HOUSTON – Houston-based tech company Lancium announced Tuesday it raised $150 million to build bitcoin mines across Texas that will run on renewable energy. 

Lancium says that the company will launch more than 2000 megawatts of power across its many sites in 2019, which Lancium calls “Clean campuses”. Let’s look at this in context. downtown Dallas uses 200 megawattsIt is worth the effort. 

Lancium stated that Hanwha Solutions was the leader of this round, as well other power companies.

Michael McNamara, chief executive officer of Lancium, stated that he believes that all the energy companies are investing in bitcoin mining.

Bitcoin mining is used for two reasons: to create new digital coins as well as keep track of any transactions made with existing ones. Miners all over the globe use their computing power and contribute to the verification of bitcoin transactions. 

These energy traders require a lot energy to log these exchanges. But they also provide something Texas needs now, a flexible buyer who will buy when supplies are plentiful and then shut down when not. This flexibility can be a big help in stabilizing an unstable grid like solar and wind. 

If it’s particularly sunny or windy, the grid will be full of power but not always with enough people. When it is cloudy or there’s not a breeze the demand may outstrip supply. This can cause extreme supply/demand curves that lead to high prices. This is not good news for the grid. Bitcoin mining is able to offset these price swings.

Texas is also a great place to work for miners. 

The state boasts some of the cheapest sources of energy on the planet – a major incentive to miners who compete in a low-margin industry, where their only variable cost is typically energy. You will also find many land, as well as crypto-progressive and friendly politicians.

Brandon Arvanaghi, bitcoin mining engineer, said, “Bitcoin was made for the Grid.” Meow is a company which allows corporate treasury to participate in crypto markets.

Arvanaghi said, “It’s like a match made for heaven.”

The “U.S. Wind belt” is a large area of West Texas that includes the areas with the highest winds speeds in the country. It also boasts the most affordable utility-scale sun in America. 2.8 cents per kilowatt hour. 

The Texas grid’s wind and solar share is growing at an accelerating pace. from 9% in 2011 to 26% of the gridConnell anticipates this rate of growth will increase in the coming years.

Connell stated that “we’re adding 14 gigawatts solar and wind in this year.” Connell stated, “What it took to generate 35 gigawatts solar and wind in 20 years… we’re going to double that over the next five-years. And this is all happening in West Texas.”

All of the renewable energy that is being put onto the grid should be considered a positive thing because it will replace less environmentally-friendly sources like natural gas and coal. 

However, it can also cause logistical problems.

McNamara stated that “the grid of the future” is a problem. According to Lancium’s chief, there is an inequality between the locations where most solar and wind energy is captured and customers. 

McNamara said, “You cannot build a 1000-megawatt sunspot in New York City, Tokyo, Frankfurt.” 

Also, it is important to ensure that renewable energy sources can meet the minimal demand for an electric grid. It is also known as baseload in industry and is something many renewables are lacking.

Nic Carter, Castle Island Ventures founder and partner explained that “Solar or wind don’t produce power as a basisload.”

“Solar works 10 hours a day and with wind – it could be windy or there could be none whatsoever. That means that you must be prepared to lose any form of renewable energy at any moment,” Carter said.

Carter says there are two options to prepare for a zero output. The shortfall can be compensated with natural gas as a power source, which requires the spinning of turbines at short notice in order to counter the volatile nature of renewables. 

The Lancium technology, which was recently patented, makes it possible to transform bitcoin mines into an incremental demand dial. This can be changed up and down as quickly as 5 seconds. 

Carter stated, “Instead of matching supply and demand by fiddling with the supply variable,” 

This company builds mines in areas where solar and wind are plentiful and the transmission system constrained. The lines are not full, so power does not want to flow down them. 

Clean Campuses are also expected to house high-throughput computing, and other energy-intensive apps, which will help solve congestion. 

McNamara explains that Lancium’s locations act in the reverse of a power plant. When there is excess supply, the mines absorb it. This will allow them to monetize these assets when they are not being bought. The flip side is that the mines will slowly reduce their energy consumption as more people use the grid. 

McNamara stated that “In times when there is scarcity, data centers can go down and these lines will be able to carry renewable energy to Houston and Dallas, where they are needed,”

The addition of bitcoin miners into the energy buyer portfolio helps improve the economics of renewable power generation, which is fraught with volatility. CNBC spoke to Connell about negative energy prices for West Texas in 2020. That is, when there are more supply than demand. 

Carter tells CNBC, “Renewables in Texas are also economically viable if there’s demand for semi-stranded asset,”

West Texas only has 12 gigawatts transmitting power and five gigawatts demand. This constraint means that it is home to approximately 34 gigawatts in electricity.

Bitcoin miners can be thought of as temporary buyers who keep these energy assets in operation until new transmission channels allow them to absorb the stranded sources.

McNamara claims that this will have the combined effect of reducing the use of coal and gas, and rapidly increasing the availability and cost of solar energy. This makes bitcoin mining an “inherently decarbonizing technology.”

Chad Harris runs America’s most important bitcoin mine. He had a great way of explaining the dynamics. A crowd of Houston’s bitcoin miners, oil and gas executives and others heard him tell them that they are the “most efficient battery on market.” 

It is instead able to enjoy a number of financial benefits through its agreement with Texas’ non-profit operator. The Electric Reliability Council of Texas ERCOTERCOT is a bitcoin mining company that has an easy and beneficial relationship with.

Imagine how much Amazon would pay to tell you, “Hey, there is too much power demand.” Arvanaghi said, “Please power down your data centre.” 

Arvanaghi said, “But that it can with bitcoin very easily. All you have to pay the miners slightly less than what they would make mining for Bitcoin that hour.”

Even those bitcoin miners who don’t have a deal made with ERCOT may choose to turn down power when there is high demand. Lancium data shows that if miners were willing to lower their uptime expectations from 100% and 95% to 25 percent in 2021, their per megawatt-hour price would have dropped from $178 a to $25. 

The Texas grid is a little isolated island that requires this strategically timed energy curtailment. 

90% of Texas, unlike the rest of continental America that falls under either the Eastern interconnection or Western interconnection (the names given to the interconnected power networks linking the states), runs on ERCOT. It is a deregulated independent network of energy providers and not tied to any other U.S. grid. 

This competitive market can drive down power prices as suppliers compete to win customers. However, this also reduces the safety net built into the grid. In the event of an emergency, such as a power cut or a natural catastrophe, this can cause problems. 

As a form of insurance, adding a controllable load resource such as bitcoin miners to your grid is a kind of life insurance. This is almost like an insurance policy against catastrophe.

Lancium and ERCOT have an exclusive arrangement that allows them to precisely match power shortage or surplus specifications. SmartResponse software from Lancium allows data centers and bitcoin mines to adjust their electricity consumption according to the power grid.

Lancium can then power down specific miners to enable it to toggle the grid to its exact requirements. 

Lancium and other bitcoin miners know that this is a very important part of their lives. The gear is not worn out by constant powering on and off, so bitcoin doesn’t have an uptime requirement. This is a win-win situation.

“That’s the beauty of bitcoin – it’s something no other industry can really do,” Arvanaghi told CNBC. It is very harmonious.