This bill would limit cryptocurrecy companies’ participation in ERCOT incentives

Lawmakers are considering limiting rebate programs for energy-intensive crypto mining operations.

By Alexandra HartApril 19, 2023 1:46 pm, ,

Texas’ grid operator ERCOT has some tools to help prevent blackouts in times of peak demand. One such tool is an incentive program that calls on some large-scale customers to cut back on power usage when asked. 

But a bill working its way through the Texas Legislature would limit cryptocurrency companies’ participation in certain incentive programs, as well as require those companies to register with ERCOT as something called a “large flexible load.” 

Houston Chronicle energy reporter Kyra Buckley has been following the latest and spoke with  Texas Standard about what the bill would do, and why some think it’s necessary. Listen to the story above or read the transcript below.

This transcript has been edited lightly for clarity:

Texas Standard: I want to understand how these ERCOT incentive programs work in general, before we get to the crypto companies. 

Kyra Buckley: Basically, ERCOT has a handful of programs where they work with customers that use a lot of electricity. So normally you’re thinking like big industrial users, manufacturers. But lately, that’s also meant cryptocurrency mining. But what happens in these scenarios is that essentially these customers register with ERCOT and say “hey, if there is a grid emergency on the horizon, we could shut down some of our power” and they get compensated for that. And normally they get compensated at the wholesale price of electricity. And as we know here in Texas, when electricity is scarce on the grid, that’s when the price goes up. So when these companies say “hey, we will turn off our electricity as part of this program,” they’re getting compensated a pretty good premium for doing that.

So that’s how they work in general. Tell us more, though, about this Senate Bill 1751 and what it would do.

So Senate Bill 1751 would basically say that, of these ERCOT programs where companies can enroll and shut down their power, any of these programs, the amount of participants that are cryptocurrency miners would be capped at 10%. So any program wouldn’t have more than 10% of cryptocurrency miners. And one of the reasons that the bill authors say that this was important is because cryptocurrency miners, they are very flexible with their energy use and they can essentially shut down really quickly. But a large industrial user might not be able to do that and might not be able to shut down for as long as a cryptocurrency mine can. So there was a little bit of, you know, to try and maybe make this more fair and then also to kind of make sure that cryptocurrency miners weren’t making up the bulk of participants in the program, that they kind of stayed at that smaller amount of 10%.

And just to be clear, I think a lot of listeners may know this by now, cryptocurrency mining uses a lot of energy. And I guess that sort of adds to the controversy surrounding crypto companies’ participation in incentive programs because, in essence, you can build a business model that relies on taking advantage of these incentives.

Absolutely. And one of the issues is that, as we know here in Texas, when we have a lot of people using power at once, it can stress out our grid. And it normally happens on a hot summer day when everybody turns on their air conditioner. One of the concerns is that, if you’re a cryptocurrency mine using a lot of electricity, that you could essentially be one of the reasons that the grid is being pushed towards that max. And then you would be capitalizing on it as soon as you shut down your electricity. And as we know, that’s just not a widespread program for a regular user. So I can’t just say “hey, ERCOT, I’ll shut down my electricity for 2 hours and why don’t you write me the wholesale price for it?”

Okay, so what about the crypto industry? What are they saying in response to this? And does it appear likely that this bill will pass?

You know, they are not happy, which probably doesn’t surprise folks. I will say, though, that the cryptocurrency mining industry has said that they agree with part of the legislation where they say, “yes, we should be registering with ERCOT and letting them know that we’re one of these large electricity users and that we can shut down when needed.” What they don’t agree with is being capped at that 10% participation. Another part of the bill also would end property tax abatements for these companies. They opposed that, as well. They say “hey, we can actually help stabilize the grid because we are flexible users of electricity.”

Now, of course, some electricity experts would take issue with that statement, but that is what the industry is saying. They also say “hey, we help create jobs in some rural areas.” Now, I should note that a lot of those jobs do end up being temporary contract work to help set up some of these big operations. But that is the argument that the industry is making.

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