With his new cryptocurrency mining business on city lands, Denton is suddenly a crypto player
The town of Denton has leased 31 acres of vacant land next to its gas-fired power plant from a cryptocurrency mining company. You might not have heard this, as most of the deal’s public documents refer to the company only as a “data center.”
The secret deal requires that no press release be sent out describing the deal, unless special permission is granted. So far, this has not happened. The watchdog will inform you.
City officials say when the operation opens in the coming months, the amount of electricity used by Denton Municipal Electric customers will suddenly double. That’s how much electricity the powerful computers and cooling systems at the new facility will use each day – an amount equal to what the municipal utility is already selling.
Officials say this will stabilize tariffs for all of its customers and no longer put pressure on Texas’ fragile power grid. In the event of an electrical emergency, crypto-mining companies can immediately shut down and send unused power to the ERCOT grid operator to help replenish the power supply. In return, crypto companies are paid by ERCOT for this assistance.
The company involved, Core Scientific of Bellevue, Wash., Wants to keep a low profile. After I sent a request to the company, their PR firm contacted me to ask when this story would be released. The company did not respond to questions about the project.
I cannot give you the financial details of the deal because important figures are hidden from the public. City officials say information about public power plants is allowed to be kept confidential under the state’s public information law.
Denton City Council passed an order of approval and executives also signed a complex power purchase agreement, but important details were redacted.
Here’s what The Watchdog learned: The city’s deal allows the company to operate crypto mining operations on city property for seven years with an option to renew for another seven.
The city could make up to $ 4 million a year from sales tax and franchise fees, Denton Mayor Gerard Hudspeth told me.
Denton Municipal Electricity [DME], the city-owned electric utility, will earn up to $ 8 million per year from additional but unspecified charges built into the contract, DME chief executive Tony Puente told me.
This money will be used to repay loans taken out by the city after the February freeze caused unusually high energy costs, Puente said. As a result of this new offering, customers will not see their rates increase, he said.
The mayor said the deal should allow the city to lower its property tax rate, pay more police officers and fund environmental projects.
âWe have a surplus budget because it [the deal] past, âsaid the mayor proudly.
In public meetings, some members of the city council raised valid questions about the environmental impact and the pressure it could put on the state’s electricity grid. The mayor said the city will monitor the impact using funds from the city’s sustainability fund.
City staff tried to reassure elected officials that regular use of power from the plant adds predictability to the grid, as the same amount of power would be used every day. They say it’s good for the stability of the network.
“Texas is the land of bitcoin”
Thanks to China’s decision to kick out the cryptocurrency industry, Texas is a popular destination (no pun intended).
Crypto firms in search of cheap land, low electricity rates, and a state willing to stick to confidential agreements have hit the winning trifecta here.
Lee Bratcher, head of the Texas Blockchain Council, a trade association for the burgeoning industry, coined a slogan: âTexas is the land of bitcoin.
He said the Denton deal is the first in the state where a company leases city-owned land near a power plant.
The configuration is that the temporary structures will be placed on concrete slabs. The structures, which resemble shipping containers, will house hundreds of high-powered computers costing up to $ 15,000 each.
The structures will be air conditioned with additional swirling fans to help keep computers cool.
Core Scientific plans to hire just 16 people to run the facility around the clock.
In crypto mining, computers are constantly racing against other computers to analyze digital patterns in the hope of hanging on to a financial transaction. When it works, the financial reward can be significant and the winnings count as valuable bitcoin. Even though the value of bitcoins fluctuates, it is often high enough to make these mining operations convenient.
On Friday, a bitcoin was valued at $ 41,000.
It’s hard to imagine that a mining operation could consume as much electricity as DME’s 53,000 customers.
Texas seems like a strange place to attract the growing industry, if only for the hot and humid weather.
New York University professor David Yermack said Wired magazine that “Texas is pretty much the weirdest place” he’s heard of for bitcoin mining.
He told me in an interview that many companies driven out of China ended up in countries with cold and dry climates, such as Iceland or Sweden.
Crypto companies, he said, âshould be treated like any other consumer of electricity, and if they can make any money doing this, I’m not sure there is any point in it. ‘worry. â¦ If someone wants to buy energy, there should be no question about its use.
However, he criticized the confidentiality of such agreements.
âThe industry is quite transparent,â he said. âThere are very few trade secrets among bitcoin miners. They just plug in specially designed hardware, and it all does exactly the same thing. I’m not sure there are any proprietary secrets that you would like to prevent people from finding out.
Yet in the city’s ordinance approving the deal, the city says it is withholding information because it contains “business and financial information on electric competition … which could provide an advantage to competitors.”
The city’s agreement with Core Scientific states that “neither party will issue any press release or publicity … or release information with the intent that such information be published. “
In addition, a “data center” seems so much less threatening than a mine of bitcoins.
And this project may not be the end.
Denton Mayor Hudspeth told me, âThere are more. There is another under consideration in another part of town with the potential to double [usage]. Instead of $ 4 million next year, we could potentially get an increase on that amount. It fixes a lot of roads and really helps the city get back on a solid footing. “
When I asked Denton Electric GM Puente about the mayor’s comment, he laughed and said, âWow, the mayor didn’t take anything away. “
Two mines in Denton would help transform the city into a crypto capital of Texas.
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