers.
Doug Lewin, president of Stoic Energy, a Texas-based energy consultancy, is worried about a different problem: What happens if miners decide not to switch off their machines? While the price of bitcoin sits at $17,000 per coin (down 63 percent this year), miners stand to profit by shutting down. But if the price were to rise, a tipping point would be reached whereby continuing to mine becomes the more lucrative option.
Some mining companies, like Marathon, are contractually obligated to shut down when demand spikes. But if others choose not to, they would be competing with consumer demand and increasing the risk of a blackout, says Lewin, who argues 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 demanding they halt their operations if power reserves fall below 3GW. But in the meantime, he claims, the price of bitcoin would have to rise by ten times in order for the profit motive to collapse.
Despite objections—and questionable logic—under Governor Abbott, the message is clear: “Texas is open for crypto business.” And despite headwinds, Bratcher says the mining industry in Texas is still growing and ERCOT intends to forge ahead with plans to bring more facilities onto the grid. But as winter starts to bite, the Bitcoin battery experiment could soon get the ultimate stress test. Shelley says the “frightening” scale of Abbott’s plans will have the opposite of the desired effect, increasing the chance that Texas ends up in the dark once again.