Although Bitcoin (BTC) mining remains a controversial topic, it is becoming more common to hear how Bitcoin mining can help balance the demand on the network. This is demonstrated in the state of Texas, how capable Bitcoin miners are participate in demand response programswhich incentivize miners to shut down their operations during peak demand.
A spokesperson for the Electric Reliability Council of Texas (ERCOT) – the organization that runs the Texas electric grid – told Cointelegraph that crypto loads can impact the grid just like any heavy load. Still, they noted that cryptocurrency miners can help stabilize the grid by stopping their demand for electricity in real time:
“Cryptocurrency mining is extremely sensitive and can shut down in a split second and stay shut down as long as needed. We are working closely with the cryptocurrency mining industry and have created a large Flexible Load Task Force to make sure we move forward with respect to network reliability and load growth in Texas.
On March 25th, ERCOT implemented an interim process to ensure that new large loads, such as Bitcoin miners, can be connected to the ERCOT network. While evaluating large load interconnects is not a new process, ERCOT explained that the timeline most cryptocurrency miners are working on requires a new process to ensure existing standards for new large load interconnects are met. ERCOT’s Technical Advisory Committee approved the creation of a “Large Flexible Load Task Force” on March 30 to help develop a long-term process to replace the current interim process.
Software providers want to help miners balance the network
While it’s notable that ERCOT is helping Bitcoin miners connect to the Texas network faster, software providers have also begun working with miners to ensure they have the tools needed to properly balance the network.
Michael McNamara, co-founder and CEO of Lancium — a Texas-based energy and infrastructure company — told Cointelegraph during Texas Blockchain Summit that in 2020, Lancium demonstrated how a bitcoin mine can work as a manageable load:
“For loads to qualify as a controllable load source in ERCOT, customers must be able to do two things. First, it must reach the target level of power consumption – either more or less – according to ERCOT guidelines in less than 15 seconds. Second, they should provide “primary frequency response”. This means miners must be able to respond to a loss of production – such as an unexpected shutdown of a thermal plant – within 15 seconds.”
Given these requirements, McNamara shared that Lancium has licensed software to certain Bitcoin miners to act as controllable loads within ERCOT to provide network stability services. Known as Lancium Smart Response, McNamara explained that the software works by automatically responding to electrical grid conditions and signals within seconds.
“When it comes to meeting ERCOT requirements, software like Lancium Smart Response is essential to meeting ERCOT’s required time. Controllable load sources provide more surgical and precise grid stabilization benefits than other demand response programs – and customers are rewarded at a higher level for providing these more valuable services to the grid,” he explained.
For example, McNamara pointed out that miners using Lancium software can become certified by ERCOT to participate in its various grid stabilization programs, which could help operators generate more revenue while reducing energy costs by 50%.
Specifically, an ERCOT spokesperson told Cointelegraph that ERCOT has a program for any load to participate in providing additional services. According to ERCOT, these programs require loads to qualify to provide these services. “Some cryptocurrency miners have qualified to offer these services similar to other loads that participate in these existing programs. These programs are commonly referred to as demand response programs, and operations voluntarily choose to ‘reduce’ participation,” ERCOT said.
While McNamara was unable to comment on which miners will use Lancium Smart Response, Dan Lawrence, CEO of Foreman Mining, told Cointelegraph that Bitcoin miner CleanSpark uses his firm’s software to manage its operations.
Taylor Monnig, VP of mining technology at CleanSpark, told Cointelegraph that Foreman allows miners to effectively curtail operations instead of flipping breakers. “The load can then be directed to where it’s needed, essentially acting like a battery,” he said.
Automation is really important for Bitcoin miners participating in load response programs. To put this into perspective, Sam Cohen, head of business development at Foreman, told Cointelegraph that the software allows a miner to achieve a goal at scale.
“As an example, if a curtailment service provider asks a miner to reduce their consumption by 10MW, Foreman can reduce their load in less than a minute without operator intervention,” he explained.
Monnig added that Foreman allowed CleanSpark to program its machines to stop hashing when necessary. “For example, the S19 miner will drop from 3,000 watts to 90 watts in sleep mode. Then, when the network does not need power, the machines turn on again. It’s all automated.”
However, unlike Lancium, Foreman does not currently work directly with ERCOT. “We would like to work more closely with ERCOT and I believe we are ready to do so. However, there is a lot of red tape involved in working at ERCOT,” he said.
Because of this, Foreman worries that the growing Texas mining industry may be controlled by a handful of players rather than many software providers. “Foreman Pushes Bitcoin Mining Decentralization. If things continue on the path they are headed, it is possible that all large-scale manageable mining workloads in Texas could be controlled by a handful of providers, demonstrating the source of centralization,” he noted.
Bitcoin mining as a source of controllable load
Centralization aside, Gideon Powell, CEO and Chairman of Cholla Petroleum Inc. — a Texas-based exploration company focused on the energy sector — told Cointelegraph that he believes bitcoin mining is the peak of the burden for demand response programs like those pioneered and developed. from ERCOT.
“When we run out of power on the grid, we have two options: spin up more generators or just reduce power consumption. As individuals, it’s hard. But bitcoin miners and software companies allow ERCOT to view and manage these loads to provide a demand response that is much more in line with traditional generator operation (in reverse),” he said.
Powell added that bitcoin mining can help power the Texas grid as wind and solar power become more common. For example, he noted that grids have historically been thought of in terms of heat generation because the heat generation allows the pulp to always match the generation and load. Still, he noted that wind and solar are intermittent, making load balancing difficult because these renewables are constantly up and down.
“Many companies have developed technology that allows Bitcoin miners and other data centers that use latency agnostic computing to respond to instructions from ERCOT or react to real-time prices on the network. When energy is scarce, prices go up and Bitcoin miners and many others can take a cut,” he explained.
Powell went on to argue that ERCOT is the freest market network in the world with the regulatory framework needed to support a bottom-up solution. “That’s why Texas will continue to attract the energy entrepreneurs needed for increasingly complex energy markets.”
While this is noteworthy, it is important to emphasize that Bitcoin energy consumption continues to rise year-on-year, which may result in tighter regulation. However, McNamara remains optimistic, noting that bitcoin mining continues to be a friendly resource for the Texas network, which also shows the potential the technology could have in other regions.