Texas Electrical Grid Operator Paid Millions of Dollars to Cryptomining Companies to Curtail Operations During Peak Demand
“Bitcoin miners make money from mining that produces major strains on the electric grid: and during peak demand when the profitability of continuing to mine decreases, they then collect subsidies in the form of demand response payments when they shut off their mining operations and do nothing.”
Washington (October 12, 2022) — Senator Edward J. Markey (D-Mass.) today joined Senators Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.), and Dick Durbin (D-Ill.) and Representatives Al Green (D-Texas), Katie Porter (D-Calif.), Jared Huffman (D-Calif.), and Rashida Tlaib (D-Mich.) in sending a letter to the Electric Reliability Council of Texas (ERCOT), the operator of Texas’ electrical grid, seeking information about ERCOT’s subsidies for cryptominers, and about how cryptomining is impacting climate change, the stability of the energy grid, and consumers. A previous investigation by the lawmakers revealed that cryptomining uses an exorbitant amount of energy, and the lawmakers are now expressing concerns about ERCOT’s payments to cryptominers during periods of peak energy demand – payments that can comprise almost 10 percent of a cryptominer’s annual revenue.
Cryptomining companies are flooding into states like Texas, a “deregulated safe harbor” that has been courting cryptominers, and are using significant amounts of energy:
While businesses and consumers are asked to voluntarily conserve power during times of peak demand, some companies – including cryptominers – have enrolled in ERCOT programs under “demand response” agreements, that pay them for curtailing their operations during these times. The lawmakers note that taking ERCOT’s payout rather than continuing to mine for crypto due is often driven by economic incentives: “In simple terms, the Bitcoin miners make money from mining that produces major strains on the electric grid: and during peak demand when the profitability of continuing to mine decreases, they then collect subsidies in the form of demand response payments when they shut off their mining operations and do nothing,” wrote the lawmakers.
Riot Blockchain, the largest cryptominer in Texas, made around $9.5 million from ERCOT’s demand response curtailment program during the July 2022 heat wave – more than the $5.6 million it made from actually selling Bitcoin that month. One report found that in coming years, Texas may pay miners up to $170 million annually through these programs – as climate change that cryptomining is contributing to will further exacerbate extreme weather, creating a feedback loop resulting in further strain and more payouts to cryptominers.
“Cryptomining is adding significant demand to an already unreliable grid, ‘pos(ing) enormous challenges to the transmission and distribution system and to prices’ and contributing to the global climate crisis. Yet at the same time, cryptominers benefit from huge ERCOT subsidies in the form of demand response agreements that come at the expense of ratepayers and establish ‘misaligned incentives between crypto-asset miners and grid operators,” concluded the lawmakers.
The lawmakers are calling on ERCOT to detail the current and projected energy consumption of cryptomining in Texas, the power purchasing and curtailment agreements ERCOT currently has with cryptomining companies, and the impacts of cryptomining’s energy use on the electricity costs to consumers and small businesses, by October 31, 2022.