There are basically two places in earth that have a power market structured like Texas, Texas and the United Kingdom.
We have an extraordinary reliance on wind and solar, and broadly insufficient thermal generation to deal with generation falloff.
To be clear - I think wind and solar are great, and we should build more, but you also need a sizable amount of thermal generation (preferably nuclear) to provide for base load.
I also don't think thermal can be replaced readily with gas turbine, battery, pumped storage, or other forms of rapid spin up equipment.
Bitcoin (as what is effectively a big resistor) is useful as a artificial price support, to keep the market price at or above the marginal cost to generate power via a thermal plant. Essentially artificial static - but easy to shed - demand.
To explain further, bulk power buyers buy their power often directly from a nearby source and site their facilities near those points, but they purchase power at fixed rates. When market price at those interconnection points rises above the price they paid, they're can be forced to shut down and resell that power back into the market pool.
The losses from shutting dorm bitcoin are limited to production losses during the shutdown, and there is no loss of already made 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.
I probably wouldn't have picked a market power system like Texas, but it's here, it's what we have, and these kinds of weird market incentives are needed to make it operate correctly (absent a rate of return pricing mechanism.
The 2019 power crisis, when the texas grid kinda almost went dark?
Our shortage was greater than the entire State of California's generation. It was greater than the spare capacity in any of the three neighboring interconnections.
Like I'm not opposed to us joining our neighboring interconnections, but the problem would still exist to some extent because of the ability to move power long distances - and this assumes you build more HVDC and AC interconnections. (There is currently HVDC interconnection).
Also, the problem would still remain, 4-6 hours a day, the cost of spot power at interconnection points would be lower than the marginal cost to operate a thermal plant.
Opens with a disingenuous "$86M owed, which will be paid for by Texas consumers" no, it already has been paid for by consumers when they bought the energy from them because they needed it. I'm trying to figure out if these people truly don't know how any of this works because they're uninterested or if they deliberately pretend like they don't because the truth is not condusive to the narrative they want to build.
This is known as a Virtual Power Plant.[0] In the case of this cryptocurrency company, they are selling the electricity that they "would" be consuming if it wasn't being bought back from them. If they hadn't "sold" it back to the grid, it wouldn't have been available to be used by other customers.
This site is pretty generic template agitprop. Industry and activist groups make things like this all of the time to frame certain issues they don't like in the worst possible light.
You can find this sort of stuff in lots of industries that have cash flows at risk that are trying to manufacture outrage in the voting public to create activists who will attempt to influence legislative priorities.
Who is this they you speak of? Texas is a beautiful state, with a psychotic energy system, and a government that doesn’t represent the will of their people.
What looks like a crypto mine is in the upper left. Notice the new tent-like structures. some under construction, all the air-handling equipment, and the huge busbars of the power distribution system. Also notice the active parking lot.
The big plant at the lower right is a defunct Alcoa aluminum refining operation, sold in 2021. It looks like two of the long buildings that formerly housed aluminum electrolysis operations have been converted - they have what looks like air handling equipment outside and there is an active parking lot nearby.
The large substation to the northeast of the mining farm is left over from the Alcoa era. So heavy power was available at that site.
The actual positive is that Texas is the largest producer of wind and solar, by a pretty large margin. The problem is that it creates an excess of energy production from morning to mid afternoon. Having flexible users, like crypto miners, buy that energy offsets the occasional energy crunch where they are paid, with energy credits, to cut usage.
This works in theory, but the problem is, these miners are not actually a flexible user in practice. Every minute they’re not mining, they’re losing money in the sunk cost of (depreciating) hardware. For example, in Q2 2023, Riot (the biggest miner in Texas) recognized 66mm of depreciation on only 50mm in revenue.
Crypto mining can scale up and down extremely easily. They are a good fit for hydro, wind, solar, and nuclear where not using the energy means it’s simply wasted (at least until serious grid scale battery exists).
If you want to judge payers of electricity you should also look at video games. It is pure entertainment with no societal value beyond that. If that doesn’t bother you, maybe don’t judge what people want to electricity for if they buy it on the open market.
> They are a good fit for hydro, wind, and solar, and nuclear where not using the energy means it’s simply wasted
This is a persistent myth in crypto circles, but it doesn’t match up with the financials of any company I’ve seen. Instead what happens is that once you’ve paid to build up mining capacity, particularly for mining rigs, any downtime is extremely costly.
Miners are always racing against the clock of increasing hashrate and the next halving.
What I mean is, if the price of electricity skyrockets temporarily, it’s very easy to stop mining. They are extraordinarily sensitive to prices given there is a direct relationship to electricity and mining pool payouts.
The prohibitionist's entire premise boils down to a lack of understanding for markets and the subjective theory of value. Your comment illustrates this well.
Some will value entertainment more than others. Teetotalers don't value alcohol and would ban it by citing social ills. Negative externalities are a magic hand-wave here, "The climate apocalypse is neigh! You must taboo the things I say!"
This is why judging the usage of electricity is a fool’s errand. The market has a price, and if I want to use it to heat my pool and power my air conditioners that’s my choice. The government should not prevent me from heating if a coat is sufficient, nor cooling if being naked is sufficient, if I’m willing to pay. If that argument makes sense, then using it to play video games, train LLMs, or mine crypto is simply a choice the market makes.
There are basically two places in earth that have a power market structured like Texas, Texas and the United Kingdom.
We have an extraordinary reliance on wind and solar, and broadly insufficient thermal generation to deal with generation falloff.
To be clear - I think wind and solar are great, and we should build more, but you also need a sizable amount of thermal generation (preferably nuclear) to provide for base load.
I also don't think thermal can be replaced readily with gas turbine, battery, pumped storage, or other forms of rapid spin up equipment.
Bitcoin (as what is effectively a big resistor) is useful as a artificial price support, to keep the market price at or above the marginal cost to generate power via a thermal plant. Essentially artificial static - but easy to shed - demand.
To explain further, bulk power buyers buy their power often directly from a nearby source and site their facilities near those points, but they purchase power at fixed rates. When market price at those interconnection points rises above the price they paid, they're can be forced to shut down and resell that power back into the market pool.
The losses from shutting dorm bitcoin are limited to production losses during the shutdown, and there is no loss of already made 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.
I probably wouldn't have picked a market power system like Texas, but it's here, it's what we have, and these kinds of weird market incentives are needed to make it operate correctly (absent a rate of return pricing mechanism.
There's a way insufficient thermal generation can be mitigated- operate under one of the Eastern or Western grids instead of maintaining your own.
The motivation behind having a separate Texas grid is political and nothing else. That's why they have ask home consumers to conserve energy.
The 2019 power crisis, when the texas grid kinda almost went dark?
Our shortage was greater than the entire State of California's generation. It was greater than the spare capacity in any of the three neighboring interconnections.
Like I'm not opposed to us joining our neighboring interconnections, but the problem would still exist to some extent because of the ability to move power long distances - and this assumes you build more HVDC and AC interconnections. (There is currently HVDC interconnection).
Also, the problem would still remain, 4-6 hours a day, the cost of spot power at interconnection points would be lower than the marginal cost to operate a thermal plant.
Related:
Texas paid Bitcoin miner Riot $31.7M to shut down in August (cnbc.com): https://news.ycombinator.com/item?id=37419220
Opens with a disingenuous "$86M owed, which will be paid for by Texas consumers" no, it already has been paid for by consumers when they bought the energy from them because they needed it. I'm trying to figure out if these people truly don't know how any of this works because they're uninterested or if they deliberately pretend like they don't because the truth is not condusive to the narrative they want to build.
Not sure how one can “buy energy” from a crypto company that doesn’t generate electricity…
This is known as a Virtual Power Plant.[0] In the case of this cryptocurrency company, they are selling the electricity that they "would" be consuming if it wasn't being bought back from them. If they hadn't "sold" it back to the grid, it wouldn't have been available to be used by other customers.
[0]https://en.wikipedia.org/wiki/Virtual_power_plant
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They had already purchased it and sold it back.
This site is pretty generic template agitprop. Industry and activist groups make things like this all of the time to frame certain issues they don't like in the worst possible light.
You can find this sort of stuff in lots of industries that have cash flows at risk that are trying to manufacture outrage in the voting public to create activists who will attempt to influence legislative priorities.
They hate crypto, and they hate Texas, so they can take a cheap shot.
Who is this they you speak of? Texas is a beautiful state, with a psychotic energy system, and a government that doesn’t represent the will of their people.
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This crypto mine in Google Earth.[1]
What looks like a crypto mine is in the upper left. Notice the new tent-like structures. some under construction, all the air-handling equipment, and the huge busbars of the power distribution system. Also notice the active parking lot.
The big plant at the lower right is a defunct Alcoa aluminum refining operation, sold in 2021. It looks like two of the long buildings that formerly housed aluminum electrolysis operations have been converted - they have what looks like air handling equipment outside and there is an active parking lot nearby.
The large substation to the northeast of the mining farm is left over from the Alcoa era. So heavy power was available at that site.
[1] https://earth.google.com/web/search/Rockdale,+TX/@30.5699918...
The only positive perspective here is that at least Texas is disconnected from the rest of the country grid.
The actual positive is that Texas is the largest producer of wind and solar, by a pretty large margin. The problem is that it creates an excess of energy production from morning to mid afternoon. Having flexible users, like crypto miners, buy that energy offsets the occasional energy crunch where they are paid, with energy credits, to cut usage.
This works in theory, but the problem is, these miners are not actually a flexible user in practice. Every minute they’re not mining, they’re losing money in the sunk cost of (depreciating) hardware. For example, in Q2 2023, Riot (the biggest miner in Texas) recognized 66mm of depreciation on only 50mm in revenue.
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Wouldn't the power be easily used up by all the air conditioning units?
This truly seems like scapegoating larger issues
Crypto mining can scale up and down extremely easily. They are a good fit for hydro, wind, solar, and nuclear where not using the energy means it’s simply wasted (at least until serious grid scale battery exists).
If you want to judge payers of electricity you should also look at video games. It is pure entertainment with no societal value beyond that. If that doesn’t bother you, maybe don’t judge what people want to electricity for if they buy it on the open market.
> They are a good fit for hydro, wind, and solar, and nuclear where not using the energy means it’s simply wasted
This is a persistent myth in crypto circles, but it doesn’t match up with the financials of any company I’ve seen. Instead what happens is that once you’ve paid to build up mining capacity, particularly for mining rigs, any downtime is extremely costly.
Miners are always racing against the clock of increasing hashrate and the next halving.
What I mean is, if the price of electricity skyrockets temporarily, it’s very easy to stop mining. They are extraordinarily sensitive to prices given there is a direct relationship to electricity and mining pool payouts.
1 reply →
The prohibitionist's entire premise boils down to a lack of understanding for markets and the subjective theory of value. Your comment illustrates this well.
Some will value entertainment more than others. Teetotalers don't value alcohol and would ban it by citing social ills. Negative externalities are a magic hand-wave here, "The climate apocalypse is neigh! You must taboo the things I say!"
I think people have underestimated the environmental impact of training AI models.
While one can argue things like GPT3/4 are useful, the question becomes how useful are they if they burn up gigawatthours to do it?
GPT3 alone took around 334MWh to train, and that's one model from one company, and that's just for training, not usage.
We should be focusing on making power cheaper and more accessible to everyone, not policing what people do with the power they have purchased.
This is why judging the usage of electricity is a fool’s errand. The market has a price, and if I want to use it to heat my pool and power my air conditioners that’s my choice. The government should not prevent me from heating if a coat is sufficient, nor cooling if being naked is sufficient, if I’m willing to pay. If that argument makes sense, then using it to play video games, train LLMs, or mine crypto is simply a choice the market makes.
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> It is pure entertainment with no societal value beyond that.
I think entertaining society should be very high up on the list of societal values.
Crypto, on the other hand, I struggle to find any value worth the cost.
I can’t be entertained by crypto mining? One man’s entertainment is another man’s boredom. Maybe we ban professional sports as well?