Texas is quickly becoming a major cryptocurrency mining hub after China banned such operations earlier this year. Miners are flocking to the Lone Star State for its supply of cheap, loosely-regulated energy, the Comptroller's office said in its latest fiscal notes newsletter.
Texas has quickly become one of the biggest crypto mining hubs in the country, thanks to its cheap electricity, expanding renewable options, legislative backing and relaxed regulatory environment. It was the second-biggest contributor to U.S. BTC production in November, according to the Cambridge Bitcoin Electricity Consumption Index. The state's 11.22% hash rate share — the mining rate for crypto transactions — trailed only Georgia's 30.67% share. Next in line, Kentucky came in at 10.93% and New York at 9.77%, rounding out the top four states.
Cryptocurrency Mining: A Mixed Blessing
That status is a mixed blessing, because crypto mining consumes massive amounts of energy. Texas officials predict mining operations could demand as much energy as the city of Houston by 2030. Typical miners currently use about 3,000 megawatts of energy per day, or about 4% of peak demand on Texas' hottest days, experts estimate. And grid operator The Electric Reliability Council of Texas (ERCOT) projects mining operations could hit 17,000 MWs by 2030.
Texas Crypto Mining: Firms Feel The Heat Of Grid Stress
"With mining, we could see demand growing quite a bit faster than in the past, which presents challenges because we can only build power plants and transmission lines and substations so fast," says Joshua Rhodes of the Webber Energy Group at the University of Texas Austin.
The Comptroller's office included Rhodes comments in the newsletter, but still contends mining offers a potentially beneficial, and symbiotic relationship between power usage and generation.
ERCOT offers incentives, however hopeful, encouraging business to participate in demand response programs, to shut down or reduce operations when demand is high. In addition, the note says, economic theory suggests increased mining activity could spur business investments in energy infrastructure. If mining operations increase in certain areas, the price of electricity could rise, which could drive a greater supply of power plants to be built there, it says.
Government Backs Bitcoin Mining
Of course the surge in power demand, and any problems that might bring, would occur first. Price increases and subsequent infrastructure investments by businesses would follow.
Texas Gov. Greg Abbott has been a vocal proponent of bringing bitcoin mining to the state. He discussed a number of points similar to those in the ERCOT note during a Bloomberg interview in January.
Manufacturing facilities and industrial chemical plants also place huge demands on the grid. However, such facilities are expected to be around for decades.
That's not necessarily the case with crypto mining. "Bitcoin mines can come in so fast and may be gone so fast depending on the price of bitcoin," Rhodes says.
That risk may not incentivize building long-term energy infrastructure around those operations. It could potentially spur renewable generation if miners were setting up contracts. But there isn't much evidence of that happening with electricity providers, Rhodes says.
But if miners are willing to be flexible, by participating in controllable load resource program or repurposing surplus gas for mining, they could be a valuable asset to the grid, the Comptroller's newsletter notes.
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