Is cryptocurrency the magical route to resource adequacy? Or just magical thinking?
Of all the proposals to avoid another Texas electricity crisis like February 2021, surely the most outside-the-box is to increase electricity demand from electricity-intensive cryptocurrency mining. The idea is to beef up electricity demand with new crypto mining, which will then attract new supply. And then scale back the crypto demand when the grid is strained and have that supply available for other consumers. Clever, right? Or maybe a bit too clever.
Of course, crypto currencies themselves are controversial: are they a Ponzi scheme or brilliant currency innovation? Does their mining destroy the environment or support a clean energy transition? Is crypto mining an economic boost for surrounding communities or a visual and noise nuisance? I’m going to set those issues aside today and focus on whether the Texas plan for grid reliability through crypto mining will work.
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At first, the answer may seem to be obviously no: Adding demand will just make a grid tighter and increase capacity problems.
But promoters of this plan highlight that their economic thinking goes beyond the short-run demand increase to consider the longer-run additional supply that the demand would elicit. Plus, the plan recognizes the heterogeneity among electricity buyers, that crypto mining electricity demand is likely to be highly price-responsive and nimble, so it would quickly disappear when the price…
