(Bloomberg) -- Bitcoin miner Riot Platforms Inc. is “in a really good position” to benefit from the increasingly volatile energy market in Texas as the state faces another potential surge in power demand this summer, its chief executive officer said. 

The Castle Rock, Colorado-based company is among the largest publicly traded Bitcoin miners and operates one of the world’s biggest sites in Texas. Riot has made tens of millions of dollars by shutting down its mining machines and selling pre-purchased power back to the state’s grid at a premium during summertime energy shortages. In 2023 and 2022, Riot earned $71.2 million and $27.3 million, respectively, in power credits, according to its 2023 annual report.

“So how it plays out in this summer and mainly Q3 coming up here, it is hard to predict, it’s going to be based on external factors like weather and generation performance that we cannot control,” Riot CEO Jason Les said during the company’s earnings call on Wednesday. “However, because we have this 345-megawatt fixed-price power, because we have these blocks and because of what we’ve learned from the power strategy that we’ve developed, we are in a really good position to act on the opportunities when they occur here.” 

Bitcoin mining is an energy-intensive process in which miners use specialized computers to validate transactions on the blockchain and earn a reward in the form of the token. Mining companies such as Riot have been able to lock in large amounts of electricity at a fixed price for an extended period of time through power-purchase agreements with energy suppliers. Unlike factories and other traditional large-scale power consumers, Bitcoin miners can scale back their operations at any time to take advantage of volatile energy markets.  

Besides selling power when that option is more attractive than Bitcoin mining, “we’ll just be responding to the spot prices of power as they occur there, which also gives us the benefit of capturing those very low-priced, or negative-priced, hours when they occur as well,” Les said during the call. 

The Bitcoin mining industry is facing a variety of headwinds ranging from elevated energy prices and increasing competition to a software-code update known as the “halving” that drastically reduces their main source of revenue. While Bitcoin prices soared in the first quarter, production of new coins plunged as mining difficulty, which is a measure of computing power needed to produce Bitcoin, surged in the same period. 

Total revenue for Riot in the first quarter was $79.3 million, up from $73.2 million in the same three-month period of 2023. The company attributed the increase to a 131% gain in Bitcoin prices, partially offset by lower production. The company produced 1,364 tokens, down 36% compared with last year’s first quarter. The cost to mine Bitcoin soared to $23,034 per token from $9,438 in the same period last year. The increase was primarily driven by rising mining difficulty, the company said. 

Bitcoin miners compete for a fixed amount of Bitcoin reward. It has become much more difficult for a miner to get the tokens as more and more computing power from competitors goes online. Adding to the pressures, the halving took place for the fourth time in April and cut in half the amount of Bitcoin rewarded to the miner that is the first to successfully process a block of transactions. After the halving, daily production of new Bitcoin fell from 900 to 450 tokens. 

©2024 Bloomberg L.P.