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Issue #1382: Bitcoin Mining Should Be Incentivizing Reliable Base Load

Issue #1382: Bitcoin Mining Should Be Incentivizing Reliable Base Load

Sep 6, 2023
Marty's Ƀent

Issue #1382: Bitcoin Mining Should Be Incentivizing Reliable Base Load

It's the week after Labor Day in Texas. Temperatures are still in the low 100s and everyone who escaped the Summer heat for cooler destinations has returned for work. Your Uncle Marty is proof of this. I returned from the beautiful beaches of South Jersey over the weekend and have been home turning my air conditioner to cooler temperatures and my lights on. My return along with tens of thousands of other Texans has significantly increased the demand on Texas' grid. Earlier tonight, the demand for electricity within ERCOT was so high that it temporarily brushed up against the available supply and almost led to blackouts.

Luckily for myself and the tens of millions of my Texas compatriots bitcoin miners reacted within seconds to turn down their machines so that they could send electricity back to the grid to prevent rolling blackouts from materializing. Above, our friend Pierre Rochard points out that demand brushed up with generation supply because wind generation absolutely shit the bed as it has been doing all Summer (you'd think people would understand that part of the reason that it gets hot is because the wind stops blowing) and the sun did what it does every day in the evening, it set. The culmination of these two factors led to the shortage of supply that almost made my lights go out.

We have two important lessons to take from tonight's close call; bitcoin miners are undeniably becoming one of the most integral parts of any grid system that fanies itself as robust and unreliable energy generation is a big problem. Thank God for the large bitcoin miners in the state and their ability to react quickly to demand signals from the grid. Without them, it is likely that there would have been rolling blackouts. And for those of you thinking, "That's not true! That electricity would have been available to the grid anyway if miners weren't there sucking it up!" this is simply not true. By using that electricity when demand is lower, miners are providing power companies with significant revenue streams that allow them to run profitably and build out more generation and transmission.

However, it should be understood that this is a very nuanced discussion and there are ways that bitcoin miners may be aiding in the degradation of the grid system. And that degradation is driven by the fact that some large mining operations are incentivizing the build out of more unreliable solar and wind power generation because they are promising to consume electricity while transmission lines are built out. Once those transmission lines are built out that power will be able to be delivered to market, but NOTHING will fix the reliability issues that comes with these energy sources.

The solution to the problem we faced within ERCOT today is not more wind and solar generation. The solution is the build out of reliable base load in the form of nuclear, natural gas and coal plants to the point of absurdity. There should be 2-3x the amount of generation that should ever be demanded by the grid at any given point in time and miners should use the excess to facilitate the production of bitcoin blocks and ensure the profitability of power companies. We shouldn't be getting cute by trying to brute force wind and solar generation onto the market. It's a pretty straightforward problem to solve. There are more people and industrial activity moving to Texas than ever before, it gets really hot in the Summer, and we need more reliable electricity to support the growth within the state.

Unfortunately, at the moment it is hard to build out more reliable energy infrastructure because the unreliable infrastructure is being heavily subsidized, which is artificially manipulating opportunity costs and pricing new reliable generation sources out of the market. The ham-fisted nature of renewable energy subsidies is actively harming the reliability of the grid system. It's a great shame because the free market has the solution; interruptible bitcoin mining operations. There is no need for subsidies to solve this problem. They only serve to make the problem worse. And one of my fears is that an industry that I love, that I'm passionate about, and that I know can provide the necessary solutions for the market is succumbing to the siren calls of fiat by running with the "incentivization of renewable build outs" meme. I caution anyone who is pushing this meme to think twice because when the fiat experiment explodes and those subsidies disappear you are going to wake up and be running a wildly unprofitable company and you'll have aided in the destruction of our grid systems.

Final thought...

I can't find my laptop charger.

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