Comment by gray_-_wolf
2 years ago
> Some of these tactics have proven controversial with consumers. One program that pays big power users like cryptocurrency operations millions to conserve, has come under particular scrutiny, as Texans have been asked to conserve voluntarily for months.
This is... amazing. Not in a good way.
The original idea behind this is sound. Because production and consumption must net to ~0, from the grid's perspective cutting load is just as valuable as providing generative capacity.
Imagine you own a factory that typically runs 24/7 and is part of the system's base load. There is a material cost for you to shut down production. These structures were set up to make it economically viable to have these types of installations shut down in extreme events and function as "virtual power plants" (remember, lowering base load is physically and economically equivalent to providing additional generation.)
So far, this kind of makes sense. But unfortunately the same framework can also be applied to cryptocurrency operations, where it really does not make intuitive sense. Largely, IMO, because Bitcoin is so piggish for energy for so little societal value to start with.
You achieve similar results by simply charging such customers current market rates. Nobody is going to be mining Bitcoin while paying 2.50$/kWh.
That’s the objection, it’s simply a waste of money.
It's so weird because I thought the whole point of ERCOT was to be a market and use market forces to solve everything.
So why are they paying bitcoin miners to turn off, rather than just charging them market rates at all times and letting them decide for themselves?
I feel like I'm missing something here.
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You don’t get the same outcome.
Consider the payment as the cost of maintaining demand during periods where you don’t want it.
It's like a factory that can only produce 100 widgets each week, nothing more or less. Ideally you want to always sell 100 widgets each week (supply = demand). You could build a smaller factor that only makes 60 widgets, but the cost per widget would be 50% higher and at market rates you can't make enough money to justify the investment.
So what you do is build the 100 widget factory and you sign up a customer who will always buy 40 widgets each week, and the remaining 60 widgets you sell to smaller customers.
If suddenly the demand from smaller customers hits 90 widgets one week, you don't want to just cut off the 40 widget customer and say "tough shit", because they may not come back and you're stuck with 40 widgets each week you can't sell.
So you pay them money in exchange for accepting a lower supply of widgets that week.
Even with the payments, net-net you’re better off because during the 50 weeks per year when smaller customers only buy 60 widgets, overall your set up is more efficient.
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If prices were perfectly liquid and symmetrical, sure. Unfortunately they're not and the system is pretty complex. There's a bunch of different ways to purchase energy and not all of them are sensitive to realtime price.
Establishing a separate mechanism to compensate "virtual" generation (via load reduction) works no matter what pricing structure I use for my typical energy purchases.
I have a friend who works in the energy industry specifically targeting power grid management.
It is far easier for power companies to manage power loss for things with consistent power usage (low variance) than high variance / inconsistent power loads.
Businesses tend to be very consistent, even if their power draw is high, like manufacturing or hospitals etc.
Residential power tends to be more variant and harder to fine tune for because it can spike quite suddenly in unexpected ways and tends to add more base load over time.
Therefore, it’d actually make more sense for power companies to buy people homes in other states if lowering base load is a concern, since residential is where all the major issues are for load balancing, no?
> it’d actually make more sense for power companies to buy people homes in other states
No, because of scale. A large factory is one entity to deal with. Moving just one out of state is possible, but meaningless as even though houses are significant overall you need to deal with many houses before an actual difference is made, while if you can deal with a factory you can make a large difference for the same amount of effort.
A factory/hospital is also easier because they probably have a backup plan. if there is any possibility that the power will go out they are likely to have made backup plans. You are overall cheaper than their backup plans, but you can probably make them a deal where they run their backup plan instead of connecting to you. Since they already have the generator it isn't a problem for them to use their generator on your busy days, and so a small discount makes it easy to work with the factory than a home owner who is probably thinking about friends and family they are moving away from.
The power company has a list of who these deals are with and the priority order. I know of one factory with a coal boiler from the 1800s, and a generator from then 1920s - the whole is very inefficient and takes a full day to start up, but the power company makes it worth while to keep everything operational because every 5 years they can power it on and supply the whole town (at 5x the normal cost of power from the plants they run all the time). Meanwhile there is a store near my parents that is running their generator every hot day - a modern diesel generator when sized properly is not a lot more expensive than grid power so the store doesn't need a big incentive to use it instead of grid power.
Of course all of the above is for exceptions. Where I live now we have built far more wind than needed most of the time, and as a result 80% of our power is renewable. There are very few days when backups are even needed.
Would it help if the state were to provide tax incentives for in home battery backups?
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You could certainly make an argument that zoning needs to be "power neutral": can't zone any houses or businesses without zoning an equivalent power plant. Very SimCity.
Maybe they can just price electricity at different tiers of use. Or home vs business rates. Charge crypto farms more, especially if the grid is struggling.
Texas’ strategy is to encourage additional growth in the crypto mining sector because ostensibly they use a lot of power during off-peak days/hours which supports capital payback but also is flexible enough to turn off their load when the grid production is over stressed, so they theoretically won’t contribute to blackouts.
Not sure if this thinking is fully correct, but on its face it’s at minimum not completely absurd.
Also I think some of the Texas leadership is financially or emotionally invested in cryptocurrency.
They already do this. Commercial rates are cheaper than residential rates.
(Residential customers are getting ripped off, honestly)
Texas would never do anything that makes them appear 'anti-business' though. It goes against the entire political ethos of the folks in charge down there.
That would require admitting that the free market can't solve the problem, and likely makes it worse.
Texas needs a capacity market, where generators are paid based on their must run status. They choose not to previously because of politics (prioritizing low cost over resiliency). The PUC is working to fix this ("performance credit mechanism").
https://www.texastribune.org/2023/03/01/texas-power-market-p...
That doesn’t gel with lobbyists.
Wat? There isnt already such a thing?
There is. Pricing is split mostly along residential vs. commercial vs. industrial although there’s a few more layers of discrimination based on usage patterns and “power factor” (reactive vs capacitive load).
Is it? There’s not nearly enough information to tell.
Austin Energy appears to charge about 10 cents/kWh (interestingly, it’s comparable across all service classes if I read the tariff sheet right). They pay up to $80/kW saved on average (across all events, I think) [0], I think annually. The webpage is vague. So Austin Energy is effectively paying $80/kW/year of capacity available on 10 minutes notice.
1 kW for a whole year is 8766 kWh, which would cost about $876. And you need to actually be using that kW to resell it as average demand response, so this program is about a 10% discount for being willing to shut down on 10 minutes notice. Or alternatively, you get 10% off in exchange for reducing your SLA a bit :)
Hate bitcoin miners all you like, but the actual payment seems quite reasonable.
[0] https://savings.austinenergy.com/commercial/offerings/load-m...
What if you only run the 1% of the year that you think is most likely to require spare capacity?
(hopefully they have safeguards against that?)
It seems they only pay if the metered usage shows a reduction.
It's called demand management / demand response / frequency response. I think that line sounds like a bit of click bait as there isn't much context around it.
I would imagine that the crypto operations also pays a lot of money for generation services - so knowing how much it purchases for electricity vs how much it conserves would add a lot of context. Stating that they get millions (loose numbers) from DM/DR programs is pretty soft reporting and they are providing a grid stabilizing service.
The argument that retail consumers can't get money from DR programs i'm not sure is accurate though don't know what ERCOT currently offers for residential consumers. I know of services that allow consumers to cash in through smart thermostats etc (OhmConnect). Also its a lot cheaper to get a couple large consumers to reduce their usage then aggregating over a large group of houses.
Now if you are trying to argue that this use case for the electricity is wasteful thats another argument or that Texas handling of the grid has been challenged especially the natural gas fiasco - also another argument.
So... start a "cryptocurrency" business and get paid to not use electricity.
I mean, if that's not a good way to funnel money from the lower classes to the rich, I don't know what is.
You joke but in August the biggest Bitcoin mine in North America got paid 3.5x more by the utility to turn their rigs off than they made in actual Bitcoin mined -- and they say openly that collecting credits is core to their strategy.
https://www.cnbc.com/2023/09/06/texas-paid-bitcoin-miner-rio...
Well that’s it then. I will startup a small crypto mining company, threaten to mine bitcoin and get paid out not to.
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Clearly I need to start Big Resistor Inc. It's just a big connection across the grid that wastes megawatts of energy, but I can get paid for turning it off.
Only if your threat to turn it on is realistic. That is you have to be willing to buy at market rates metawatts of energy when they don't feel like paying you. If they think you are doing this - that is not producing value with those metawatts you buy when you buy they will call your bluff: not pay you and thus force you to lose $$$ proving you are serious. I think their pockets are bigger than yours and so it won't work out.
I am curious what it takes to get this sweet deal. Surely anyone can join in the mining and get paid to do nothing on the wonky Texas grid and when you can run - deliver nothing of positive value to society.
Does one need a minimum number of rigs? Maybe a permit? Just apply to the utility?
I’d rather be paid than volunteer to sit around in the dark, sweating like a chump.
You probably need to start out by wining and dining folks at the Texas Railroad Commission.
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I want to buy up all of the old readily available GPUs. No need to fight over new latest gen GPUs to actually produce coins. You just need equipment that looks like you can do mining. Then, voluntarily not mine anything so the power company pays you. That is the actual business model to not ever mine anything.
I guess you also need to draw and pay for a lot of electricity most of the time to get that kind of deal.
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is this what they mean by privatizing profits and socializing losses
It’s a cute saying, but that really doesn’t make sense in this situation. How is society taking a loss?
No, this is called, "It never trickled down, it only funneled up!"
I grew up in Texas. I honestly think the main problem with the politics there is that they have never had to deal with limited resources, basically ever. Food, water, fuel, land, education, basically everything a society could want was bountiful there. In my lifetime however, that has changed in certain areas.
One of the reasons why I'm so obsessed with transportation alternatives is that I came of age as Austin went from an arguably perfect highway capacity, then suddenly tipped into an unfixable accelerating traffic nightmare. Watching a finite resource (highway capacity) suddenly cross a depletion threshold, and cascade out of control really effected me. Once it happens, nothing can really be done about it except at enormous cost.
We are now seeing the same happening with power capacity. We will soon see it with water as the Ogallala Aquifer disappears.
The type of politically palatable libertarianism that thrives in most of Texas, require effectively unlimited access to resources.