During a heatwave, Texas compensated a Bitcoin mining operation with over $31 million to reduce its energy consumption.

During a recent scorching heatwave in Texas, Riot Platforms, a prominent bitcoin mining operation, received substantial financial incentives from the state to reduce its energy consumption. Instead of solely focusing on the energy-intensive process of minting digital currency through thousands of computers, Riot Platforms received a significant sum from Texas.

In August, Riot disclosed that the Electric Reliability Council of Texas (ERCOT), responsible for managing the state’s power grid, disbursed $31.7 million in energy credits to the company. This amount exceeded the value of the bitcoin mined that month by approximately $22 million. The purpose of these credits is to encourage companies to curtail activities that could strain Texas’ already burdened energy system, especially during periods of extreme weather.

Jason Les, CEO of Riot, highlighted the profound impact of these credits on the cost efficiency of their bitcoin mining operations, positioning Riot as one of the industry’s most cost-effective bitcoin producers. It’s worth noting that Riot, a publicly traded company, reported a loss of over $500 million in 2022, despite generating $259.2 million in revenue. In its most recent quarter, it incurred a loss of approximately $27 million on $76.7 million in revenue.

Texas has been grappling with escalating demand for energy due to climate change-induced extreme weather events. In 2021, a severe snowstorm caused a blackout, affecting residents when coal and gas facilities, nuclear plants, and wind turbines were knocked out.

The strain on the state’s power grid remains an ongoing concern. Recently, Texas officials declared an emergency due to soaring temperatures, which raised the specter of rolling blackouts across the state. ERCOT urged residents and business owners to conserve energy between 5 p.m. and 9 p.m. to alleviate the situation.

Bitcoin mining, a process that involves verifying virtual transactions on a computer network in exchange for bitcoin, is notorious for its high energy consumption. According to data from the Cambridge Center for Alternative Finance, Bitcoin consumes approximately 110 Terawatt Hours per year, equivalent to around 0.55% of global electricity production, roughly on par with Sweden’s consumption.

The issue of heavy energy consumption by bitcoin mining has sparked controversy in Texas. Some residents are expressing discontent, feeling that their tax dollars are subsidizing energy credits for miners. In Navarro County, Texas, a petition opposing a bitcoin mining facility garnered nearly 1,200 signatures, citing concerns about the strain on local infrastructure.

Texas lawmakers have also grown cautious about cryptocurrency mining. In April, the state’s senate passed a bill aimed at curbing incentives for miners participating in the state’s energy grid load-reduction program.

For now, these energy credits serve as a lifeline for Riot and other bitcoin miners whose profitability has been eroded by the cryptocurrency market downturn, exacerbated by the collapse of the FTX exchange last fall.

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