Riot Blockchain Made More in Power Credits Than Bitcoin

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row upon row of wires attached to computer units and fans sit on warehouse shelves. A lone man stands at the far end of these machines.

The bit­coin min­ing machines in the Whin­stone Bit­coin min­ing facil­i­ty in Rock­dale, Texas, owned and oper­at­ed by Riot Blockchain.
Pho­to: MARK FELIX/AFP /AFP (Get­ty Images)

At least one big bit­coin min­ing oper­a­tion in Texas that was not actu­al­ly min­ing much bit­coin dur­ing this season’s record-break­ing heat net­ted mil­lions of dol­lars in profits—more than they would have if they just kept on min­ing with­out any shut­downs. It’s thanks to pow­er pur­chase agree­ments signed with the local grid, allow­ing them to sell elec­tric­i­ty they pur­chased ear­li­er back to the provider for a tidy sum.

Riot Blockchain itself announced it had made an esti­mat­ed $9.5 mil­lion in pow­er cred­its thanks to the mul­ti­ple times it shut down its min­ing rigs. This was even more than the amount the com­pa­ny gained in sell­ing bit­coin that month. The company’s page said it sold 275 bit­coin, with net pro­ceeds equalling just $5.6 mil­lion. This is com­pared to last year when the com­pa­ny said it pro­duced 444 bit­coin, worth approx­i­mate­ly $16 mil­lion just before the price of BTC real­ly spiked toward the tail end of 2021.

This net prof­it has proved that even despite the down­turn in the cryp­to mar­ket and dis­rup­tions to min­ing oper­a­tions, these com­pa­nies are still set on their path to keep on keep­ing on with their incred­i­bly pow­er-hun­gry oper­a­tions. Digiconomist’s bit­coin ener­gy graph shows that kilo­watt hours per year peaked in the begin­ning of June but then tanked through­out June/July. That line’s start­ing to inch up once again, and even at its deplet­ed state it’s still way above U.S. bit­coin ener­gy con­sump­tion back in March, 2021.

Riot Blockchain included this handy graph to show they made a net profit thanks to their power purchase agreement with ERCOT.

Riot Blockchain includ­ed this handy graph to show they made a net prof­it thanks to their pow­er pur­chase agree­ment with ERCOT.
Graph­ic: Riot Blockchain

The Elec­tric Reli­a­bil­i­ty Coun­cil of Texas—AKA ERCOT—had asked busi­ness­es to rou­tine­ly pow­er down in order to con­serve elec­tric­i­ty through­out July. Riot and its mas­sive 750-megawatt bit­coin min­ing facil­i­ty in Rock­dale, Texas reduced pow­er mul­ti­ple times dur­ing times of peak demand. Of course, many of the dozens of large-scale bit­coin min­ing oper­a­tions also cut activ­i­ty dur­ing the past month to not over-stress the often over­taxed grid, but Riot remains the largest token min­er in the Lone Star State.

The amount of bit­coin pro­duced dur­ing this past month was 318, 28% less than the same month last year. While the com­pa­nies did pub­licly agree to shut­downs in order to pre­serve the grid, they were also avoid­ing scal­ing elec­tric­i­ty prices dur­ing peak loads.

ERCOT pro­vides pow­er pur­chase agree­ments that are usu­al­ly termed for one year, but Lee Bratch­er, the pres­i­dent of the Texas Blockchain Coun­cil, told Giz­mo­do in a phone inter­view that only a hand­ful of the biggest bit­coin min­ers actu­al­ly have these PPAs. The ones that do, like Riot, can take advan­tage of the need to cur­tail pow­er, while oth­er min­ers sim­ply have to make do.

The Texas Blockchain Coun­cil net­works and pro­motes the many cryp­to min­ing oper­a­tions in the state. Bratch­er called these PPAs “a good deal” for ERCOT, since it can regain the pow­er need­ed for the rest of its grid dur­ing peak times.

At the same time, the mas­sive draw of these min­ing oper­a­tions is only expect­ed to increase. Texas’ grid sys­tem has said that Texas cryp­to min­ers will put a six gigawatt-demand on the grid by next year. Con­gres­sion­al Democ­rats have warned the sev­en largest min­ing rigs in the U.S. draw pow­er equiv­a­lent to all the res­i­den­tial homes in the city of Hous­ton. These cryp­to min­ers are only expect­ed to get big­ger over time.

Bratch­er said most of the Texas min­ing oper­a­tions vol­un­tar­i­ly shut down oper­a­tions once the local price of pow­er on ERCOT’s grid broke above $180 or high­er per megawatt hour, which would basi­cal­ly incur a net-neg­a­tive cost to mine their bit­coin. Shut­ting down basi­cal­ly made costs and rev­enue zero out, but the lost oppor­tu­ni­ty cost for many of these com­pa­nies was in the hun­dreds of thou­sands or even mil­lions, depend­ing on the fluc­tu­at­ing price of cryp­to ver­sus the over­all cost of power.

So will this hap­pen again? After all, the Nation­al Ocean­ic and Atmos­pher­ic Admin­is­tra­tion is antic­i­pat­ing more above aver­age heat in August. Texas is one of the most like­ly places where tem­per­a­tures could spike above his­tor­i­cal aver­ages, includ­ing heat in the triple dig­its. In the release, Riot’s CEO Jason Les said his com­pa­ny “has con­sis­tent­ly and proac­tive­ly pur­sued low-cost, large-scale access to pow­er under its long-term fixed rate pow­er contracts.”

Bratch­er said that most of these agree­ments will essen­tial­ly allow com­pa­nies like Riot to con­tin­ue sell­ing back unused pow­er if pow­er demand increas­es to a point it makes sense to shut down. So even if we get even more extreme heat (which cli­mate sci­en­tists have said is increas­ing­ly like­ly) that won’t nec­es­sar­i­ly stop the cryp­to min­ers from dig­ging for dig­i­tal gold.

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