“A lot of the supply chain issues that were strong during the Covid times are not necessarily a bottleneck factor anymore.” said Matthew Kimmell, digital asset analyst at CoinShares. “What may be a limitation is just their cash on hand.”
Energy costs for miners have been high throughout the year due to Russia’s invasion of Ukraine and heat waves across Texas in the summer. The Federal Reserve’s tightening of monetary policy and implosions of major crypto firms sent Bitcoin prices down more than 60% this year.
After China banned crypto miners last year, Texas sought to fill the gap as a way to add fuel to the state’s fast-growing economy. But because mining hinges on power consumption, the wave of new demand threatens to stress a grid still trying to recover from failures during an extreme winter storm in February 2021 that left millions in the dark for days and more than 200 people dead.
Governor Greg Abbott has touted mining as a way to aid the grid because machines can be quickly ramped down during periods of stress and ramped up to soak up excess wind and solar generation that would otherwise be wasted. The ability to reliably swing output from such large amounts of demand would be a boon, however the rules that would require miners to act a certain way under certain market conditions are still being debated. Critics are concerned that existing practices will enable crypto miners to dodge costs tied to upgrade the grid to accommodate all their demand to consumers.
Abbott’s office did not respond to requests for comment.
Texas has about 1.5 gigawatts of crypto mining capacity, mainly Bitcoin, operating with about 37 gigawatts vying to connect to the state grid as of Oct. 20, according to the most recent data available from the Electric Reliability Council of Texas. That queue has more than doubled in six months.
While the queue indicates growing power demand from miners earlier this year, the amount may be inflated. Power brokers and mining companies could have filed multiple applications for the same mining site as those applications do not require deposits.
Some applications may not even come through because those with little experience in Bitcoin mining are likely to abandon their plans, said Ethan Vera, chief operations officer at crypto-mining services firm Luxor Technologies.
This article was provided by Bloomberg News.