Everything is bigger in Texas. Even government subsidies.
There is an American saying.
Good enough for government work.
It is used by people who think poorly of the government. The idea is that government is usually a waste of money. If they are charitable, the government is doing the minimum to get by.
While I am not a fan of bureaucrats, I usually get worried when politicians start slashing jobs or saving money without having a viable alternative.
Don’t mess with Texas?
Texas paid a company more than thirty million to cease operations during a heatwave. To be fair, the company used a lot of electricity in its operations so cutting down their usage did prevent the electrical system from overloading.
Sometimes the government needs to pay people if they want things. Nobody complains if the government compensates landowners for private property to be used to build public infrastructure. We must then see what benefit the Texas government got for thirty million dollars.
The company in question is called Riot. It mines Bitcoins. There are huge debates on the benefits of Bitcoins. Proponents say Bitcoins allows owners to transact without government or anybody’s supervision. One scenario was in Canada when some truckers protesting found that their bank account were frozen by the government. There were a few heart string tugging stories about how women in less developed countries found freedom using Bitcoin. How it allowed a refugee to take out her savings without being robbed. There is a catch in the stories. There is no million-dollar economic case for Bitcoin unless you are a criminal. 98% of ransomware payment have to be made in Bitcoin.
I need stop here. This article is not about the usefulness of Bitcoin. John Oliver covered this topic in 2018.
He did it again five years later. Spoiler Alert: There is no happy ending.
Men at work
Fool me once, shame on you. Fool me, you can’t get fooled again. — George W Bush.
The biggest issue is that mining Bitcoin, or any crypto currency takes a lot of electricity. This is not a new problem even for Texas. Texas already paid Bitcoin mining companies in 2021 to stop operations when the electrical grid was failing. In 2021, the reason was that Texas had not winterized their electrical production and there was a cold winter that affected the state.
This time, it was due to the heat. Riot made more from the energy credits than it did from the mining operation in the month of August. The Bitcoin mining business starts looking like a new way to shake down the government.
Texas produces more electricity than any other American state. As Texas is not linked to the national grid, it cannot export its surplus electricity. More importantly, it cannot import the electricity when Texans need it most. The state that produces the most electricity should have some of the most knowledgeable people about energy markets and their users. Or at least people that should not be paying Bitcoin miners to stop using electricity.
Who is paying for this?
I can understand the disagreements over water between farmers and city dwellers. I can accept that some farmers grow flowers instead of crops. I can hold my nose about raising crops like tobacco, Khat and betel leaves. There are tradeoffs in life. However, if a country is facing a famine because it is farming the wrong crop, we have to ask some questions.
One reason why Bitcoin mining moved to the US is that China banned the activity for environmental reasons. For all the claims that Bitcoin mining can utilize renewable energy sources, the fact that Texas has to pay them to prevent the grid from overloading is proof something is wrong in the business model.
To allow Texas to max out its electricity production, the federal government has agreed to relax some pollution standards for the Texas companies. In 2021 when the electricity production in Texas failed, other states offered a hand to Texas. The country saw an out of state congresswoman raise money for the people of Texas while their Texas senator was having a trip to Cancun.