The Power (Needed) to Coin Money
The Public Utility Commission of Texas voted on November 21 to require cryptocurrency mining facilities consuming more than 75 MW within ERCOT to register with state regulators. Texas has become quite the epicenter of the rapidly expanding “crypto” uni-verse, and this regulatory development not only reflects a recognition of the impact of that growth on the energy industry, a pillar of the Lone Star State’s economy in its own right, but also exposes a potential shortcoming of the burgeoning sector.
A creature of cyberspace, crypto is inextricably tethered to and continuously dependent on functioning computers and other electronic infrastructure for its very existence and legitimacy, such as it is. Consequently, crypto miners increasingly strain power grids as the popularity of bitcoin and similar digital currencies continues to rise, and the issue is especially acute in Texas. Robert Walton, writing for Utility Dive, reported on November 25 that, whereas crypto miners, per the U.S. Energy Information Administration, consume 0.6%-2.3% of all U.S. electricity, ERCOT sorts their power needs into a bigger bucket labeled “large flexible loads,” whose “[aggregate] demand in Texas could total 54 billion kWh in 2025, up almost 60% from expected demand this year,” and “would represent about 10% of total forecast electricity consumption on the ERCOT grid next year.” Conceivably, speculators could decide that being part of a group responsible for so much energy usage makes crypto more trouble than it is worth.
In their present forms, standard banking and finance at large also employ a sprawling technological apparatus that requires immense amounts of electricity. However, those institutions represent a more or less natural evolution of systems that began well before the Industrial Revolution, still manage to manage the entire economy, and, if necessary, can always return to their origins in physical media requiring no more energy than the finite quantities needed to run the printing presses and coin stampers. Moreover, those legacy systems are currently what confer value on crypto in the first place, for, ironically, many of those who hoard bitcoin and other supposed substitutes for the regular U.S. dollar do so primarily because of what they fetch in regular U.S. dollars, rendering crypto redundant at best and unnecessary at worst. The status of crypto as legal tender, subject to the whims of the U.S. Congress, is tenuous as well.
The negative effect of its substantial associated energy demand on the price of electricity is just another hindrance that may impair the viability of crypto in the long run. Electricity will perpetually be an essential input factored into determining its value, which energy consumers, the vast majority of whom still pay their utility bills the old-fashioned way, may ultimately deem far less than advertised.