Grid reliability must always be maintained by ensuring that demand is equal to supply. Although ERCOT can alter the supply side by turning natural gas turbines up/down on short notice in order to adjust for fluctuations, the goal of grid operators is to keep balance. 

ERCOT can pay industrial customers to reduce their power use through its “demand response” programs. The grid may also ask residential customers to conserve power if the curtailment fails. And when all else fails, ERCOT can run rolling blackouts, shutting down different parts of the state in quick succession — but with no one patch suffering an outage for an extended period of time.

The problem with that first — and best — option is that many of these arrangements between ERCOT and energy buyers require response times of ten to thirty minutes. However, ERCOT’s independence means that the grid can respond much quicker, at times in the range between sub-seconds to ten minutes, says Connell of Lancium.

Bitcoin mining is here to help. When the grid has a problem or requires extra power, miners can shut down all their machines in seconds. There is no requirement for uptime, and the equipment does not wear down from being turned on and off often. 

This is also a good investment for miners. Miners commit to buying a certain amount of power, and either use it for mining if the grid doesn’t need it, or sell it back at a profit if the grid demands it.

Think about how much Amazon would charge you to say “Hey! There’s too many people who want power.” Brandon Arvanaghi (a bitcoin mining engineer) said, “Please power down your data centre,” and now owns Meow which enables corporate Treasury participation in crypto markets.

Arvanaghi continued, “But it is able to do that with Bitcoin very easily because all you need to do as they have done mining for bitcoin this hour was pay them slightly more.”

Even miners of bitcoin who have not made a deal to ERCOT will sometimes turn off their computers during peak demand when the prices rise.

Lancium builds bitcoin mines in areas where solar and wind are plentiful and the transmission system constrained. This means that the power lines can be full but it is not possible to move the energy down. 

According to Michael McNamara, Lancium’s Chief Executive Officer, the sites are like large power stations but reversed. These mines will be able to absorb enough renewable energy when demand is high and monetize the assets in times of low supply. The flip side is that the mines will slowly reduce their energy consumption as more people use the grid. 

You can think of Bitcoin miners almost as temporary buyers who keep these energy assets in operation until they are fully absorbed by the grid.

McNamara said, “In times when there is scarcity, data centers will shut down. These lines can transport the renewable energy to Houston and Dallas where they need it.”

CNBC hears McNamara say that the result is that coal and natural gas are being retired faster and renewable energy sources such as wind and solar can be added quickly. It makes Bitcoin mining an essentially decarbonizing technology.

Bitcoin is also a way to access the natural gas reserves that are locked up by the government.

Oil and gas companies struggled for years with how to deal with an oil spillage. Gas delivery is more difficult than oil. It can be easily trucked to distant destinations, but it’s possible for oil.  

A drilling company will often chuck gas into a pipeline if it is next to one. They then take the money the buyer is willing to give them. Things get complicated if the drilling site is more than 20 miles away from a pipeline. 

Most of the time, the amount of gas in the well will not be large enough for it to justify building a brand new pipeline. Most people dispose of their gas reserves on the spot if a driller is unable to find an easy way to get it sold.

One method is to vent it, which releases methane directly into the air – a poor choice for the environment, as its greenhouse effects are shown to be much stronger than carbon dioxide. Flamming it is a more eco-friendly option. This involves actually setting the gas on fire. 

According to Adam Ortolf (head of business development for Upstream Data in the U.S.), flares can only be 75% to 90% effective. Upstream Data manufactures and sells portable mining solutions that are used for oil and natural gas plants. He said that some methane can be vented even with flares, without having to be combusted.

This is where on-site mining of bitcoin can be particularly impactful.

Ortolf claims that methane becomes 100% combustible when it’s run through an engine or generator.

He said that no one will use a generator to run the gas unless it is economically feasible. Generators are expensive to purchase and maintain. The producers will not internal combust gas if it isn’t economically viable.

Bitcoin is economically viable

The Permian in West Texas is currently burning 50 percent of the country’s natural gas. Cruz stated in October that he believes that bitcoin has a huge opportunity because it’s energy that is being lost.

Wood Mackenzie analyst Hertz Shargel believes that Bitcoin could double ERCOT’s demand, but not like Cruz. He doesn’t believe additional demand to be a positive thing.

“His analogy is this: “If you quit smoking for two packs daily and stop taking one pack when on vacation, it won’t be good for your overall health.”

“The net impact is a very large addition of load onto the grid,” agrees Adrian Shelley, who runs the Texas branch of Public Citizen, a consumer advocacy and lobbying group. Shelley believes that some of this consumption may not be concentrated in times of surplus energy.

Shelley said to CNBC, “I don’t know that it would happen that they would only consume energy for which there was no demand.”

Hertz Shargel claims that ERCOT needs to be focused on grid improvement to facilitate the transfer of power from wind and solar farms to large consumers centers. Hertz Shargel also believes bitcoin miners won’t work well to address demand fluctuations. Instead, he argues, “the intermittency of renewables should be met with demand response from societally-beneficial loads, like industrial facilities, commercial buildings, and residential air conditioners — or energy storage.”

But ERCOT interim CEO Brad Jones thinks bitcoin miners can be helpful.

James is currently touring Texas and has hosted public events for Texans to address questions about the grid. Common questions include the effect of cryptocurrency mining on grid, winter weather and the impacts it has on electricity.

James stated that although he supports bitcoin, he is not a good investor. This was his message to residents of Frisco Texas. ERCOT’s chief explained the beneficial and mutually beneficial relationship that exists between the grid, bitcoin miners.

James explained that a lot of these solar or wind plants can provide power at a low power level, which is negative $23/megawatt hour. This is a huge opportunity for bitcoins. You can pay them to exercise power. They can get paid to use power. However, this is not always a bad thing.

James asserts that the market is not healthy if there’s too much negative power. Bitcoin miners can “soak up” some negative energy and then shut off when they see the price of electricity rise (around $100 according James).

It’s a great resource that we have.