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Several bitcoiners and Senator Ted Cruz (R-TX) believe bitcoin can power the Texas electric grid. “Much of the discussion about bitcoin sees cryptocurrency as an energy consumer,” Senator Cruz said at the Texas Blockchain Summit. “The perspective I’m suggesting is largely the opposite, that it’s a way to strengthen our energy infrastructure.”
Cruz’s concern is not minor: with heavy snowfall in February, the Texas electric system had to shut down to avoid a massive blackout, leaving more than 3 million people without power for several days. The Electric Reliability Council of Texas (ERCOT) made the decision because the consequences of an overload could affect the system’s infrastructure and further exacerbate the problem.
The outage was not limited to Texas and several homes in North Dakota, Arkansas, Louisiana, Mississippi, and northern Mexico were without power for several days while the damage caused by the outage was being repaired.
The extreme weather led Texans, unaccustomed to the cold, to turn on their heaters en masse, causing the system to overload, while a nuclear reactor in Houston remained shut down because its thermometer froze. Much of the system’s grid was not equipped to withstand such an unusual freeze.
The problems facing ERCOT
The credibility of the Texas electric system was called into question after the February snowfall, but Senator Ted Cruz seems to believe that cryptocurrency mining would not only not place an extra burden on the system, but could actually boost its performance.
The statement is controversial, to say the least, as Bitcoin mining is notorious for its high electricity consumption, which today accounts for 0.5% of global consumption. In some countries, Bitcoin miners have decided to build their own power plants.
“If [the system] has a moment where it faces a power shortage or an energy crisis, whether it’s a freeze or some other natural disaster where the power generation capacity goes down, it [Bitcoin mining] creates the ability to instantly shift that power to put it back into the grid,” Senator Cruz said.
However, some skeptics point out that Bitcoin mining is an extra burden on the already congested Texas power system, not an asset. “Miners are a strain on the grid, not a boon,” noted Ben Hertz-Shargel of Wood Mackenzie, a business intelligence consultant to the natural resources sector interviewed by CNBC.
In electric power, there is a tense balance where supply always has to match demand if blackouts are to be avoided. ERCOT, which is responsible for 90% of consumers in Texas, has to maintain this delicate balance that oscillates on transmission lines at 60 hertz, the standard frequency for transmission lines in the United States.
In electric power, if supply exceeds demand then the transmission frequency increases, but if consumers demand more power than can be generated, the frequency decreases.
Although ERCOT can deal with an unstable pulse for a few minutes, if the transmission line pulse remains below 59.4 hertz for more than 9 minutes, there is a risk that the machines will automatically start to disconnect from the system to avoid damage, which could cause multiple generating plants to go down in a matter of minutes.
The problem with ERCOT is that it is isolated from the rest of the American power grid, so the Texas power system cannot quickly call for extra electrical power if it sees an unusual spike in demand.
How can bitcoin power the Texas power grid?
Rockdale used to be the world’s largest aluminum factory, run by Alcoa, in south Texas in a far-flung rural region. The factory relied on a generating plant to power its business, because running an interconnection grid just to power the factory was too costly. When the plant closed in 2008, Alcoa left an unused capacity to generate electricity.
The plant remained unoccupied until two Bitcoin mining companies leased the space from Alcoa and brought the plant back online, this time using the electrical capacity to decrypt complex algorithms, approve Bitcoin transactions and issue new tokens to the ecosystem.
ERCOT has a free-market approach for regulating electric power transactions, however, this approach has come at the cost of remaining completely independent of the national grid, isolating Texas’ access to electric power from the national system.
While it is in the grid’s interest to reactivate old generating plants and have others built by private parties, it is in the bitcoiners’ interest to be able to connect to the grid to have more generating capacity.
The cost of shutting down the bitcoiners’ operation is relatively low compared to that of the industrial sector, and the sale of the extra energy to the electricity system at peak hours could, at least partially, replace the losses from stopping bitcoin mining.
The solution also comes as a win for the miners, since by needing extra energy from the system, and in seasons when consumption is relatively low, they could buy that energy from the grid, justifying the installation of networks in areas where otherwise it would not make economic sense. This would expand the generation capacity and connectivity of all of ERCOT.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica