The Flexibility Illusion of Cryptocurrency Mining

Abstract

Flexible demand is increasingly important in energy systems with high renewable penetration. Bitcoin mining is often cited as a large, theoretically flexible load. Despite electricity consumption rivaling medium-sized industrial economies, the energy market behavior and impacts of Bitcoin miners remain largely unexplored. We exploit the large-scale relocation of Bitcoin mining to Texas, which became the world's largest mining hub following China's 2021 ban, to estimate its effects on local wholesale electricity prices. Combining a novel, hand-collected dataset on mining facility locations with high-frequency wholesale price data, we identify price impacts using a DiD design. We find that miners select into renewable-rich, high-GDP per capita counties with initially lower electricity prices on average. Mining entry has no significant effect on daytime prices but increases nighttime prices by 19.9%, indicating that Bitcoin miners fail to exploit their operational flexibility. Instead they increase baseload demand and reinforce fossil generation during low-renewable periods.