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Home Crypto News & Analysis Bitcoin

Texas lawmakers change tune on bitcoin mining amid concerns over network

by Thomas Muller
June 16, 2024
in Bitcoin
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Texas lawmakers change tune on bitcoin mining amid concerns over network
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Few states or countries have been more welcoming to cryptocurrency miners than Texas. Now lawmakers are expressing more skepticism.

DALLAS — Texas has long embraced the cryptocurrency mining industry, even taking steps to encourage the operation.

Sen. Ted Cruz called the state “an oasis for Bitcoin mining.” Governor Greg Abbott began accepting campaign donations in Bitcoin in 2015, when a single coin sold for about $250. Today, the cryptocurrency is worth $66,000 per token.

But, in a departure from recent tradition, some lawmakers expressed skepticism about cryptocurrency’s societal value during a Senate committee meeting this week.

“We were a little surprised by the tone and thrust of the committee hearing,” said Lee Bratcher, president of the Texas Blockchain Council which advocates on behalf of the cryptocurrency industry.

The Senate Business and Commerce Committee heard hours of testimony Wednesday about the impact of cryptocurrency mining on Texas’ power grid. The subject is among those that Lt. Gov. Dan Patrick asked senators to research between legislative sessions.

The meeting comes two months after ERCOT, the state’s grid operator, published a new forecast for energy demand.

In 2023, ERCOT predicted that consumption would rise to 110 gigawatts by 2030. In 2024, ERCOT predicts that consumption will increase to 152 gigawatts by 2030.

The current demand record, set in August 2023, is around 85 gigawatts.

“This actually almost doubles the peak demand of the ERCOT network in about six years,” ERCOT CEO Pablo Vegas told committee members.

The numbers should be taken with a grain of salt. Some proposed projects that drove the demand forecast will not come to fruition, and ERCOT expects to add significant electricity supply in the same time frame.

Even if demand doesn’t balloon in the way predicted, energy analysts say there will be massive growth requiring new generation capacity.

Vegas told the committee that supercomputers that mine cryptocurrencies, store data and contribute to artificial intelligence will account for about half of the forecast increase in demand. A single “AI Google search” requires between ten and 30 times more energy than a traditional Google search, Vegas added.

“Texans will ultimately pay the price,” Patrick said in a statement. “I’m more interested in building the network to serve customers in their homes, apartments and normal businesses and to keep costs as low as possible for them instead of for many niche industries that have massive power needs and produce few jobs.”

Lawmakers on Wednesday focused their discussion on cryptocurrency mining, only occasionally mentioning data centers and artificial intelligence. Those facilities present a unique problem that they will have to account for: unlike cryptocurrency mines, data centers and AI supercomputers cannot “downgrade” operations during times of peak electricity demand.

Cryptocurrency miners in Texas are now responsible for about 2.6 gigawatts of demand, enough to power the city of Austin. When grid conditions tighten, demand typically drops to about 200 megawatts, an ERCOT official told the board.

Bratcher said about two-thirds of cryptocurrency operations reduce electricity consumption on their own during lean days to save money.

But Texas pays other miners to step down and free up electricity, an agreement the state does not directly extend to homeowners and other small consumers. Patrick noted that cryptocurrency operations can make more money by slowing down operations during periods of scarce electricity supply than by mining Bitcoin.

“Why are the cryptocurrency miners getting such a sweetheart deal when we were first here?” asked energy economist Ed Hirs.

“The cryptocurrency miners work as a parasitic load,” Hirs continued. “They are the tapeworms of the ERCOT grid.”

The 2030 demand forecast aims for cryptocurrency mining to account for around 11 gigawatts, around 7% of the 152 gigawatt demand forecast.

Most debates on the issue can come down to whether a person believes that cryptocurrency provides value to society.

Bratcher argues that people who don’t believe in Bitcoin can still appreciate the mining operations because they “soak up excess energy, especially in West Texas, where we have more energy than demand.”

“They also absorb energy out of hours, overnight and in shoulder months … when we actually need additional demand to spur more generation,” he continued.

Abbott echoed that sentiment, arguing that the mining operations’ consistent demand could encourage companies to build more power plants and lure them into Texas’ electricity market. In theory, the cryptocurrency mines could reduce demand during peak times and those new power plants would continue to generate electricity for other uses.

But Texas’ electricity demand will soar even if all Bitcoin mining is halted because the state’s population is growing rapidly.

Lawmakers have indicated their intention to return to the issue of cryptocurrency when the legislature reconvenes.

“I’m not sure how the legislature is going to handle it,” Hirs said. “Can you put the genie back in the bottle?”

Disclaimer for Uncirculars, with a Touch of Personality:

While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.

No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.

And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.

Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!

UnCirculars – Cutting through the noise, delivering unbiased crypto news

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Thomas Muller

Thomas Muller

As the regulatory landscape shifts, Thomas keeps you abreast of legal developments and government actions impacting the crypto industry worldwide. His expertise in fintech regulations ensures you stay informed about compliance requirements and tax implications.

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