Playing the state’s energy market has become more profitable than mining bitcoin
www.economist.com
Playing the state’s energy market has become more profitable than mining bitcoin
www.economist.com
Why Texas Republicans are souring on crypto
Playing the state’s energy market has become more profitable than mining bitcoin
Photograph: Getty Images
Aug 27th 2024|ROCKDALE, TEXAS
Cryptocurrency is now campaign talk, thanks to
Donald Trump. Last month, in their party platform, Republicans announced plans to bring an end to the “unAmerican crypto crackdown” and pledged to “defend the right to mine Bitcoin”. At a bitcoin conference in Nashville days later, the biggest such get-together in the world, Mr Trump vowed to make America the “crypto capital of the planet”.
Unlike most campaign promises this one ought to be easy to keep—because it is already true. After China
banned bitcoin in 2021, crypto-miners went looking for refuge. In Texas they found everything they needed: cheap power, an abundance of land, low taxes and a libertarian ethos that matched their own. Three years on, America is home to more bitcoin mining than anywhere else, and Texas has more than most other states combined. But soon the Lone Star State could drive them out.
An hour’s drive north of Austin, Riot Platforms has converted the site of an abandoned aluminium-smelting plant into the world’s biggest bitcoin mine. Seven steel buildings house 100,000 “miners”, computers the size of a toaster that compete in a mathematical race to guess codes that award their owners bitcoin. Row upon row of miners are submerged in tanks of nonconductive oil to cool them. Dead crickets float on the surface, caught between tentacles of wires that feed energy to the machines.
Pierre Rochard, head of research at Riot, says it costs roughly $30,000 of electricity to mine one bitcoin and last year Riot mined nearly 7,000 (implying an annual cost of some $200m). And Riot is just getting going. The company is building a second plant in Corsicana, south of Dallas, that will be double the size.
The ambitious plan belies a new growing-pain for the industry. This summer Texas’s lawmakers—some of the most conservative in the nation—started to show signs of turning against crypto. At a committee hearing in June the Electric Reliability Council of Texas (ERCOT), the grid operator, warned that demand for energy could nearly double before 2030. An influx of people moving to Texas, harsher winter storms and hotter summers are already straining the grid and causing blackouts in cities, as Hurricane Beryl did in Houston last month. But an onslaught of new data centres, including ones for bitcoin mining and artificial intelligence, are expected to account for half the surge.
In response to ERCOT’s caution Dan Patrick, the lieutenant-governor, criticised the mining industry for not creating enough jobs relative to the amount of energy it sucks. “It can’t be the Wild Wild West of data centres and crypto miners crashing our grid and turning the lights off,” he wrote on X. State senators wondered out loud how they could get miners to leave. “[There are] too many pigs at the table who just run out of food,” said Donna Campbell, a Republican who represents seven counties in the hill country. “If they don’t come with their own trough full of food, can we just say no?”
Just saying no to crypto would be an ideological swerve for Texas. When running for governor in 2014 Greg Abbott took campaign donations in bitcoin before it was cool. He has since fervently embraced miners. After Uri, the winter storm in 2021 that left 4.5m Texans without power and killed nearly 300 people, he looked to crypto as a tool to make the grid more robust. Bringing more large loads onto the grid would incentivise power stations to produce more electricity and keep the cost of energy low, he reckoned. That year Mr Patrick created a working group to “develop a master plan for the expansion of the blockchain industry in Texas”.
The art of the deal
Around that time many crypto miners, including Riot, signed contracts with energy suppliers that locked them into fixed rates for up to a decade. Several years on, that decision looks clever. Unlike steel factories or paper mills, bitcoin miners can temporarily shut down without harming supply chains (because, although they say bitcoin is “not just magic internet beans”, there is no product that needs to get to market). That allows them to take advantage of two emergency schemes.
On the hottest and coldest days, when demand for electricity peaks and the price soars, the bitcoin miners either sell power back to providers at a profit or stop mining for a fee, paid by ERCOT. Doing so has become more lucrative than mining itself. In August 2023 Riot collected $32m from curtailing mining and just $8.6m from selling bitcoin.
The Tech Transparency Project, a non-profit organisation based in Washington, DC, accuses miners of acting as an energy-arbitrage business in disguise, holding Texas “hostage” and wasting taxpayer dollars. Their ties to China make them more dubious. But the industry is adamant that it is a stellar corporate citizen and critical to the grid’s health. By acting as “dimmer switches”, mines offer ERCOT flexibility at a price that no one else can match, says Lee Bratcher of the Texas Blockchain Council, an advocacy group. Riot reckons the industry is being unfairly targeted and that replacing mines with batteries would cost the state even more.
Yet a business that benefits financially from the state’s crisis and has lobbied against power-market reforms may no longer be the governor’s first choice to stabilise a grid facing mounting pressure. These days, assuring anxious Texans that their lights will stay on when the weather gets bad is a top priority, says Brian Korgel, the head of the Energy Institute of the University of Texas at Austin. If Texans blame bitcoin miners, rightfully or not, their leaders will too, he predicts.
Last year a bill to restrict the miners from taking part in the “demand-response” scheme passed in the Texas Senate but stalled in the House. Crypto insiders expect lawmakers to bring more such “bad bills” come January. Meanwhile Brian Morgenstern, Riot’s head of public policy, says his team is “wearing out the leather on our shoes going office to office” to persuade politicians to let them stay. He believes that Mr Trump will bring a “sea change” if elected. After all, Mr Abbott is reportedly pining for a cabinet position, and Mr Patrick, the governor’s second-in-command, is a known Trump yes-man. It is surely not in their interests to chase out Mr Trump’s new favourite industry.
www.rollingstone.com
it's about getting her over the finish line, because she's not donald trump, but i'm not gonna sit around pretending she's something she's not. i didn't vote for her, i would not have voted for her, and this is exactly why
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