March 27, 2024
Texas Heatwave Forces Bitcoin Miners to Halt Operations Amid Grid Overload
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Texas Heatwave Forces Bitcoin Miners to Halt Operations Amid Grid Overload

Texas’s electricity grid recently went into overdrive due to the state’s extreme heat, putting emergency procedures into effect and mostly harming Bitcoin miners.

Numerous mining companies were forced to temporarily halt their mining activities due to the severe heatwave that the Lone Star State experienced. In addition to Marathon Digital, which claimed a 9% decline in Bitcoin productions, Riot Platforms grabbed headlines recently when it was revealed that it “had been paid” to shut down.

Due to a heatwave that scorched the state in August, the Electric Reliability Council of Texas (ERCOT) was compelled to implement emergency measures to guarantee that customers never went without electricity. 90% of the state’s grid load, or about 25 million Texans, receives their electricity from ERCOT.

The term “emergency procedures” refers to certain power users reducing (or switching down) their energy consumption, such as Bitcoin miners.

Bitcoin mining is frequently a mysterious and debatable activity. ASICs, specialized computers, plug into a variety of power sources and start competing to identify a randomized number. One computer discovers the number and is permitted to upload the most recent block of transactions to the Bitcoin blockchain once every 10 minutes, on average. At the moment, a miner of Bitcoin gets 6.25 BTC for every block they add to the network.

“To clarify, we are not getting paid to shut off,” stated Jason Les, CEO of Bitcoin mining company Riot Platforms.

Les stated, “The bulk of the credits we earned come from essentially trading power,” in reference to the $31 million in energy credits his company received from ERCOT. The CEO continued by saying that they have power contracts, and “by choosing not to mine,” they profit from the difference in price between the contract price and the market price.

The same is done by Iris Energy, another business. Les also mentioned ERCOT’s innovative use of ancillary services to control uncertainty and fluctuation on the grid.

ERCOT purchases ancillary services in the day-ahead market to equalize the grid’s anticipated supply and demand for power the next day and to address operational problems that may arise right away.

Les stated, “We participate in auxiliary services programs. It not only permits us to sell ERCOT the “right to control our load as they choose through the program.”

Riot and other companies’ actions are what Anthony Power, a mining analyst with Compass Mining, calls “the best strategy.”

He went on to say that Riot is able to do this because they employ power purchase agreements, which essentially let them mine for a set fee.

The miners will benefit financially from this as well. He stated that they may “either mine Bitcoin or reduce energy use when rates are high to sell it back to the grid.” In addition to being attentive to grid needs, this provides them with a better return than mining.

As Les further added, “ERCOT is a deregulated market where energy is traded.” This means that “High prices are a market signal that the grid needs power.” He concluded that “Like any market, it represents demand nearing supply.”

Image: Freepik

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