Lucrative power credits swooped to the rescue for Texas-based bitcoin miner Riot Blockchain Inc (NASDAQ:RIOT)’s August revenues.
Despite the Nasdaq-quoted company producing 11% fewer bitcoins in the month compared to August 2022, this was sufficiently offset by a remarkable 2,933% year-on-year increase in Demand Response Credits.
Revenues generated from power credits, meanwhile, surged 709%, culminating in $31.6 million worth of combined revenues generated from energy credits.
Riot mined $9.5 million worth of bitcoin in the month, assuming an average August bitcoin price of $28,617 (per Riot’s August bitcoin sell price).
The group also disposed of 300 bitcoin in the period, netting proceeds of $8.6 million with an average selling price of $28,617, barely a third of revenues generated from power credits.
“August was a landmark month for Riot in showcasing the benefits of our unique power strategy,” said chief executive Jason Les. “The effects of these credits significantly lower Riot’s cost to mine Bitcoin and are a key element in making Riot one of the lowest cost producers of Bitcoin in the industry.
“Riot’s power strategy is a key competitive advantage, and when placed alongside our strong financial position and efficient miner fleet, put Riot in a leading position heading into the upcoming Bitcoin ‘halving’ event next year.”
Texas faced extreme temperatures in August, which significantly drove up the demand for electricity, occasionally nearing the total supply available in the state.
During this period, Riot actively participated in alleviating the strain on the Electric Reliability Council of Texas (ERCOT), the entity overseeing the state's electrical grid, gaining significant energy credits as a result.
Bitcoin miners flood Texas
Texas has become a hotspot for bitcoin mining, especially after regulatory crackdowns in China and Central Asia. The state's power credit system has played a pivotal role in this attraction.
Historically, ERCOT has grappled with fluctuating energy prices and inconsistent service.
ERCOT combats this by striking supply-and-demand deals with large-scale energy consumers, including bitcoin miners like Riot.
ERCOT pays these consumers to power down in times of grid stress, while relying on them at times to soak up excess energy as a price-stabilisation mechanism.
Though the relationship is mutually beneficial, Republican senators Lois Kolkhorst, Donna Campbell, and Robert Nichols attempted to pass a bill to exclude bitcoin miners from these benefits, but the bill was shot down by the House.
Bitcoin mining, a process that involves solving complex mathematical equations to validate transactions on the Bitcoin network, is notoriously energy-intensive.
The massive energy consumption of mining operations can strain power grids, especially during periods of high demand.