ERCOT paid a Bitcoin miner over $13 million to curtail electric use in summer heatwave (2024)

ERCOT paid bitcoin mining company Riot Platforms $2.5 million in September for voluntarily reducing its energy consumption as Texas’ historic heat wave pummeled the state’s battle-tested energy grid.

The latest credits mean the Electric Reliability Council of Texas’ paid the Castle Rock, Colo.-based company $13.3 million from June to September to curtail its energy use during peak summer demand for electricity.

The company also earned $11 million in power credits in September for selling prepurchased energy to TXU. Riot received $41.6 million in credits by selling its energy back to TXU from July to September. It didn’t disclose how much it earned in power credits in its June report.

ERCOT and TXU did not respond to an interview request from The Dallas Morning News.

The company said its deals with the state put it in an advantageous position. It uses the credits to pay its electric bills.

“September represented another significant month for Riot as we were able to clearly demonstrate the value of bitcoin mining while contributing to the stability of the ERCOT electrical grid,” Riot CEO Jason Les said in a statement. “When coupled with our ability to be a flexible user of power, Riot’s sizeable long-term, fixed-price power contracts represent a differentiated advantage for the company, while simultaneously making electrical capacity available to the grid when it is most needed, ensuring customers do not experience disruptions in service during periods of increased power demand.”

By curtailing its operations, Riot said it effectively doubled the revenue it would have gotten from bitcoin mining in September.

Riot mined 362 bitcoin last month, but the money it earned from its deals with ERCOT and TXU equates to approximately 511 bitcoin, the company said. At mid-day Thursday, bitcoin was trading at $27,521.

The company’s agreement with TXU runs through April 30, 2030. However, its deal with ERCOT is different, said Pierre Rochard, vice president of research for Riot.

ERCOT uses ancillary services to manage uncertainty and variability on the grid. The state purchases the services the day before the operating day to mitigate volatility in the marketplace. Customers and power generators can provide ERCOT with those services to increase or decrease the electricity supply.

Rochard said Riot’s work with ERCOT is good for both the company and the state’s residents.

“It’s a competitive bidding process, whereby having bitcoin miners participate in the bidding process, we are actually pushing down the cost of procuring ancillary services that get passed on to the ratepayers,” Rochard said. “If we win a bid with ERCOT, it’s because we were competitive on a day-to-day basis. Not that we’ve locked into anything long-term.”

Anxiety over the proliferation of cryptocurrency miners in Texas and their drain on the grid has spawned a proposed regulation that could affect oil fields, steel mills and other major electricity consumers. The proposal would require large electric consumers to get ERCOT’s approval before connecting to the grid.

Last year, Massachusetts Sen. Elizabeth Warren called on Texas to investigate the state’s subsidies to bitcoin miners. ERCOT responded the next month, denying Warren’s claims.

“Cryptominers do not receive subsidies or any other special treatment from ERCOT,” its letter said. “To the extent recent media reports have suggested otherwise, those reports are not correct.”

Riot caught flak from Texas consumers on social media last month over how much the company earned from the state. But Rochard said he thinks the ire may stem from people’s dislike toward cryptocurrency.

“It’s not even really about the energy usage. It’s that either people like bitcoin, so it justifies the energy usage, or they don’t like bitcoin at all. So everything downstream for them is a waste,” Rochard said. “That money is going to have to be spent to procure those ancillary services anyway. If it’s going to bitcoin miners, that just means that was the most cost-effective solution.”

Riot is coming off a successful summer in which its profits soared to unprecedented levels in August after it earned $31 million from its deals with ERCOT and TXU.

Though Riot hasn’t fully recovered from the market’s downward shift in 2022 when energy prices rose, the company is entering October with strong momentum. Its shares were up 16% at $10.84 on Oct. 2, according to Benzinga Crypto.

The company’s investment in Texas isn’t stopping any time soon either. It plans to build a 265-acre bitcoin mining and data center in Corsicana, and it finished upgrading its Rockdale facility in late June, according to the company’s latest quarterly report.