Although Bitcoin (BTC) mining remains a controversial topic, it is becoming more common to hear how Bitcoin mining can help balance network demand. This is demonstrated in the state of Texas, as Bitcoin miners can participate in demand response programs, which encourage miners to stop operations during peak demand.
A spokesperson for the Electric Reliability Council of Texas (ERCOT) — the organization that manages Texas’ electric grid — told Cointelegraph that cryptocurrency loads can affect the grid like any large load. However, they noted that cryptocurrencies can help stabilize the grid by cutting their electricity demand in real-time:
“Crypto mining is extraordinarily sensitive and can shut down in a fraction of a second and stay connected for as long as needed. We are working closely with the crypto industry and have built a large agile cargo task force to make sure we move forward with the reliability of the network and the growth of Texas cargo.”
On March 25th, ERCOT established a temporary process to allow new large loads such as Bitcoin miners to connect to the ERCOT network. While evaluations for large-load interconnections are not a new process, ERCOT explained that the schedule most cryptocurrency miners operate on requires a new process to make sure existing standards are met for interconnecting new large loads. ERCOT’s Technical Advisory Committee approved the creation of a “Large Flexible Freight 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 helped Bitcoin miners connect to the Texas network faster, software providers have also begun working with miners to make sure they have the tools they need to properly activate the network balance.
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Michael McNamara, co-founder and CEO of Lancium, a Texas-based energy and infrastructure company, told Cointelegraph during the Texas Blockchain Summit that in 2020, Lancium demonstrated how a Bitcoin mine can function as a managed load:
“For freight to be recognized as a manageable freight resource in ERCOT, customers must be able to do two things. First, they must achieve the target energy consumption level – either more or less – as ERCOT has shown in less than 15 seconds. Second, they must provide a “fundamental frequency response.” This means that miners should be able to react to a generation loss event – for example, an unexpected trip of a thermal generator station – within 15 seconds.
With these requirements in mind, McNamara shared that Lancium has licensed software to certain Bitcoin miners to act as managed loads within ERCOT to provide network stability services. Known as Lancium Smart Response, McNamara explained, the software works by automatically responding to grid conditions and signals within seconds.
“As we meet ERCOT’s requirements, software such as Lancium Smart Response is critical to meeting the time required by ERCOT. Controllable load resources provide more surgical and precise network stabilization benefits than other demand response programs – and customers are compensated at a higher level for providing these more valuable services to the network,” he said.
For example, McNamara noted that miners using Lancium’s software can be certified by ERCOT to participate in its various grid stabilization programs, which can help operators generate higher revenues while reducing energy costs by 50%.
Specifically, an ERCOT spokesperson told Cointelegraph that ERCOT has any freight program to participate in providing ancillary services. According to ERCOT, these programs require freight to adapt to provide these services. “Some cryptocurrencies have the right to offer these services similar to other loads participating in these existing programs. These programs are commonly referred to as demand response programs, and operations voluntarily choose to participate in the ‘downsizing,’” ERCOT said.
While McNamara could not comment on which miners will implement Lancium Smart Response, Foreman Mining CEO Dan Lawrence told Cointelegraph that Bitcoin miner CleanSpark uses his firm’s software to manage its operations.
CleanSpark’s vice president of mining technologies, Taylor Monnig, told Cointelegraph that Foreman allows miners to effectively reduce operations instead of flipping switches. “The charges can then be directed to where they are needed, essentially acting like a battery,” he said.
Indeed, automation is essential for Bitcoin miners participating in load response programs. To put this into perspective, Foreman’s head of business development Sam Cohen told Cointelegraph that the software allows the miner to target at scale.
“For example, if a miner is asked to reduce their consumption by 10 MW, Foreman can reduce their load in less than a minute without operator intervention,” he said.
Monnig added that Foreman allowed CleanSpark to program its machines to stop hashing when necessary. For example, the S19 mining machine will drop from 3000 watts to 90 watts in “sleep mode”. Then when the grid doesn’t need power, the machines start up again. All this is automated.”
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 are many bureaucratic paths to work in ERCOT.”
With that in mind, Foreman worries that the growing Texas mining industry may be dominated by a few players rather than a number of software providers. “Foreman promotes decentralization of Bitcoin mining. If things continue on the path they’re on, it’s possible that all large-scale manageable mining loads in Texas could be managed by a few providers, demonstrating the source of centralization.”
Bitcoin mining as a controllable load source
Centralization aside, Gideon Powell, CEO and chairman of Cholla Petroleum Inc., a Texas-based energy sector-focused exploration company, told Cointelegraph that he believes Bitcoin mining is top-of-mind for demand-response applications such as advanced and advanced applications. by ERCOT.
“When we run out of energy on the grid, we have two options: to fire up more generators or simply reduce our energy use. It’s hard to do as an individual. But Bitcoin miners and software companies allow ERCOT to view and monitor these loads to provide demand response that is more in line with the operation of a traditional generator (as opposed to).”
Powell added that Bitcoin mining could help power the Texas grid as wind and solar power become more widespread. For example, he noted that grids have historically been thought of from a thermal generation perspective, because thermal generation allows the rotating mass to always match the generation and load. However, he noted that wind and solar resources are intermittent, making load balancing difficult because these renewables are constantly up and down.
“Many companies have developed technology to enable bitcoin miners and other data centers with latency agnostic computing to meet ERCOT’s guidelines or respond to real-time prices on the network. When power is scarce, prices go up and Bitcoin miners and many others can be cut,” he said.
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Powell further argued that ERCOT is the world’s freest market network and has the regulatory framework needed to promote bottom-up solutions. “That’s why Texas will continue to attract the energy entrepreneurs needed for increasingly complex energy markets.”
While noteworthy, it is important to note that Bitcoin continues to see an increase in energy consumption year over year, which may result in stricter regulations. McNamara remains optimistic, noting that Bitcoin mining continues to be a friendly resource for the Texas network and that the technology is showing potential in other regions as well.