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October 14, 2021 10:02 pm

Ted Cruz Says Bitcoin Mining Can Fix Texas' Crumbling Electric Grid

An anonymous reader quotes a report from Motherboard: Texas' energy grid has problems. Those issues were laid bare this past winter when a storm put the state in a deep freeze, causing blackouts for millions and killing hundreds of people. Sen. Ted Cruz told a cryptocurrency conference in Austin last week that he believes the state's Bitcoin mining boom could repair its floundering energy grid. In a fireside chat at the Texas Blockchain Summit on Oct. 8, the Republican senator expressed his faith that the mass buildout of crypto mines in the Lone Star State could add additional energy capacity to the state's grid in the event of blackouts or power shortages. "Because of the ability to 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," Cruz told conference attendees. Bitcoin mines, which typically consist of rooms full of specialized computers that churn numbers all day in search of the answer to a puzzle that creates the next block on the blockchain, are notorious for their energy use. Bitcoin mining is well-known to use more energy than many countries and corporations, and it's designed to become more difficult (and thus use more energy) as more miners plug into the network in search of profits as the price of Bitcoin increases. But in the event that the grid is being overburdened, these mines are essentially industrial energy consumers that can shut down instantaneously, freeing up additional grid space for the heating and cooling of homes, hospitals, and other critical infrastructure. Already, some miners in Texas are making a killing by shutting down during such times and selling their contracted power supply back to the grid. Texas is the perfect candidate for this setup, Cruz said, and Bitcoin mining could play "a significant role [in] strengthening and hardening the resilience of the grid." Tim De Chant from Ars Technica says the numbers and potential incentives that Sen. Ted Cruz touts "just don't add up." Here's why he thinks Cruz is wrong: First, large bitcoin-mining operations use hundreds or thousands of powerful computers, which create a demand for power. If power plants can profitably mine bitcoin using the electricity they generate -- and there are examples of that already -- it stands to reason that bitcoin mining could create enough demand that investors would be enticed to build new power plants. Those plants could theoretically be tasked with providing power to the grid in cases of emergency. At first glance, the argument holds up. But if you dig into it, even just a bit, things quickly fall apart. For one, the blackouts during Texas' February cold snap happened because power companies failed to winterize their generators, whether they were natural gas, coal, nuclear, or wind. Lives were at stake, and yet the companies didn't prepare for the worst. Unlike power plants that serve the grid, bitcoin mining isn't critical infrastructure -- no one dies if a crypto data center shuts down. Plus, bitcoin miners are in the game first and foremost for the money, and they would be loath to spend extra cash to winterize their operations. But let's say the power stays on but demand surges. In that case, bitcoin miners would be unlikely to offer their generating capacity to the grid unless they were sufficiently compensated. Texas already has a system like that in place, offering generators a premium for bringing additional power online during shortages. During the February cold snap, wholesale electricity prices surged to $9,000 per MWh, the maximum allowed by law, leading to electricity bills as high as $10,000 for some people. One bitcoin currently sells for $57,000, and to crunch the numbers to win that one bitcoin, mining rigs draw just under 0.285 MWh, based on Digiconomist estimates. In other words, for bitcoin miners to be willing to contribute to the grid, wholesale electricity prices would have to hit $206,000 per MWh, or nearly 23 times greater than prices during the February cold snap. Those $10,000 bills would turn into $230,000 bills. [...] At today's prices, the power plants that Ted Cruz is imagining would cost over $50 billion to build. At that price, there are probably more effective ways to stabilize Texas' grid.

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