Texas lawmakers sour on bitcoin mining, fearing huge power needs

Alarmed by projections of how much electricity Texas could need by 2030, lawmakers soured on the growth of cryptocurrency mining after years of welcoming the industry to the state.

The Electric Reliability Council of Texas, the state’s grid operator, said in April that Texas could need 152 gigawatts of electricity by the end of the decade, up from a record 85.5 gigawatts set by the grid last summer. This forecast is about 40 gigawatts more than ERCOT expected last year, with about 60% of that new demand coming from potential cryptocurrency mines and data centers, regulators told lawmakers this week during legislative hearings on the power grid.

The Permian Basin alone is expected to see 24 gigawatts of additional power demand, about half from electrification from oil and gas operations and half from data centers and cryptocurrency mines, ERCOT CEO Pablo Vegas told lawmakers.

This unprecedented growth could further strain Texas’ power grid and will require significant new infrastructure, such as transmission lines to move electricity across the state. Lawmakers, including Lt. Gov. Dan Patrick, have expressed concern that Texas residents will end up bearing the cost.

“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,” wrote Patrick in a post on X. “We want data centers, but it can’t be the Wild Wild West of data centers and crypto miners crashing our grid and turning off the lights.”

Transmission costs account for 30% to 40% of the average customer’s electric bill each month, according to Courtney Hjaltman, CEO of the Office of Public Utility Council, which represents residential and small commercial customers in rate cases. That portion of the bill has risen as utilities upgrade equipment to withstand extreme weather and build new lines to accommodate demand growth.

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José Menéndez, D-San Antonio, said he doesn’t want Texans, especially those on fixed incomes, to absorb the cost of network upgrades needed for businesses like bitcoin miners.

“I see something inherently unfair in the fact that we’re asking everyday Texans who make tough decisions — costs, grocery stores — to pay for the ability for other people to make even bigger profits, especially as they move from place to place to place and to taking advantage of the low cost of Texas energy,” Menéndez said.

Lawmakers repeatedly expressed shock at how much power Texas could need in six years during Wednesday’s Senate Business and Commerce Committee hearing, with Sen. Robert Nichols, R-Jacksonville, who called it “the most troubling thing I’ve heard this week.”

“Even in the back hallway, you couldn’t tell me?” Sen. Charles Schwertner, R-Georgetown, asked after ERCOT Chief Operating Officer Woody Rickerson said the grid operator was not allowed to factor in potential sources of power demand that did not have a signed contract before this year.

Sen. Nathan Johnson, D-Dallas, said the new demand projections point to the arrival of “a whole new economy really in Texas, and certainly a new grid.”

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“These are big policy implications. Every assumption we have made in the last four years is now being called into question again. All of them,” he said.

However, cryptocurrency miners have been adamant that they are a tool for, rather than a threat to, grid stability. This is because they regularly reduce electricity consumption when power prices are high and it is economically inefficient to mine cryptocurrencies, reducing demand when the grid is most stressed. ERCOT also has so-called demand response programs that pay large electricity users, including cryptocurrency miners, to reduce consumption when the grid is stressed.

“We are the lowest risk price signal to bring in new generation,” Brian Morgenstern, head of public policy for Riot Platforms, a bitcoin mining company with facilities in Rockdale and Corsicana, told state senators. “We’re the most flexible, we’re the cheapest in terms of marginal cost, to give that power back when it’s needed, or more accurately, to give ERCOT control of our load.”

About 40,000 megawatts of so-called large flexible loads, which include bitcoin mines, have submitted applications to connect to the ERCOT network, Lee Bratcher, president of the Texas Blockchain Council, an industry association, told lawmakers. But much of it is “phantom charging,” he said.

“Very little of that will come to fruition,” Bratcher said. “A data center, a bitcoin mining data center or many others, will go in and apply for multiple sites, and that’s how you get the congested queue. We as an industry also support pushing out that burden.”

Yet Sen. Rep. Donna Campbell, R-New Braunfels, asked regulators whether Texas could stop the influx of data centers because of their potentially massive electricity needs.

“Can we just say, ‘No, you can’t come?'” Campbell asked. “Too many pigs at the table that only touch food. If they don’t come with their own bowl full of food, can we just say no?”

In response to a similar question during the House of Representatives’ State Affairs Committee hearing earlier this week, ERCOT’s Vegas said the grid operator would prefer to have more insight into cryptocurrency mining operations. Legislation has been passed to require crypto-mining facilities to register with ERCOT, but some are unlikely to do so until rules on how they must register are imposed, he said.

ERCOT is aware of about 2,000 megawatts of crypto-mining demand, but there could be more than 4,000 megawatts or more in Texas, Vegas said. According to ERCOT, one megawatt can power about 250 homes in Texas during the hottest summer days.

“To your question about legislation to put a moratorium on crypto mining, what would be more helpful for ERCOT is to have more visibility into what these big loads are doing. A good place to start might be to be sure makes us able to track and possibly even control the piles of cryptos,” said Vegas.

Bitcoin is one of many cryptocurrencies whose mines are essentially bank upon bank of computers competing to solve complex math problems and receive bitcoin as a reward. Running these computers and the cooling they require consumes large amounts of energy. According to one estimate, a single bitcoin transaction uses the equivalent of 26 days of the average American household’s power consumption.

Texas has emerged as the bitcoin mining capital of the world by luring companies with the promise of cheap electricity to power their operations. As of July, mines in Texas totaled 28.5% of the nation’s bitcoin network’s computing power, more than any other state. Governor Greg Abbott has been a vocal advocate for the cryptocurrency industry in Texas in recent years. Patrick, meanwhile, appointed several members to a working group in 2021 to develop a plan for expanding the blockchain industry in Texas.

While less the focus of lawmakers’ concerns this week, the rise of artificial intelligence is another important source of expected power demand as those companies’ data centers look for networks to join. The amount of energy required to run an AI search is between 10 and 30 times the power required for a traditional Google search, ERCOT’s Vegas told lawmakers.