Graduation Year

2024

Date of Submission

4-2024

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Reader 1

Professor Nishant Dass

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© 2024 Dallas Lind

Abstract

The state of Texas has welcomed a growing fleet of bitcoin mining operations on grounds of bolstering further renewable buildout in the state. Cheap wholesale electricity and demand response programs where miners get paid for power curtailments. Most recently, Bitcoin mining activity is estimated to represent 2.2% of baseload in ERCOT resulting in an additional $1.8 billion in power costs for the rest of ERCOT. These figures are likely to grow as more mining operations connect to the grid and mining on the blockchain becomes more computationally demanding. Currently, very little is understood about how these miners interact with the grid, attempts to survey miners on their power usage have been unsuccessful. In lieu of public reporting, a growing literature has attempted to determine the environmental and monetary costs associated with this growing industry in the state. This paper attempts to explain how Bitcoin mining operations interact with the grid through time-varying econometric techniques. Significant causal effects from Bitcoin mining energy consumption to power prices are identified, suggesting that mining operations may have considerable influence on the ERCOT power market. These results highlight a risk for policy makers and market participants who rely on accurate forecasting to manage operational and financial risk within the ERCOT market.

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