Riot Blockchain, a Nasdaq-listed company that operates bitcoin mining facilities in Texas, announced that it received $30 million from the Electric Reliability Council of Texas (ERCOT) for voluntarily reducing its power consumption during the peak demand period in August.
Bitcoin mining is the process of validating transactions on the bitcoin network and creating new bitcoins as a reward. It requires a lot of computing power and energy consumption, which translates into a high carbon footprint. According to the Cambridge Bitcoin Electricity Consumption Index, bitcoin mining consumes more electricity than many countries, such as Argentina or Norway.
According to a press release, Riot participated in ERCOT’s Emergency Response Service (ERS) program, which pays participants to reduce their electricity usage when the grid is under stress. Riot said it was able to shut off its bitcoin miners without affecting its long-term operations or profitability. The ERS program is a demand response program designed to help ERCOT mitigate rolling blackouts.
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When a grid emergency occurs—typically due to high demand, extreme weather, or transmission issues—ERCOT dispatches ERS customers to reduce energy use within 10 or 30 minutes. Riot’s CEO Jason Les said that the company was proud to support ERCOT and the Texas grid during the summer heat wave, and that the ERS program was a win-win situation for both parties.
“By participating in the ERS program, we are able to generate significant additional revenue for our shareholders, while also demonstrating our commitment to environmental, social and governance (ESG) principles,” Les said.
The company said it has signed a binding letter of intent to acquire Whinstone US, Inc., which owns and operates the largest bitcoin hosting facility in North America, located in Rockdale, Texas. The deal, valued at $651 million, will give Riot access to Whinstone’s 100-acre site that hosts bitcoin mining customers across three buildings totaling 190 MW of developed capacity. The site also has a power capacity of 750 MW, with 300 MW available for expansion.
Riot said it plans to use the remaining capacity to increase its own bitcoin mining activities and become one of the largest and lowest-cost producers of bitcoin in North America. Riot’s CEO, Jason Les, said in a press release that the acquisition of Whinstone is a “transformative event” for the company and the bitcoin mining industry. He added that Whinstone’s team has built a “world-class” facility that offers “reliable low-cost power and one of the most talented development teams in the industry.”
According to Riot, Whinstone’s facility employs about 100 people and has a direct economic impact of over $200 million in the local economy. The company also said it is committed to supporting the Rockdale community and its environmental, social and governance (ESG) initiatives.
Riot’s announcement comes amid a surge in bitcoin mining activity in Texas, which offers abundant and cheap renewable energy sources, such as wind and solar. The state also has a deregulated power grid that allows miners to choose their electricity providers and take advantage of market fluctuations. Texas Governor Greg Abbott has expressed his support for the bitcoin industry and said he wants to make Texas a “crypto leader.” He recently signed a law that recognizes the legal status of cryptocurrencies and blockchain technology in the state.
Riot is not the only company that is betting on Texas as a bitcoin mining hub. Earlier this year, Blockcap, another Nasdaq-listed firm, said it would establish its headquarters in Austin and bring 42 MW of mining capacity to the state. Bitmain, the world’s largest maker of bitcoin mining hardware, also has a 50 MW facility in Rockdale, which it plans to expand to 300 MW. And Layer1, a startup backed by billionaire Peter Thiel, operates a 100 MW facility in West Texas that uses proprietary liquid cooling technology to reduce costs and environmental impact.
Riot Blockchain claims that it is committed to reducing its environmental impact and supporting the transition to a low-carbon economy. It says that it sources more than 50% of its electricity from renewable sources, mainly wind power, and that it participates in demand response programs that help balance the grid and prevent blackouts. It also plans to invest in solar power projects and battery storage systems to further increase its share of clean energy.
However, some critics argue that Riot Blockchain is not doing enough to mitigate its environmental impact and that it is exploiting a loophole in the Texas electricity market. They point out that Texas has a deregulated and isolated grid that allows power producers to sell their electricity at fluctuating prices, depending on supply and demand.
This creates an incentive for bitcoin miners to operate when the electricity prices are low, which often coincides with periods of high wind power generation. However, this also means that they consume a lot of electricity that could otherwise be used by other consumers or exported to other states, thus reducing the overall efficiency and environmental benefits of wind power.
Moreover, some critics claim that bitcoin mining in Texas contributes to the flaring and venting of natural gas, which are practices that release greenhouse gases and pollutants into the atmosphere. Flaring and venting occur when oil and gas producers burn or release excess natural gas that they cannot use or sell, due to insufficient infrastructure or market conditions.
Texas is the largest producer of oil and gas in the US, and it also has the highest rates of flaring and venting in the country. Some bitcoin miners have partnered with oil and gas companies to use their surplus gas to power their mining operations, which they claim reduces waste and emissions. However, some environmentalists argue that this creates a perverse incentive for more oil and gas production and that it does not address the root causes of flaring and venting.
Bitcoin mining in Texas is a complex and controversial issue that involves trade-offs between economic development, energy security, and environmental protection. Riot Blockchain, as one of the leading players in this industry, faces both opportunities and challenges as it tries to balance its profitability and sustainability goals. It remains to be seen how the company will adapt to the changing regulatory and social landscape, and how it will respond to the growing scrutiny and pressure from its stakeholders.
Riot is one of the largest bitcoin mining companies in North America, with a total hash rate capacity of 2.4 exahashes per second (EH/s). The company operates over 80,000 bitcoin miners at its facilities in Rockdale, Texas, which have a combined power capacity of 300 megawatts (MW). Riot said it plans to use the $30 million payment to further expand its mining operations and increase its hash rate to 7.7 EH/s by the end of 2023.