Democrat Senators call Texas ‘Deregulated Safe Harbor’ for Bitcoin miners

A group of seven U.S. senators from the Democratic Party, led by Massachusetts Senator Elizabeth Warren, have called Texas a ‘deregulated safe harbor’ for Bitcoin miners.

The group has sought related financial and operational details from the Electric Reliability Council of Texas (ERCOT), a private body that operates Texas’s electrical grid.

The senators have written a letter to ERCOT CEO Pablo Vegas, alleging that the state is aggressively courting crypto miners, who are drawn to the state’s cheap power and laissez-faire regulation. The issue raises concerns about these operations adding to the stress on the state’s power grid.

The group has sought information from ERCOT on (i) energy consumption by cryptocurrency mining operators and (ii) their CO2 emissions in Texas over the last five years.

They have also asked for information on subsidies paid by Texan regulators to Bitcoin mining companies to lower electricity consumption during periods of peak demand.

Texas, one of the world’s cheapest energy providers

In September 2021, the BBC published a report that China’s ban on crypto mining in May 2021 forced many cryptocurrency mining entrepreneurs to move abroad. A large number moved to the American state of Texas which is emerging as the global cryptocurrency capital.

Texas is one the cheapest energy providers in the world as the power grid in the state is deregulated. During peaks of electricity demand, crypto mining farms can even sell unused power back to the grid.

In June 2021, Greg Abbott, the Governor of Texas, tweeted, “It’s happening! Texas will be the crypto leader.”

The Texas Comptroller’s office published a newsletter in August this year that underscored the state’s position in relation to hosting long-term mining operations in the region.

The officials believe that mining operations can garner a symbiotic relationship with the energy industry.

The letter alleged that unlike manufacturing or industrial chemical facilities, cryptocurrency mining facilities do not place big electrical demands on the power grid.

The adverse effect of Bitcoin mining operations on the environment is not a new topic of contention. Several prominent individuals and bodies have been critical of the same.

“In simple terms, the Bitcoin miners make money from mining that produces major strains on the electric grid: and during peak demand when the profitability of continuing to mine decreases, they then collect subsidies in the form of demand response payments when they shut off their mining operations and do nothing,” the senators stated in the letter.

An interesting case is noted here. The letter alleged that Riot Blockchain, the owner of a 750 MW plant in Rockdale, mentioned in July 2022 that it had gained around $9.5 million by shutting down operations and selling power back to the grid.

The senators pointed out that this was more than the $5.6 million Riot Blockchain made that month off selling Bitcoin.

Texas is responsible for about 25% of all the Bitcoin mining operations in the United States, and 9% of the crypto mining computing power worldwide.

Crypto mining operations put additional stress on an already unreliable grid, besides contributing to the global climate crisis.

Elizabeth Warren, who is leading this group of senators, is known to be a staunch critic of the cryptocurrency industry. Last year, she took to Twitter to say that one of the easiest and least disruptive things to fight the climate crisis is to crack down on “environmentally wasteful” cryptocurrencies.