In the face of a heatwave in Texas this August, Bitcoin mining outfit Riot Platforms slashed its production in the state, receiving $31.7 million in energy credits for the power it would have otherwise consumed.
Riot Platforms cut its energy demand by 95% to redirect crucial resources to the local electricity provider, ERCOT, mining just 333 Bitcoin in August, worth around $8.9 million.
“The Company’s curtailment of operations meaningfully contributed to reducing overall power demand in ERCOT”, Jason Les, CEO of Riot Platforms, said in a press release. “This ensured that ordinary Texans did not experience any disruption in their electricity services.”
“August was a landmark month for Riot in showcasing the benefits of our unique power strategy,” Les added. “The effects of these credits significantly lower Riot’s cost to mine Bitcoin and are a key element in making Riot one of the lowest cost producers of Bitcoin in the industry.”
Serving as the backbone for 90% of Texas’s energy needs, ERCOT is a self-sufficient, deregulated network, distinct from other U.S. energy grids.
Texas Governor Greg Abbott has taken a “miner-friendly” approach, arguing that inviting more miners to the Lone Star state could remedy its long-unstable grid by incentivizing the creation of more power generation facilities.
Decrypt has approached Riot Platforms for comment, and will update this article should the company respond.
Riot Platforms isn’t the first company to reduce its operations due to the Texas heatwaves. Bitcoin mining company Marathon Digital Holdings blamed the temporary shutdowns when reporting a 9% drop in Bitcoin production for August 2023 compared to the previous month.
Bitcoin miners face bear market and soaring energy prices
Market changes prompted Riot Platforms, like other crypto mining companies, to reconsider their strategies. Despite an impressive 8,000% revenue growth in 2021, fueled by soaring Bitcoin demand, the company grappled with challenges in the following year.
In 2022, the crypto market downturn resulted in a net loss exceeding $500 million for Riot Platforms. The company’s latest quarterly financial report also indicated a loss amounting to $27.7 million.
While 2023 witnessed a recovery in Bitcoin’s value, lifting Riot’s stock approximately 230%, its closing price yesterday was $11.24—significantly lower than its 2021 peak of $77.90.
Bitcoin miners could continue to face difficulties as the hash rate reaches new record highs ahead of the upcoming halving event next spring, with volatile electricity costs and competition among miners pushing up the cost of production, according to analysts at JP Morgan.
Hash rate refers to the computational power used to mine a cryptocurrency. The halving event, which occurs roughly every four years, will reduce miners’ rewards by half.
Reselling energy to electricity providers is just one of the different ways miners are diversifying in order to reduce their dependence on crypto; many now offer high-performance computing (HPC) services to the fast-growing artificial intelligence (AI) market.
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