In the past decade, Bitcoin has proven itself one of the most popular and functional assets. Bitcoin has earned money for investors and proven to be an effective method for transferring and sending value.
However, Texas Senator Ted Cruz appears to seek new functionality to increase Bitcoin’s importance to the Texas economy.
Senator Cruz attended the Texas Blockchain Summit, an event organized by the Texas Blockchain Council. There, the controversial Republican lawmaker named Bitcoin as a potential solution for Texas’s energy grid issues.
One of the most popular states in the country, Texas has seen an influx of people in the past few years. This means the state’s electricity grid has suffered from massive overloading. Over time, this could cause grid failures. Despite different solutions that have been proposed, Sen. Cruz believes Bitcoin could be the perfect solution.
Supplementing the State Power Grid
Speaking at a fireside chat, Sen. Cruz explained the increasing number of crypto mining operations in Texas could add more energy capacity to the state’s electrical grid. In the event of shortages or blackouts, mining could be the perfect solution for Texas.
Everyone who understands cryptocurrencies know how mining centers operate. There are computers stacked closely, vying to mine the next block of Bitcoin transactions. This year alone, many have criticized Bitcoin mining as an overly energy-intensive project. Data suggest Bitcoin could use more energy than several cities and small countries.
As more people continue using Bitcoin to get into the mining space, its energy use will continue to rise. However, as Sen. Cruz believes, miners could serve as energy consumers that will immediately support the local power grid if overburdened. In part, the Republican Senator said:
“Because of the ability [of] Bitcoin mining to turn on or off instantaneously, if you have a moment where you have a power shortage or a power crisis, whether it’s a freeze or some other natural disaster where power generation capacity goes down, that creates the capacity to instantaneously shift that energy to put it back on the grid.”
Cruz also believes Bitcoin mining could add revenues to the government as it looks to reduce energy wastage. The process of oil and gas extraction tends to create massive energy, but this energy can go to waste through burning. Instead of wasting this energy, Sen. Cruz claims that Bitcoin miners could easily tap into that - and remit payments to the government.
According to a transcript of the discussion, Sen. Cruz points out that about 50 percent of the natural gas flared in the United States is burned in power plants across West Texas. Since no transmission mechanism converts the natural gas to profitable use, it eventually gets wasted.
His solution? Use the otherwise wasted power to mine Bitcoin. The senator adds that instead of burning the natural gas, Texas could put it to productive use beneficial to the environment.
Incentives for Supporting a Failing Grid
Texas’s energy issues aren’t new. Earlier this year, the state’s power grid was severely damaged, causing a massive blackout. Cruz himself had to take his family to Cancun to escape the rolling blackouts and their effects. While the Senator believes Bitcoin could help prevent issues like these, his numbers might not add up.
First, February’s blackout wasn’t due to overloading. The blackouts were due to companies’ failures to protect power plants for the winter. Second, Bitcoin miners aren’t critical infrastructure, so they don’t necessarily have a reason to contribute to the stability of the electrical grid.
Even if they could contribute, most miners and mining firms are in the business of making money. If they must winterize operations, the high cost could be a disincentive.
At the same time, without massive compensation, miners may not have an incentive to give power to the grid. Texas already runs a similar initiative, offering generators in exchange for providing additional power to the grid during shortages.
In February, wholesale power prices jumped to about $9,000 per megawatt-hour - the maximum legally possible charge. As a result, some people had to pay over $10,000 for power. Miners would likely demand upward of $500 per megawatt-hour, which is much more than the $22 per megawatt-hour charged last year.
Even though Sen. Cruz’s claims might not be feasible, there is no doubt the state is warming up to crypto. Last month, a poll from Newsweek showed Texas is one of the most crypto-friendly states in the country.
The poll was conducted by Redfield & Wilton Strategies, a market research firm based in London. With responses from 9,700 people, it showed 37 percent of Texas residents would support a ballot measure to legalize Bitcoin; 42 percent of Texans would support crypto legislation in the state.
If adoption does increase, Bitcoin mining could indeed be a more integral part of the Texan economy.