A group of energy experts and bitcoin miners are building a 300 megawatt hosting site in Corpus Christi (Texas) that will offer customers a unique option for managing their electricity costs.

Customers will be able to form their own power management strategy and decide if and how they participate in a href=”https://www.coindesk.com/policy/2023/04/12/texas-senate-passes-bill limiting bitcoin miners’ participation in demand response programs/”>demand response programs/a>. Customers can decide how and if they want to participate in programs.

Saxet Infrastructure Group is the company that built the site in Texas. The hosting fee will not be fixed. Saxet said it would pass on variable energy costs to its customers, and charge a management fee which will be lower than many of its competitors.

The biggest expense for miners is typically electricity. Hosting contracts signed in the bull market of 2021 included an energy fee and a management fee. These fees were no longer affordable for hosting companies during the 2022 energy crisis.

As we have seen, in a fixed-price market, there is usually a loser. Either the customer signs up for a price that is too high, or it is too low. The infrastructure partner hosting partner, Ro Shirole is now the chief commercial officer at Saxet.

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Winter casualties in Crypto

This hosting conflict also affected the site that Saxet was building in Corpus Christi.

, Compute North filed for Chapter 11 bankruptcy on September 23, 2022. The company’s relationships with Generate Capital and a declining bitcoin price ( BTC), as well as its relationship to its largest lender were both factors.

Compute North was also unable to pass on energy costs due to its service agreements. It was only possible to turn off machines when energy costs exceeded a certain threshold.

Harold Coulby, Compute North’s Chief Financial Officer, said that while this strategy helps manage expenses in periods of high energy costs, it does not address long-term increases in energy prices. He made the statement last year when he filed a document with the U.S. Bankruptcy Court of the Southern District of Texas.

Saxet Infrastructure executives Steve Quisenberry, the CEO, and Matt Held, the Chief Operating Officer, were both partners in Bootstrap Energy. Compute North hired Bootstrap Energy to develop Corpus Christi’s site for March 20, 2022. Bootstrap Energy owns both the site and the land. Shirole filed a lawsuit for employment discrimination against Compute North after leaving the company in December 2021.

Compute North stopped making payments to the development firm during the summer of 2022. As of the date of bankruptcy, Compute North had not made any payments of $14.9 million. Bootstrap Energy had to develop the site after the bankruptcy court rejected Bootstrap Energy’s development contract.

Location, location,location

Held stated that the site’s geographical location offers several advantages. Near the sea in south Texas, the temperature is cooler. This is a far cry from other parts of Texas like West Texas, where many miners are located. The air is denser because it’s at a lower altitude. Lower temperatures and a more humid environment reduce cooling costs.

Held stated that the area has almost 7 gigawatts worth of wind energy, and that winds do not die down in afternoons as they do in West Texas. The demand for electricity is relatively stable in the area because there are industrial facilities and few population centres that need constant amounts of energy throughout the day.

Look ahead

Saxet is currently signing leases with tenants while the site is under construction. Saxet secured the entire capital required for the construction of this site from two private investment groups and a multi-billion dollar private equity firm in New York. Quisenberry stated that the funding would be released after Saxet reached a certain number of customers.

By the end of this year, the new company expects to have the entire 300 MW hosting capacity up and running.

Shirole stated that Saxet only accepts contracts from institutions for power management strategies larger than 25MW in order to implement its tailored power management strategies.

Shirole stated that “a number of large-scale miner who have walked us through this structure truly see this as the future of at-scale mining.”

Saxet executives said that the strategy can change as the market and the regulations evolve. Customers will also be reviewing their power strategies regularly.

Quisenberry stated that “full transparency in energy pricing is key to our business and the industry as a whole.”

Read more about how Compute North, a troubled data center, struggled with Crypto Winter. Then its relationship with a major lender soured

Aoyon Ashraf, Mark Nacinovich and Aoyon Ashraf edited the book.