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?