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Don’t Mine Me: ERCOT Requirements May Slow Texas’ New Crypto Currency Mining Operations

Don’t Mine Me: ERCOT Requirements May Slow Texas’ New Crypto Currency Mining Operations Background Image

By Mike Tomsu, Devika Kornbacher, Marcus Martinez, and Steve Weinberger

As Texas positions itself to become the world’s newest bitcoin mining hub, the Electric Reliability Council of Texas (“ERCOT”) has recently taken actions that may stall the integration of new cryptocurrency mining operations within the state. Apprehensions about the potential impacts of the crypto mining boom on the reliability of the Texas power grid have prompted ERCOT to place new requirements on certain large loads attempting to interconnect to the grid.

Specifically, ERCOT has established an interim process requiring the submission and approval of reliability studies prior to the interconnection of large loads, and has commissioned a task force to develop a more permanent set of standards. According to ERCOT, the new interim process and task force are largely meant to address the inability of ERCOT’s existing planning models and processes to incorporate the accelerated development timelines associated with crypto mining operations.

While it has historically taken around two years for the activities associated with a large-load interconnection request to come to fruition, crypto mining projects often become operational in less than a year. Crypto mining projects typically involve using powerful computers to solve complicated puzzles that validate previous cryptocurrency transactions on the distributed ledger of a blockchain (e.g., the Ethereum blockchain) and add new blocks to the ledger. This process is critical to the decentralized nature and security of cryptocurrency and requires large quantities of power to complete. According to the Texas Blockchain Council, in addition to the approximately two Gigawatts of crypto mining capacity currently active in Texas, the state is attracting an additional two Gigawatts of capacity per year. The rapid development timeline of crypto mining projects has exposed gaps in ERCOT’s existing methods of evaluating the reliability impacts of new large loads.

There have also been concerns about the ability of current review processes to capture the transmission impacts of ancillary services provided to the ERCOT market by crypto mining operations.

Interim Process

Pursuant to a March 25 market notice published by ERCOT, large loads that meet certain requirements must follow a new “Interim Large Load Interconnection Process” before being allowed to interconnect. This interim process applies to load interconnection requests that have not already been modeled and studied in a completed ERCOT Regional Transmission Plan, Full Interconnection Study, or Regional Planning Group review, and that meet the following requirements:

  • New loads not co-located with a Resource with total demand within the next two years of 75 MW or greater;
  • Existing loads not co-located with a Resource increasing total demand by 75 MW or greater within the next two years;
  • New loads co-located with a Resource with total demand within the next two years of 20 MW or greater; or
  • Existing loads co-located with a Resource increasing total demand by 20 MW or greater within the next two years.

For each of these loads, Transmission Service Providers (“TSPs”) are required to submit an interconnection study that meets the NERC Reliability Standard FAC-00202. Only after ERCOT approves the study will the applicable load be allowed to (1) be included in ERCOT’s Network Operations Model, (2) register as Load Resources, or (3) receive approval to energize.

ERCOT anticipates that the review process, which includes an initial review, a secondary review for higher-impact loads, and the possibility of restrictions placed on the scope of interconnection, could take anywhere from two weeks to several months to complete.

Large Flexible Load Task Force

ERCOT has also commissioned a task force to develop a permanent system for the accelerated interconnection of certain large loads. This task force, called the Large Flexible Load Task Force (“LFLTF”) is a non-voting body that will ultimately provide a recommendation to the ERCOT Technical Advisory Committee (“TAC”) at the conclusion of its review. The LFLTF has held four meetings as of May 24, 2022. Topics of discussion included the LFLTF’s proposed charter, antitrust admonition, a definition of a “large flexible load”, and identifying any needs for metering requirements, specifically as it relates to nodal vs. Load Zone settlement. The presentation materials from those meetings, including issues lists with owners assigned to certain tasks, have been posted here.

Next Steps

The interim process, which went into effect on March 25, will remain in place until the TAC implements a more permanent solution. For the time being, loads that meet the applicable specifications should consult with their TSP regarding the development and submission of any required interconnection studies.

ERCOT has set up a new mailbox for this matter, largeloadinterconnection@ercot.com, and has stated that stakeholders may contact ERCOT if they have questions about the interim process. Additionally, stakeholders have been encouraged to register to the task force email distribution list, and email any suggestions on issues to be considered at upcoming meetings.

The LFLTF intends to schedule one or two meetings per month until the conclusion of its review.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.