Since the mining ban in China, Bitcoin mining has surged in the US. With over 50% of the North American hashrate situated in Texas, the state has emerged as the Bitcoin mining capital of the United States, and arguably, of the world. This week’s article takes a close look at the mining industry in Texas, examining the extent of mining activity and the factors driving this robust growth. We will delve into the following topics:
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Massive Operational Capacity
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Home to Publicly Traded Companies
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5 Reasons for Bitcoin Mining Growth in Texas
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Energy Power House
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Large Flexible Loads (LFLs)
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Massive Operational Capacity
While mining in the US began a decade ago, a significant shift occurred when numerous crypto mining firms relocated from China following the country’s industry ban in May 2021. Over the past three years, a wave of large-scale miners has gone public in the US, with the majority establishing operations in Texas.
Earlier this year, TheMinerMag analyzed 20 publicly listed mining firms and 2 private operators in North America. Together, they claim an operational capacity of 5.42 GW, spanning across both the United States and Canada. Approximately half of this capacity is situated in Texas, making it the Bitcoin mining capital of the United States and arguably the world.
Home to Publicly Traded Companies
Texas hosts prominent publicly traded operators such as Riot Blockchain, Galaxy Digital, Bitdeer, Cipher Mining, Core Scientific, Hut 8, Applied Digital, and Iris Energy. Marathon recently joined this group by acquiring a 300 MW site in Granbury.
The Lone Star State is home to Riot Blockchain’s Rockdale Facility, boasting a total power capacity of 700 MW. This facility is believed to be the largest single facility, measured by developed capacity, in North America. Additionally, Riot has initiated the development of a 1 gigawatt (GW) site in Navarro County, Texas.
5 Reasons for Bitcoin Mining Growth in Texas
Texas has grown to dominate the Bitcoin mining industry for a variety of reasons. These are 5 important reasons why miners settle in the Lone Star State.
Abundant Energy Resources: Texas is known for its abundant energy resources, particularly wind and solar power. Additionally, it has a well-established oil and gas industry. This surplus of energy makes Texas an attractive location for Bitcoin mining operations.
Low Energy Costs: The cost of energy in Texas is relatively low compared to other states and countries. This is partly due to its deregulated energy market, which allows consumers to choose their electricity providers.
Energy Infrastructure: Texas has a robust energy infrastructure, including power plants, transmission lines, and substations, which can support large-scale Bitcoin mining operations.
Favourable Regulatory Environment: Texas has a business-friendly regulatory environment, including supportive policies for emerging industries like mining. This regulatory stability encourages investment and innovation in the sector.
Access to Skilled Workforce: Texas has a skilled workforce in technology and energy-related fields, providing mining companies with access to the talent necessary to operate and maintain sophisticated mining infrastructure.
Energy Power House
Texas stands as a powerhouse in energy production, excelling in both traditional and renewable sources. Energy constitutes a vital component of the Texan economy, with the state claiming the title of the nation’s largest energy producer, generating 47,107 thousand MWh. Texas accounts for 12.4% of the total power production in the US, producing twice as much energy as Florida, the state with the second-highest production. Here are some key points highlighting Texas’s role in energy production:
Oil and Gas: Texas has a long history as a leading producer of oil and natural gas in the United States. The state’s oil industry dates back to the early 20th century with the discovery of the Spindletop oil field near Beaumont. Today, Texas continues to be a major player in the oil and gas industry, with significant reserves and production capacity.
Renewable Energy: In recent years, Texas has emerged as a leader in renewable energy production, particularly wind and solar power. The state’s vast land area and favourable weather conditions make it well-suited for renewable energy development. Texas leads the nation in wind energy production, with wind farms across West Texas. Additionally, solar power capacity in Texas has been rapidly growing, driven by declining costs and supportive policies.
Texas operates within a deregulated energy market, empowering consumers to select their electricity providers. This competitive landscape fosters innovation and investment in energy infrastructure, resulting in reduced costs for both consumers and businesses.
Moreover, Texas holds the distinction of being the largest consumer of energy in the United States, propelled by its sizable population, robust industrial base, and energy-intensive sectors such as manufacturing, petrochemicals, and Bitcoin mining.
With its advantageous position, Texas is poised to maintain its leadership in US energy production. Planned expansions in energy generation, encompassing increased oil and gas production alongside renewable energy initiatives, are projected to drive net increases in Texas’ energy output by between 26% and 59% by 2050.
Large Flexible Loads (LFLs)
ERCOT, the operator of the Texas energy grid, has historically grappled with fluctuating energy prices and intermittent service. In response, ERCOT initiated a voluntary power curtailment program for Large Flexible Load (LFL) customers in early 2023, encouraging them to reduce power consumption during periods of peak energy demand. The objective was to bolster the grid’s resilience during extreme weather conditions.
According to Lee Bratcher, president of the industry non-profit Texas Blockchain Council, Bitcoin mining operations now constitute 95% of the Large Flexible Loads in Texas. During a heatwave last summer in Texas, there was a curtailment of over 90% in Bitcoin mining activity each day. Industrial-scale Bitcoin miners suspended operations during the power emergency, redirecting power primarily to office buildings and on-site backup systems, rather than to the mining machines themselves.
Some miners can mitigate the impact of curtailments by securing low prices through long-term power contracts. Additionally, certain mining companies participate in demand response programs provided by the Electric Reliability Council of Texas. In August 2023, Riot set a record by earning $31.7 million in power credits after selling pre-purchased electricity back to the grid.
