Bitcoin Mining Presents Radical Solution in Texas Power Network
By Landon Manning
As climate change-induced heat waves present an exceptional crunch on power grids worldwide, an opportunity arises to make lemonade from lemons using the world’s premiere decentralized internet currency.
The issue of electricity has been a contentious one in the Bitcoin (BTC) community for many years, as the blockchain’s trustless and decentralized nature can only be maintained through proof-of-work mining; in other words, large numbers of computations must be run to produce new coins so that the infrastructure of the entire project remains sound. This has been a particularly salient issue for many legislators, such as those in New York who have been waging a sustained campaign to eliminate fossil fuel-based bitcoin mining in the state.
This has become an especially salient issue for the state of Texas, which has dramatically risen to become one of the main bitcoin mining capitals of the world after China formally banned bitcoin, causing the industry and capacity built there to scatter worldwide. This has led to new growth in local economies as bitcoin fortunes continue to rise, but now a particularly hot summer has brought the whole arrangement into jeopardy.
Record heat waves, and the accompanying demand on power grids by air conditioning, have shown the degree to which the state is not prepared for these disasters. The Electric Reliability Council of Texas (ERCOT) has been struggling, with its CEO openly admitting that heat exceeds all estimation. The electrical grid managers have had to take drastic measures to prevent blackouts, even including the controversial measure of remotely tampering with homes’ thermostats.
Naturally, this has led to the view that the state is unable to handle the electrical demands of the bitcoin mining industry as it exists today, let alone for the business to expand even further into the future. On July 13, this issue made headlines as ERCOT formally requested that miners cease operations, and “nearly all” of these, over 1,000-megawatts worth, complied with this request. ERCOT estimates that such a curtailing represents more than 1% of the entire grid’s capacity, which is now available for the consumers. This seems like a significant setback for the potential future of a Texan Bitcoin industry, but there might be a radical solution between the lines.
Blake King, avid Bitcoiner and former ERCOT employee, published his description of a new opportunity for miners in the region, based on his in-depth interior knowledge of the unusual organization that literally powers the Lone Star State. Essentially, the electrical grid is entirely privatized, with ERCOT itself being a nonprofit corporation tracing its roots to a commission of power plant providers, rather than an administration either established or run by either state or federal government. In fact, the grid does not send any electricity over state lines, and as a result, is largely exempt from federal regulation.
King’s solution relies on the ersatz method that this corporation uses to determine power generation: to make a long story short, estimated power needs are determined in advance, and various generators make “bids” to be placed online on any given day, with a cycle of various types of electricity employed in turn to meet various electrical demands that companies put in. One of the great problems in electricity generation is the concept of “peak demand.” Essentially, power that goes to your home — or any other output — is “live,” traveling down wires and through transformers from the place it is originally generated. All forms of “storing” the extra energy produced are hideously inefficient, with batteries not being sufficient for the generated power or losing stored energy over time, while other forms of storage often require massive infrastructure.
In short, rather than letting the extra energy be wasted, or possibly employed in several proposed minor industries, King suggests that miners should be directly plugged into sites of electricity generation. Bitcoin can be mined on-site with portable electrical equipment, requires zero raw materials except for the electricity which would have been wasted anyway, and miners are used to traveling far in search of cheap electricity. In other words, these miners could be spread all over the state, looking for electrical plants that are “off-grid” during low-demand times and finding an immensely profitable way to dispose of this additional energy.
Plans for mining bitcoin outside “peak demand” hours could be implemented more or less anywhere that electricity is produced, but Texas’ particular “bidding war” system that sees generators sporadically taken entirely offline could be a particular use case for this system. Although it seems that the power grid will be at maximum capacity as the heat waves persists, there will be plenty of opportunity in the future for Bitcoin outside peak demand hours. With bitcoin becoming a profitable and portable way to invest excess energy, a bold (and currently unstable) experiment in Texas could become a worldwide model.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
