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ERCOT Wind Curtailments: Finding Opportunity for Crypto Mining?

As cryptocurrencies continue to gain traction, an increasingly growing obstacle to crypto mining (the process by which additional coins are created) is the amount of electric load required for mining activities. Marginal power production throughout most of the US is from fossil fuels, so additional load from mining would bring about additional emissions. However, some areas, like ERCOT, have grown renewables capacity significantly throughout the past few years; so much so in fact that not all generation from those renewables is always able to hit the grid. Instead, some of the power generated by wind and solar is effectively discharged into the ground through a process known as curtailment. Capturing that energy would be beneficial to the system, and one way to do that is shifting load (such as a crypto mining rig) closer to the generating resource, essentially working around any transmission constraints. So how prevalent are wind curtailments in ERCOT, both throughout the ISO and on an individual unit level?

The above chart shows a scatterplot with dots representing individual wind units in ERCOT, and the amount of MWh it has generated vs the amount of MWh it has curtailed in total from January 2017 to March 2021. One thing to point out is that at the system level, there is not a significant amount of generation being curtailed. Through that same period, there were around 322 TWh of total wind generation, with only 11 TWh of curtailment (around 3% of wind generation). However, this plot does show that curtailments can be an issue on a more local level, so it cannot be assumed that every generator is curtailing around 3% of generation.

As seen above, curtailments have an inverse relationship with pricing. Areas with less curtailment indicate that wind is not the marginal generation as often, and pricing is slightly higher on average. For the six wind projects selected in the first graphic, this translated to an average spread of about $6/MW since 2017.

Using BTU Analytics’ Power View, we can look at where these 6 projects are located. The units with large volumes of curtailment occur in the Panhandle, which is to be expected, given the large number of wind units, relatively low local demand, and transmission constraints. However, this does show opportunity around those units to not only capture the lower energy pricing but also capture volumes that would otherwise be curtailed. This presents interesting opportunities for additional load, storage, or transmission for the area.

In next week’s Energy Market Insight, BTU Analytics will continue to dive into renewable energy curtailments, but on a more regional level in ERCOT and look at what opportunities exist in regions with historically less wind generation, such as ERCOT North, South, and Houston.

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Corey Boettiger is a Senior Quantitative Analyst at BTU Analytics. He works primarily on BTU Analytics’ power market analysis, with a focus on power price modeling and plant revenue modeling. He has previously been involved in several areas of BTU Analytics’ market research, including wellhead economic and NGL production, and has created and maintained several of BTU Analytics’ models. He holds a B.S. in Applied Mathematics and Statistics from the Colorado School of Mines.

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