Inside two mining operations turning Texas power into crypto profits

Amid the loud fans and a towering wall of supercomputers, a digital gold rush is taking place in Texas.

The Lone Star State has emerged as the bitcoin mining capital of the United States because of access to cheap energy, open land and support from state leaders such as Gov. Greg Abbott. But it’s also faced criticism from Texans about energy consumption, the industry’s deals with ERCOT, environmental effects and more.

Without the knowledge of how bitcoin mining works, the anger and confusion from citizens is understandable, Lee Bratcher, president and founder of the Texas Blockchain Council, said.

“If I didn’t work in this industry and hadn’t been knee-deep in this ERCOT stuff for the last four years, I would also hear the headlines and think, ‘Man, is bitcoin mining a good thing to have in Texas?'” he said. “But having this background knowledge, I’m like, ‘Absolutely, it’s a good thing.’ In fact, we want more of it because it can help stabilize the grid, it can increase renewable generation, it’s got incredible economic development potential and [it’s] creating a lot of jobs.”

Getting people’s attention for long enough to show them how bitcoin mining works is the biggest challenge bitcoin miners are currently facing in Texas, Bratcher said.

Fort Worth-based 360 Mining, an oil and gas company that also mines bitcoin, and Austin-based cryptocurrency tech giant CoreScientific gave The Dallas Morning News tours of their North Texas facilities on Nov. 15 as part of the 2023 Texas Blockchain Council Summit.

How do its deals with ERCOT work?

Riot Platforms, another bitcoin mining company, faced criticism from Texans in October over its deals with ERCOT, which helped the company snag $13 million over the summer. But the Castle Rock, Colo.-based company isn’t the only one benefiting from those deals.

CoreScientific also works with ERCOT in a similar capacity using ancillary services, said Steve Gitlin, senior vice president of investor relations at CoreScientific.

Big power generators, like bitcoin miners, are able to provide ERCOT with ancillary services to increase or decrease the electricity supply.

“We have deals with ERCOT that allow us to purchase power and use that power to drive our operations,” Gitlin said. “The interesting thing about these kinds of facilities is because they’re so large when the grid needs electricity back, they [ERCOT] can come to us and ask us to power down and return some of that power to the grid. Think of our site as a really big battery that can provide energy to the grid.”

ERCOT did not respond to an interview request from The News.

However, 360 Mining’s Fort Worth facility is off the grid, meaning it has to work with ERCOT in a different way, CEO Chris Alfano said.

“Instead of pushing megawatts of electricity back through transmission lines, we’ll shut down the generators and push natural gas back into the pipeline,” he said. “So our way of curtailing would be shutting down our bitcoin mine and freeing up all of that natural gas to go to power plants, so they can generate more electricity.”

If the state is working with bitcoin miners to help with power capacity, it’s because it was the state’s cheapest option, Bratcher said.

“ERCOT paid about a billion dollars for ancillary services,” he said. “It would have been higher had…