Cryptocurrency and the Texas Electric Grid

Texas is well known for cattle and oil. Today, though, there’s a new economic boom taking place in the Lone Star State – cryptocurrency.

The Legislature has shown support for developing the cryptocurrency industry here in Texas. House Bill 1576 (87R), which Texas 2036 supported earlier this year, creates a state working group and master plan for blockchain, the distributed-leger technology that powers cryptocurrency.

The Legislative Budget Board describes this technology as “a new and growing capability for initiating, recording, and verifying transactions instantaneously.” Several state governments are exploring the potential for this technology to improve state services including:

  • Managing property deeds
  • Authenticating academic credentials
  • Submitting healthcare providers reimbursement
  • Filing and managing insurance claims
  • Evaluating and managing professional licenses
  • Tax calculations and payment
  • Administering tickets, fines, and citations, including payments and processing
  • Managing, updating, and transmitting criminal records
  • Managing birth and death certificates
  • Managing, updating, and transmitting healthcare records
  • Managing microgrid transactions in the energy section
  • Recording and reporting financial transactions and financial statements
  • Managing lineage of patents, trademarks, reservations, and domain names
  • Managing voting in elections

In a post-Winter Storm Uri world, however, Texans are concerned that the digital “mining” – the complex computer processing necessary to produce cryptocurrency – could put too much strain on the state’s electric grid. But Texans are resourceful and innovative, and despite the doom and gloom headlines, there’s no reason why Texas can’t benefit from this growing industry.

While cryptocurrency mining is energy-intensive, with a little forethought and planning, Texas can afford to bear the extra load. Texas’ current market design favors price responsive demand. This means consumers can choose to reduce or reroute their electricity usage when prices are high. For example, one mining operation could switch to another server farm on a separate part of the grid, or temporarily power down part of an operation in order to control costs. Because many residential and commercial energy demands are inflexible, having an industry with highly flexible energy needs can help benefit grid stability.

And mining operators are also exploring generating energy as well. Houston-based Lancium raised $150 million to build over 2,000 megawatts of renewable energy capacity to power its mining operations – 10 times the amount of power used by downtown Dallas. Not only could cryptocurrency companies use this generation capability to ensure backup power at their facilities if demand drives up prices, but they could also potentially sell it during periods of high demand, helping strengthen the resilience and reliability of the grid itself.

As long as grid operators have the visibility and tools to take advantage of flexible demand from the server farms doing the mining, Texas can provide a pathway for this emerging industry.

Updated: December 16, 2021

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