2023-09-08 15:33:55
The hot weather in Texas over the summer overloaded the electrical grid, forcing the power company to order emergency procedures. This, of course, also affected bitcoin miners in Texas. The heat in Texas forced several mining companies to stop their mining activities, if only temporarily. Mining company Riot announced yesterday that they were “paid” for the shutdown, as was mining company Marathon Digital, who reported a 9% drop in bitcoin mining. The Electric Reliability Council of Texas (ERCOT), Texas’ power utility, was forced to order emergency procedures during August to ensure customers were never without power while the state was hit by an already normal summer heat wave. ERCOT supplies power to approximately 25 million Texans, representing 90% of the state’s grid load. Emergency procedures indicate that certain energy consumers, such as bitcoin miners, need to reduce their energy needs. In the case of miners, this practically means shutting down the machines. “Let’s make it clear that we don’t get paid to turn off the machines.” – said Jason Les, CEO of mining company Riot. Referring to the $31 million in energy credits received from ERCOT, Les said: “Most of the credits received are essentially from energy trading.” The CEO added that they have energy contracts and “by choosing not to mine” they make money on the difference between the contract price and the market price. Mining companies also trade energy Les also pointed to a unique strategy ERCOT has implemented to deal with grid uncertainty and variability – ancillary services. Ancillary services are purchased by ERCOT in the day-ahead market to balance forecast electricity supply and demand on the grid for the next day and mitigate real-time operational issues. “We participate in additional service programs.” Les said, explaining that the program also allows them to sell ERCOT the “right to regulate our load as they see fit.” Anthony Power, a mining analyst at Compass Mining, believes what Riot and others are doing is “the best strategy.” According to him, Riot can do this because they use power purchase contracts, which essentially allow them to mine at a set price. This also provides a financial incentive for miners. “Either they mine BTC or, in case of high prices, they curtail their operations and return the allocated power to the network.” – explained the operating model. This gives them a better return than mining and at the same time they are responsive to network demands. As Les said: “ERCOT is a deregulated market where energy is traded”. This means that “high prices signal to the market that the network needs energy”. He concluded that “like any market, this also means that the demand is adjusted to the supply”.
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