Michael McNamara admits that his pitch for Texas' troubled electric grid sounds counterintuitive.
In a state that broke power demand records 11 times just this summer, he and others at the company he co-founded want to use as much electricity as they can for operations such as bitcoin mining and hydrogen production. The company, called Lancium, recently broke ground on an 800-acre campus in Abilene that could suck up 1.2 gigawatts of electricity, enough to power about 240,000 homes on a hot summer day.
But rather than strain power supplies, the company said, the project will help stabilize the grid, provide incentives to grow renewable energy and bring high-tech jobs to rural areas of the state.
“The concept we have is in order to facilitate the renewable energy transition, we need to move the [demand] to where the renewables are the most abundant,” McNamara said.
The Woodlands-based Lancium, founded in 2017, hopes to build out what the Electric Reliability Council of Texas(ERCOT) calls “controllable load resources,” or large demand centers that can ramp up or down their power usage within seconds when directed to by the nonprofit grid manager or in reaction to real-time conditions on the grid.
On Wednesday, the company announced it would begin selling its software to other companies, allowing them to ramp up and down their power usage on a dime to take advantage of pricing and other incentives ERCOT offers for flexible loads.
Already, it is offering space in its Abilene facility and its already-built facility in Fort Stockton with crypto miners, computing companies and other firms. They pay Lancium rent and some fees, while Lancium passes on energy cost savings, as well as some incentives ERCOT provides for flexible loads, to their tenants.
Cryptocurrency mining operations have garnered much attention in Texas in recent months for the scale at which companies hope to build them, and the amount of energy it would take to support. ERCOT officials said those types of companies create about 1.5 gigawatts of demand now at their peaks.
“Crypto miners can help stabilize the grid by shutting down their demand for electricity in real time,” said Christy Penders, a spokeswoman for ERCOT.
“Crypto mining is extraordinarily responsive and can turn off in a fraction of a second and remain off as long as needed.”
Raymond Cline, who co-founded Lancium, said that large demand can almost act like a peaker plant when grid conditions are tight, thanks to its quick ability to turn on or off. A peaker plant is generation that comes online to help meet peak demand.
“The grid is agnostic in times like that if there's a 500 megawatt drop in demand or a 500 megawatt ramp up of generation,” he said. “Whichever of those two things happen will have the same effect on the grid.”
Ed Hirs, an energy fellow with the University of Houston said crypto mining and other large loads can reap enormous benefits for turning off in response to tight grid conditions — Bloomberg reported that one crypto miner made $9.5 million by shutting down operations during this summer’s tight grid conditions and selling the power itself.
“The public policy question is why is the state offering these sort of sweetheart deals to crypto miners when we already have millions of customers within ERCOT who have smart meters," or meters that can automatically turn up thermostats on hot days, he said.
But Hirs worried about the increased demand over the long term. While soaking up the negative electricity prices now in West Texas is great, once more data centers get built, they could limit the amount of cheap power flowing to the rest of the state, raising prices.
“Adding more demand over time is going to drive up the price,” Hirs said, “and potentially the volatility for the other consumers on the grid.”
Meanwhile, regulators are still trying to wrap their arms around what this could mean in the near term, because the scale and number of these projects coming is unprecedented.
“We created something that the power industry asked for, but they don't yet understand the implications or the ramifications,” said Cline, the Lancium co-founder. “We're all still trying to figure it out.”
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