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New Texas Senate Bill Slashes Bitcoin Mining Incentives

Texas-based bitcoin mining companies could soon find themselves without the financial incentives that allowed the industry to enjoy strong competitive advantages in the Lone Star State.

Introduced earlier this month, Senate Bill 1751 aims to safeguard the state’s electricity grid during times of peak demand, and a proposed measure is utility-scale. 

A key provision in the bill is that it would limit bitcoin mining companies from participating in a government-run demand-response program. 

That program rewards miners for returning electricity to the grid when demand threatens to overload the system, as long as expected demand is “less than 10 percent of total demand required of all loads participating in the program,” according to the bill.

The bill also prohibits “virtual currency mining from receiving a tax subsidy, given the fact that a significant amount of virtual currency mining growth is already projected to happen in the state,” said bill author Sen. Lois Kolkhorst during her testimony Tuesday, adding there is no need to subsidize this growth. 

The Texas senator insists that the bill is not “punitive” but “right-sized to an industry” that doesn’t need this type of help. 

Sharing portions of a presentation made at the same deposition as Decrypt, U.S. Blockchain Corp.s Chief Commercial Officer Matt Prusack said that his company understood that “the purpose of SB1751 is to provide for responsible growth in Texas’ Bitcoin mining industry. While we share this goal, we believe that the proposed legislation could have unintended consequences that may adversely affect both the mining industry and the larger energy market.

Riot Blockchain, one of Texas largest bitcoin mining companies, which has recently rebranded as Riot Platforms, has been the biggest beneficiary of Texas’ current incentives. 

It earned up to $9.5 million in electricity credits last summer after shutting down operations during the heatwave. Riot’s Bitcoin mining operation at Rockdale, believed to be one of the largest in North America, has an aggregate 750MW capacity. 

The company has also begun work on a larger-scale development, aiming at generating one gigawatt (GW) of power, expanding Bitcoin mining and hosting capabilities in Navarro County, with the first 400 MW of capacity expected to start operation in July 2023.

According to a recent report by Reuters, which quoted Lee Bratcher, chairman of the Blockchain Texas Council, Bitcoin miners currently use approximately 2,100 MW of the state’s electricity, an increase of 75% in the past year. 

Recent energy use metrics are nearly three times higher than in the previous year, Bratcher said. 

ERCOT data also shows the demand from the Texas bitcoin mining sector accounts for almost 3.7% of the state’s projected lowest peak load for the year. 

Among those who opposed the bill and took testimony were the president of the Blockchain Council of Texas, Lee Bratcher, and Kristine Cranley, director of business development with the organization, and Riot vice-president Pierre Rochhard.

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