Climate change complicates bitcoin mining in Texas

ERCOT, which operates Texas’s power grid, has requested that bitcoin miners suspend operations during the state’s current heat wave, which has caused a surge in residential and commercial energy demand. Bitcoin miners complied, freeing up to 1,000 megawatts by turning off their machines.

Why should we care?
Texas has marketed its crypto-friendly regulations as well as low energy costs in an effort to lure bitcoin miners to the state. And it’s done so successfully, with as much as a quarter of all US bitcoin mining activity taking place in Texas. But needing to completely shutter operations for indefinite periods every summer doesn’t make for a sustainable business model. Texas hasn’t connected its energy grid to other states in order to avoid federal regulations, which means the Lone Star State can’t draw from other states’ surplus power when it faces a shortage. This contributed to last year’s winter power outages, which killed hundreds of people—and, due to the state’s wonky pricing structure meant to curb demand (akin to Uber surge pricing), electricity providers charged up to $8,800 per unit of electricity, rather than the standard $26, during the storm. While bitcoin miners can secure advantageous energy prices from the regulator, their decision to move to Texas is yet another blow to their profitability; miners are struggling to repay their debts and raise more capital given the continued decline in bitcoin prices (hovering around $20,000 after a high around $60,000). Inadvertently, Texas’s libertarian energy system may become another nail in the coffin for the bitcoin project, especially as energy demand continues to rise along with global temperatures.