Stabilizing Texas Energy Grid Puts Bitcoin Miners In Berkshire Hathaway's Crosshairs

Warren Buffett has always hated Bitcoin. Now, he has another reason.

How are Bitcoin miners promoting sustainable power use?

We always knew that Warren Buffett and, by extension, Berkshire Hathaway, hated Bitcoin. A "gambling token" with "no intrinsic value", and "rat poison squared" are some of the ways he has described it.

Now, it appears that Bitcoin is eating Buffett's lunch.

Bitcoin More Environmentally Friendly Than EV Industry
Far from being a dangerous source of pollution, Bitcoin mining uses more sustainable power than any other major industry.

Winter In The Lone Star State

The story starts in Texas and is described by Daniel Batten, who specializes in analyzing Bitcoin mining's badly-misunderstood ESG credentials.

Back in 2021, the Electric Reliability Council Of Texas (ERCOT) was looking for ways to balance power usage in the state. ERCOT operates Texas's electricity grid and supplies power to around 25 million citizens.

This can be challenging in Texas. In February 2021, storms knocked a significant section of the state's power generation offline, particularly natural gas stations, which are more vulnerable than other power plants, which were susceptible to freezing up. Since Texas only rarely experiences cold weather, many homes are inadequately insulated, meaning they require more power to heat, and power infrastructure was not "winterized" to protect it in such extreme conditions. Millions of people lost power, and almost 200 died.

Enter Berkshire Hathaway

Berkshire Hathaway Energy proposed a solution to these energy demand spikes, suggesting that ERCOT invest up to $10 Billion in buying Berkshire Hathaway's gas "peaker" plants. These supply power at short notice, at times of peak demand. They are expensive and typically have high greenhouse gas emissions, but Berkshire Hathaway Energy said they would provide 3-4 GW of emergency energy when required.

After ERCOT's old CEO was fired, the new interim CEO, Brad Jones, started exploring other options. As it happens, the Chinese ban on Bitcoin mining was also bringing an influx of miners to Texas. The state has a huge amount of renewable power resources, specifically solar and wind, and often produces more power than can be used. Bitcoin mining helps soak up that demand, avoiding the need to shut down different energy plants—a difficult and costly process.

Shutting down a Bitcoin mining rig, on the other hand, is straightforward. And miners are uniquely sensitive to the price of electricity.

Jones recognized the opportunity. Welcome the miners and allow them to enjoy the benefits of that clean power. At time of peak demand, ERCOT is able to shut off miners' rigs. The result is an organic system that naturally balances the grid with supply and demand, releasing new supply as it is required thanks to miners' ability to react fast.

Miners 1, Berkshire Hathaway 0

Before long, miners were consuming 3 GW of electricity in Texas. Most mining companies were participate in ERCOT's Demand Response programs, working with the authorities to balance the grid at times of high demand. Bitcoin mining has even helped develop Texas's renewable energy infrastructure, increasing the amount of clean power available (particularly wind).

The growth of the mining industry has completely eliminated the need for dirty gas peaker plants, the cost of which would now be around $18 billion: That's $18 billion that would have gone into Berkshire Hathaway's pockets.

And 18 billion more reasons for Buffett to hate rat poison squared.

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