Comment by 4567546
2 years ago
Unfortunately not how it works. The reason that Texas is paying miners to load shed is because they are being paid to supply a constant load to the grid. They shut down in order to dump capacity into the grid because that is less expensive than attempting to bring new capacity online to meet demand and then later bring that capacity back down when it is no longer needed. Because of the way miners can ramp up and down their loads systems can be set up to smooth out extreme spikes in electrical demand.
These miners have no choice but to shut down because ERCOT can also remotely kill their ability to consume the load. Part of the payments they get are because of the service being provided to the grid and also to encourage miners to continue operating in good faith by volunteering to load shed and work with grid operators.
The story is even more complex when you throw in things like land being bought to the sum of 240 million for these miners to operate on and locals in areas like this seem excited for the job opportunity so I have to believe good portions of that 34 million are making its way right back into the local economy of central Texas.
The reason Bitcoin mining works and not your space heater is because of the incentive structures built into the proof of work system within Bitcoin.
I think this is worth digging into deeper and figuring out how we can objectively measure if this is successful or not. I think there is a legitimate counter argument to make that without mining actually, Texas would have had a full grid blackout this summer.
I also have the somewhat controversial opinion that things like bitcoin are useful because they create static but easy to shed demand.
So to explain what I mean by that in depth - the economic losses from shutdown are limited to production losses during the shutdown, and there is no loss of inventory, or other secondary losses like process startup and shutdown for a refinery, semiconductor fab, or other kinds of manufacturing which product a physical good.
This static load absorbs some of the excess generation from wind and solar, thereby keeping the spot price in the grid high enough that thermal generation is still cost effective to build and operate.
Now, that all said, I dont think we should be paying them to shut down, they should just be disconnected wholesale from the grid during periods of ultra high demand as a condition of their interconnection to it. That said, we have programs designed to offset economic losses from disconnection from the grid during high use periods, and the bitcoin plants are just using that existing mechanism - I have mixed feelings about it, but I dont think its all bad.
This only makes sense with the unstated premise that the state is helpless to regulate the market with its own set of incentives.
Legally, it in some ways, it currently is.
Could Texas return to Integrated utilities, and Rate of Return based pricing? sure, but that'd be up to the legislature to deal with.
I think the current system surprisingly (even to me) works well, I think building in market incentives is probably easier than trying to put the genie back in the bottle.
“Pay Bitcoin miners” to stabilise the grid, that market incentive?
even with incentives, it’s still cash-negative for the miners to buy electricity from ERCOT though, right?
In that vein, I’m more interested in what Crusoe Energy is doing. They started out with Bitcoin mining at “energy island” locations. Now they are setting up AI data centres at such sites.