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Crypto Miners Headed To Texas Despite Vulnerable Power Grid

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EDITOR'S NOTE: Bloomberg reports that crypto miners are flocking to Texas. The outlet says, “An army of cryptocurrency miners heading to the state for its cheap power and laissez-faire regulation is forecast to send demand soaring by as much as 5,000 megawatts over the next two years.” While Texas is aggressively courting these people, it could cause a major problem with the already-weak power grid in the state. The demand for power from these miners could crash the entire system, or, at the very least, add to the cost of power for all other Texans. However, there could be good that comes for it for the grid if the miners follow all the rules and regulations. Time will tell what this means for Texas and the rest of the country.

Crypto miners with more than double the power demand of Austin are descending on the anti-regulation state.

Texas, already home to the most vulnerable power grid in the U.S., is about to be hit by a surge in demand for electricity that’s twice the size of Austin’s.

An army of cryptocurrency miners heading to the state for its cheap power and laissez-faire regulation is forecast to send demand soaring by as much as 5,000 megawatts over the next two years. The crypto migration to Texas has been building for months, but the sheer volume of power those miners will need — two times more than the capital city of almost 1 million people consumed in all of 2020 — is only now becoming clear.

The boom comes as the electrical system is already under strain from an expanding population and robust economy. Even before the new demand comes online, the state’s grid has proven to be lethally unreliable. Catastrophic blackouts in February plunged millions into darkness for days, and, ultimately, led to at least 210 deaths.

Proponents like Senator Ted Cruz and Governor Greg Abbott, both Republicans, say crypto miners are ultimately good for the grid, since they say the miners can soak up excess clean power and, when needed, can voluntarily throttle back in seconds to help avert blackouts. But it raises the question of what these miners will do when the state’s electricity demand inevitably outstrips supply: Will they adhere to an honor system of curtailing their power use, especially when the Bitcoin price is itself so high, or will it mean even more pressure on an overwhelmed grid?

“There’s nobody looking at the scale of potential investment in crypto and its energy demand over the next couple of years and trying to account for that in some sort of strategic plan,” said Adrian Shelley, director of the Texas office of the consumer advocacy and lobbying group Public Citizen, which has sharply criticized the vulnerabilities of the state’s unregulated power market.

Here’s what you need to know about Texas, cryptocurrency and the power grid.

Why Texas?

Texas is rolling out the red carpet for crypto miners as onetime leader China has banned the industry. Mining for crypto requires massive amounts of power, complicating Beijing’s efforts to curb greenhouse-gas emissions and shore up energy supplies ahead of the winter.

Miners setting up shop in the Lone Star State can often count on a 10-year tax abatement, sales tax credits and workforce training from the state, depending on where they are located and how many jobs they add. Even without formal incentives, the cheap power prices and the state’s hands-off policy toward business is often enough of a lure. 

Mammoth Miners

U.S. now leads in Bitcoin mining after Mainland China closed up shop

Source: University of Cambridge

Note: Data for Germany and Ireland may be significantly inflated due to redirected IP addresses via the use of VPN or proxy services.

The pitch is working: The grid operator Electric Reliability Council of Texas, or Ercot, will account for about 20% of the Bitcoin network globally by the end of 2022, up from 8% to 10% today, according to Lee Bratcher, president of the Texas Blockchain council. Right now, Ercot has somewhere between 500 and 1,000 megawatts of mining capacity, out of about 2,000 nationwide. The state grid will add another 3,000 to 5,000 megawatts of mining demand by the end of 2023, he said. 

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