ERCOT had a new tool for ensuring the homes of its residents stayed warm as the state of Texas plunged into subzero temperatures over the holiday break.
In February 2021, Texas experienced one of the most costly and deadly winter storms in the state's history. Over 5 million homes lost power, and up to 706 people lost their lives due to the storm, which also incurred over $10 billion in debt.
Fast forward to December 2022, and many in Texas were concerned that they would see a repeat of the previous year's events. As the polar vortex of 2022 hit Texas, temperatures in some towns went subzero, and wind chills brought temperatures to a frigid -15 degrees Fahrenheit in north Texas.
As the 2022 winter storm arrived, there were a few differences in the grid compared to the 2021 event. ERCOT, the Electric Reliability Council of Texas, had put significant resources into strengthening the grid to ensure that there would not be a repeat of the previous year's disaster. There was also a new tool at ERCOT's disposal: Bitcoin mining. In June 2021, China banned Bitcoin mining in the country, leading more than half of the world's miners to look for a new home. Over the following months, a significant portion of these miners came to Texas, attracted by the state's cheap energy and sophisticated programs that allow customers to participate in the grid. These programs, known as ancillary services, include demand and frequency response, and were used in February 2021 to prevent further collapse of the grid.
Ancillary services pay customers to reduce their energy consumption during peak demand in order to stabilize the grid. Fortunately for ERCOT and the residents of Texas, Bitcoin miners excel at participating in these programs. Unlike most customers, miners can reduce their peak load capacity by up to 97% for an unlimited amount of time. In addition to their ability to participate in grid balancing programs, miners are also very responsive to power prices. The break-even price for mining is currently $70 per megawatt. Anything above this price becomes uneconomical for miners. During peak demand, power can cost thousands of dollars per megawatt, so even if miners are not being paid to participate in the grid, they are incentivized to shut down to avoid losing money during winter storms. Very few industries have this capability.
The most interesting competent to this recent response by miners is that we have data to show that miners can and will reduce their power consumption when ratepayers need it most. We saw the hashrate of Bitcoin mining drop more than 30% right at the moment that the polar vortex was rolling through Texas and the midwest.
Hashrate is a measure of all the computation occurring on the Bitcoin network and unlike Amazon or Google data centers temporary, regional outages do not cause any interruptions for the Bitcoin network. Imagine if 30% of Amazon or Google's data centers went offline. They would have significant service interruptions. The flexibility of Bitcoin mining is part of the reason why mining is such an important customer for grids across the USA.
I also spoke with Lee Bratcher, President of the Texas Blockchain Council and he stated that miners returned up to 1,500 megawatts to the grid. To put that in context, that is enough to heat over 1.5 million small homes or keep 300 large hospitals fully operational. Companies like Riot, CoreScientific, Lancium, and others in Texas shut down their power consumption during the storm to help ratepayers and grid operators. In a way, this ability of miners to wind down during winter storms provides a buffer for the state of Texas to ensure that their grid remains stable and resilient. Miners in other states also delivered megawatts back to the grid during the polar vortex and it is likely that we will see more states encourage adoption of Bitcoin mining due to its ability to improve reliability during winter storms.
Want to read more about how mining can balance the grid? Check out another piece from Satoshi Action Fund: How Can Bitcoin Balance the Grid