Ted Cruz, Greg Abbott, and the Magical Thinking About Bitcoin’s Ability to Fix Texas’ Grid

This week, Texas Gov. Greg Abbott said he’ll make Texas the primary state for bitcoin. What’s extra, he espoused the wonders of crypto mining as a option to prop up the state’s flailing electrical grid, a view Cancun-loving Sen. Ted Cruz additionally shared at a bitcoin mining convention final week. It’s a seductive story: magical web cash saving the state from one other lethal blackout. But the truth is rather more sophisticated.

A bunch of very on-brand-looking bitcoin miners descending on the governor’s mansion in Austin on Wednesday. That identical day, Abbott announced a plan to drop cryptocurrency machines into greater than two dozen grocery shops. Apparently, the assembly went properly.

“The Texas grid will be stronger & more resilient as a result of flexible loads like BTC mining that generate demand but can turn off in seconds during peak demand,” Lee Bratcher, president of the Texas Blockchain Council, said of the meeting on Twitter.

Cruz parroted a really related line final week. “Because of the ability of bitcoin mining to turn on or off instantaneously, if you have a moment where you have a power shortage or a power crisis, whether it’s a freeze or some other natural disaster where power generation capacity goes down, that creates the capacity to instantaneously shift that energy to put it back on the grid,” he said on the Texas Blockchain Summit.

This concept that bitcoin can “strengthen the grid’s resilience,” as Cruz went on to say, could be welcome in a state the place the grid failed in spectacular trend throughout a February chilly snap and repeatedly strains to satisfy demand throughout crushing summer season warmth waves. But in actuality, bitcoin isn’t going to avoid wasting the state’s vitality infrastructure.

Texas’ energy grid is absurdly deregulated. It’s run like an public sale: Generators set bid costs to promote energy to the grid, and the Electric Reliability Council of Texas, accepts the bids beginning with the bottom after which working upward till it has sufficient energy to satisfy demand. More bitcoin mining in Texas would improve demand for electrical energy. Except as a substitute of working air-con in a warmth wave, that demand is for one thing completely nonessential exterior the circle of bitcoin evangelists. For an already harassed grid, that looks as if a nasty thought.

The thought Abbott and Cruz are pushing is that the flexibility for non-essential vitality customers to go offline when wanted might be useful. But the issue in Texas wasn’t simply elevated demand; it was additionally a complete lack of preparation as a consequence of deregulation. There are only a few guidelines for producers, so profit-making is the operative precept, which was a key purpose the February blackouts occurred. Companies didn’t weatherize their infrastructure in an effort to maintain prices down and income excessive. Bitcoin miners do nothing to resolve that challenge.

It’s additionally unclear why cryptocurrency miners would ever comply with shut down operations until they have been provided a lot of cash to take action. Some crypto miners are, certainly, scoring wild profits by going offline throughout peak demand and promoting their allotted vitality provide again to the grid. That’s nice for the bitcoin miners, nevertheless it might be terrible for everybody else in the event that they need to shoulder that value. In February, turbines introduced extra energy on-line however charged outrageous costs. In the tip, odd individuals needed to pay for it within the type of five-figure vitality payments for the month.

How a lot cash would it not take to persuade miners to close down operations on condition that being on-line is the one option to earn a living? ArsTechnica did a back-of-the-envelope calculation primarily based on the vitality it takes to mine a bitcoin and its worth versus the utmost payment energy plant operators can cost ERCOT:

But brushing these considerations apart, bitcoin miners would doubtless demand much more than the present $9,000 per MWh cap. One bitcoin at the moment sells for $57,000, and to crunch the numbers to win that one bitcoin, mining rigs draw just below 0.285 MWh, primarily based on Digiconomist estimates. In different phrases, for bitcoin miners to be keen to contribute to the grid, wholesale electrical energy costs must hit $206,000 per MWh, or almost 23 instances higher than costs throughout the February chilly snap. Those $10,000 payments would flip into $230,000 payments.

There’s one other downside with bringing extra crypto to Texas: It might give the state an excuse to maintain soiled energy on-line. In Upstate New York, as an illustration, an offline coal plant was introduced again to life to run on pure gasoline and mine bitcoin (and sometimes generate energy for the grid). For a state the place fossil gasoline pursuits are so entrenched, you possibly can wager coal, oil, and gasoline producers and their buddies in authorities will take any alternative to maintain soiled vitality sources alive even when it fries the local weather.

It’s clear that Texas’ grid wants assist, however bitcoin isn’t the reply. More democratic management and preparation mixed with much less profit-seeking and reliance on fossil fuels are what the grid wants. And bitcoin gained’t usher any of that in.