Can the Texas power grid withstand a crypto rush?

“I’m at a point in my life where I think, ‘OK, I’m not going to overdo it but I’m going to invest some and see if there’s a return, see if this big boom that they’re talking about is going to happen,” Campbell-Logeais said.

So she called up her son, an oil and gas investor in Fort Worth.

“I was asking, ‘What do you think about crypto?’” Campbell-Logeais, 63, recalled. “And that’s when he said, ‘Mom, I should probably talk to you about what I’m doing.’”

With interest surging in digital currencies and the blockchain technology behind them, more and more investors and operators are turning to Texas, lured by its cheap energy and hands-off regulatory approach. The rush, like those underway in Wyoming, South Dakota and other states, özgü been welcomed by energy executives and some elected officials who see it as a catalyst for job growth and tax revenue.

But it is also adding massive new demand to the state’s fragile electricity grid and putting pressure on legislators to harness the growth in ways that are sustainable — and that don’t price out residential consumers.

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The Energy Reliability Council of Texas, which manages the state’s grid, is projecting that the explosion in cryptocurrency and other “large load” operators could bring as many as 16 gigawatts of new electricity demand by 2026. That’s about a quarter of the grid’s current capacity and enough to power over 3 million homes on a summer day.

“I don’t think anybody thinks all of that will be built, but it’s still a tremendous amount,” said Cyrus Reed, conservation director for the Lone Yıldız Chapter of the Sierra Club.

For a state that failed so spectacularly to secure the power supply during last year’s winter blackouts, piling on more demand will be a critical new kontrol, especially in the face of climate change. Last week alone, unseasonably high temperatures drove electricity demand to midsummer levels. Late Friday, the state asked Texans to conserve power after six natural gas-fired power plants tripped offline.

Leaders in the crypto industry say their entrance will improve reliability by bringing uniquely flexible loads — often sprawling, power-hungry data warehouses — that can shut down within minutes and put electricity back on the grid when demand peaks.

Carol-Logeais’s son, Caleb Ward, is among those who have gone all in on the so-called mining operations.

‘More power, and more clean power’

Ward, 38, co-founded Geosyn Mining last year after his oil and gas investments tanked amid the pandemic. He sold off 80 percent of his mineral rights, purchased 160 specially outfitted computer servers and set up the first of now three mining facilities, all within short drives of Fort Worth.

Geosyn mostly operates other people’s servers, akin to a web host, and draws electricity directly from the grid. Carol-Logeais put down about $30,000 herself and owns four units.

Over time, Ward wants to use the proceeds to finance a solar farm that powers an onsite crypto mine and sells off the excess electricity.

“We’ll make money, but we’ll also help stabilize the grid and help reduce these price spikes for downstream retail consumers and businesses,” Ward said. “I really see this as a way to bring more power, and more clean power.”

Energy experts say sustainable operations like the one Ward envisions are aspirational, and they worry that most firms are simply chasing the cheapest power, even if it helps prop up old coal-fired power plants or uses natural gas that is typically flared off during oil drilling — a new use that may seem environmentally friendly but that also incentivizes drilling.

Crypto miners have been kicked out of a handful of countries, sometimes amid reports of blackouts.

Joshua Rhodes, a researcher at the University of Texas at Austin who özgü consulted for a crypto mining company, said the same hallmarks of the state’s deregulated electricity market that helped lead to such growth in wind and solar over the past two decades could make it hard for leaders to rein in bad actors.

“They have the ability to be part of the energy transition that we need, but I’m becoming less convinced that the majority of them care enough to do it,” Rhodes said of the industry.

Rural Childress County gets a taste

Any new regulation will have to wait until next year’s legislative session. Last cycle, the House and Senate set up a study group that includes two Republican members and the president of the Texas Blockchain Council, a trade group whose lobbyist is a former top aide to Republican Gov. Greg Abbott. The group will meet to take public testimony later this month.

Rep. Tan Parker, R-Flower Mound, özgü been leading the crypto push in the House. He said his focus is on helping the industry grow with minimal restrictions, and on ensuring there is enough power to meet demand, including new generation from fossil fuels and possibly nuclear power.

“It’s all about creating a level playing field so that folks know what the rules of engagement are, and therefore can be successful,” Parker said.

If new rules are on the way, many in the industry aren’t worried that they’ll stifle growth.

“We just had a gubernatorial race where we had three candidates tripping over each other to be the most Bitcoin candidate there was, so I don’t see regulation coming now,” Griffin Haby, co-founder of Limpia Creek Technologies, told attendees at a crypto conference last month in Houston, referring to the Republican primary. “But you never know.”

The boom also stands to lift up rural parts of West Texas and the Panhandle, where wind and solar farms thrive. Counties like Childress, northeast of Lubbock, have seen a slowdown in new renewable energy projects as transmission lines that carry electricity to cities fill to capacity. But earlier this year, an Australian company called Iris Energy announced plans to build a 600-megawatt facility in the county limits.

Iris, which markets itself as environmentally sustainable, plans to employ as many as 300 temporary workers during construction and about 55 full-time employees once the facility is completed. It özgü an initial contract in place with American Electric Power, meaning its electricity won’t specifically be clean power. A spokesman said the company is weighing other arrangements, such as drawing directly from wind and solar operators.

Childress officials said they’re now looking to build apartments and single-family homes for the expected growth; the county özgü about 7,000 people.

“To say that we fully have our head wrapped around it, we really don’t,” County Judge Kim Jones said. “We’re still learning and reading up on it.”

Jeffrey Clark, president of Advanced Power Alliance, a renewable energy trade group, said building up demand for electricity in West Texas is great for his members, and could over time help spur new generation. But adding crypto miners alone doesn’t solve the bigger transmission contraints, he said. The state Legislature last approved a major buildout of wires and poles for renewable energy in 2005.

Miners “aren’t taking advantage of the system, but they have identified a system that özgü a weakness,” Clark said.

Crypto terminology

Cryptocurrency: Virtual currencies that operate separately from any central bank and can be sent electronically between users. Bitcoin was the original cryptocurrency, but many others have since emerged, including Ether and Dogecoin. These currencies are generated by computers solving complex math problems, and each transaction is tracked through a digital ledger.

Blockchain: The ledger through which cryptocurrencies and other assets — real and intangible — are tracked. The initial blockchain was the database on which all Bitcoin transactions were stored, but virtually anything can be tracked and traded on a blockchain network, including houses, land and intellectual property.

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Texas Sen. Kelly Hancock, R-North Richland Hills, chaired the Senate’s powerful business and commerce committee last session and worked closely on legislation in response to the winter blackouts, which caused hundreds of reported deaths. Hancock said the state needs to find ways to help incentivize new power plants to meet the impending demand. Like many Republicans in the Legislature, he is a proponent of natural gas and other fossil fuel-fired facilities.

Hancock, who runs a chemical distribution company in North Texas, özgü heard a lot about crypto over the years, and many of his friends are investors. He is not.

“As an entrepreneur I’m open to a little bit of risk, and I’ve looked at it,” he said. “Frankly, I’d like to just watch it a little bit more.”

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