Ted Cruz’s claims that Bitcoin could solve Texas’ power woes 'don’t add up': tech expert
The problems with Texas' power grid were painfully obvious in February, when the state was hit with unusually cold temperatures and millions of Texans found themselves without heat or electricity. Sen. Ted Cruz — the far-right Texas Republican who infamously headed to Cancun, Mexico for a vacation during that crisis — recently claimed that the cryptocurrency Bitcoin has the stabilize Texas' power grid, but journalist Tim De Chant debunks that claim in an article published by Ars Technica on October 13.
De Chant notes that Cruz recently told the Texas Blockchain Summit, "Because of the ability of Bitcoin mining to turn on or off instantaneously, if you have a moment where you have a power shortage or a power crisis, whether it's a freeze or some other natural disaster where power generation capacity goes down, that creates the capacity to instantaneously shift that energy to put it back on the grid."
But De Chant lays out some reasons why Cruz's claims "don't add up."
"The blackouts during Texas' February cold snap happened because power companies failed to winterize their generators, whether they were natural gas, coal, nuclear, or wind," De Chant explains. "Lives were at stake, and yet, the companies didn't prepare for the worst. Unlike power plants that serve the grid, Bitcoin mining isn't critical infrastructure — no one dies if a crypto data center shuts down. Plus, Bitcoin miners are in the game first and foremost for the money, and they would be loath to spend extra cash to winterize their operations."
De Chant goes on to discuss the ways in which Bitcoin miners might perform in Texas during another cold snap.
"Let's say the power stays on but demand surges," De Chant argues. "In that case, Bitcoin miners would be unlikely to offer their generating capacity to the grid unless they were sufficiently compensated. Texas already has a system like that in place, offering generators a premium for bringing additional power online during shortages. During the February cold snap, wholesale electricity prices surged to $9000 per MWh, the maximum allowed by law, leading to electricity bills as high as $10,000 for some people."
According to De Chant, "Bitcoin miners would likely demand even more than the current $9000 per MWh cap. One Bitcoin currently sells for $57,000, and to crunch the numbers to win that one Bitcoin, mining rigs draw just under 0.285 MWh, based on Digiconomist estimates. In other words, for Bitcoin miners to be willing to contribute to the grid, wholesale electricity prices would have to hit $206,000 per MWh, or nearly 23 times greater than prices during the February cold snap. Those $10,000 bills would turn into $230,000 bills."
De Chant concludes his article by saying that Cruz's idea wouldn't be cost-effective.
"Last February," De Chant notes, "Texas lost half its generating capacity, or 52.3 GW. It's hard to imagine a world where Bitcoin would spur over 50 GW of dedicated generating capacity in a single state. At today's prices, the power plants that Ted Cruz is imagining would cost over $50 billion to build. At that price, there are probably more effective ways to stabilize Texas' grid."
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