Sunshine, heat and Bitcoin will reshape electricity in Texas
No electricity grid in the U.S. has added more renewable power over the past decade than the Texas grid has. Back in 2012, both California and the Midwest generated more power from wind, solar and other renewables than the Lone Star State. But in 2022, Texas was the winner. The future of the state’s grid is a study in supply, demand and uncertainty.
One thing that is certain: Most of Texas’ renewable generation today is from wind. Last year, wind projects in the Electric Reliability Council of Texas (ERCOT, the grid that covers most of the state) generated more than 107,000 gigawatt-hours of electricity; solar generated 24,000, less than a quarter of what wind produced. But solar is growing rapidly, and generating most during the hottest months, when the grid is under the greatest strain to meet high demand.
Less certain, but still likely: ERCOT expects only a slight expansion of the wind power fleet between now and 2025 while solar is expected to surge. Solar capacity could double from 2023 to 2025, if all projects with an interconnection agreement reach completion.
Still less certain: the weather. Texas had a punishingly hot summer last year. There were 61 days from the start of May to the end of September that were the hottest in the past five years. Hot weather started earlier than usual as well, during the months when plant operators typically perform scheduled maintenance. The grid set repeated peak demand records in the summer months of 2022, forcing ERCOT to issue a so-called conservation appeal on July 11 and 13. Another very hot summer could push electricity demand up even further in 2023.
Research group BNEF also reached another important finding about last summer: Demand was higher than what record temperatures alone would suggest. There were other factors contributing to it — in particular, Bitcoin mining.
Bitcoin is the biggest element of uncertainty in the Texas grid. Thinking about Bitcoin in Texas means not a forecast (of high certainty), or a projection (of lower certainty), but a scenario — a what-if that allows us to think about how new renewable power, weather and a novel demand source will interact.
Bitcoin mines use electricity in such a quantity, and with such consistency, that we can express that in terms of electricity demand. Today there are 1.8 gigawatts of Bitcoin mines operating in ERCOT, and BNEF tracks 10 gigawatts of potential projects. Not all of those will come online this year or next, but in BNEF’s base-case scenario, there will be 5.3 gigawatts of total demand from Bitcoin mining this year, and 5.9 gigawatts’ worth in 2024.
Last year’s question about all those new miners was, “Will they crash the grid?” Ask the miners themselves and they will say they’re helping the grid because their load is “interruptible” — that is, it can turn on and off depending on demand. Some of the miners have registered as a “controllable load resource” that can respond to electricity system signals instead of just running flat-out. The state has also established an interim program that pays Bitcoin mines to reduce their peak power.
The answer is as complex as the question, but it hinges on an important idea: Bitcoin mines will only operate when the economics are favorable to do so. So if temperatures are lower than last year, and wind and solar generation is higher, power prices could be relatively lower and then miners might operate even during peak demand. But if there is less wind and solar, or higher temperatures, then Bitcoin mining might switch off due to higher power prices, keeping total demand lower. And with Bitcoin running consistently during off-peak periods, prices could be higher at times when they historically have been lower, such as at 11 p.m., when there is no solar to offset Bitcoin.
One likely outcome for the Texas grid — factoring in renewables, weather and Bitcoin — is a significant change in “net load” profile. In the past, low wind speeds in the late afternoon meant that power was scarce during the hottest times of day and months of the year. Now with solar generating significantly at that time of day, the grid’s net load (the amount it requires after renewable generation) is falling. Not only that, the peak net load will likely shift to evening hours.
But there is another possibility too — the bear case.
With lower temperatures, ample solar and less Bitcoin mining, Texas peak power demand might be little different than it was in 2022. In that event, the net load tops out at 62 gigawatts, almost 12% lower than in it was in 2018.
Rules govern markets, but uncertainties shape them. The Texas power market today has multiple uncertainties, each of them meaningful for the future of the state’s electricity grid. The one thing that is certain? It is the U.S. market to watch, a new postcard from the future of U.S. electricity.
Nat Bullard is a senior contributor to BloombergNEF and writes the Sparklines column for Bloomberg Green. He advises early-stage climate technology companies and climate investors.