Power Markets

A Glimpse into ERCOT Trading on 8/4/23

Power Markets for Bitcoin Miners, 8/7/23

David Bellman

Key Takeaway #1

This past Friday was another eventful day for ERCOT intraday trading, with day-ahead clearing $201/MWh – and on screen trading as high as $1045/MWh – and real-time eventually settling at $551/MWh.

Key Takeaway #2

An active trading desk would have captured at least $178K to balance the curtailment of operations for 8 hours with a potential profit of $1.5 million.

Key Takeaway #3

There are many opportunities and potential land mines in power trading – BitOoda has the experience to guide you through it.

Key Takeaway #4

As noted in our previous report, ERCOT prices continue to be strong, which opens an opportunity for miners with an active power trading desk. This week’s report will give you glimpse of what an ERCOT power trader in ERCOT would have seen on Friday and how it might have played out IF the trader had a mining operation tied to ERCOT pricing with a 100 MW hedge.

Day-ahead prices cleared $201/MWh (please see the chart on the next slide). As a miner, you would likely have turned operations off for 8 of the 24 hours, assuming breakeven was above $90/MWh and the day-ahead curve was accurate. There were some preliminary signs in the morning that the real-time price would likely be stronger than the day-ahead. As an ERCOT trader, there are many things to monitor, from load to wind to outages. The day-ahead is built based in part on those variables. Therefore, a bullish signal to the day-ahead is if the latest forecast has more load, less wind/solar, or more outages – all of these factors would drive the real-time to clear higher. In the morning, the wind forecast was much lower than the day-ahead. Wind changes near peak load time periods are worrisome. Load forecast was coming down, which was the one bearish factor.

In addition to these factors, traders can compare the day-ahead price curve with the actual real-time as time moves. By 12pm, the real-time was leading the day-ahead in pricing. A miner with a power hedge or a fixed PPA would be technically long financially. A likely power hedge could have resembled a term structure where the hedger was in-the-money (sub $90/MWh).The August on-peak 2023 contract before March 2022 and from May through June this year was under $90/MW.

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As noted in our previous report, ERCOT prices continue to be strong, which opens an opportunity for miners with an active power trading desk. This week’s report will give you glimpse of what an ERCOT power trader in ERCOT would have seen on Friday and how it might have played out IF the trader had a mining operation tied to ERCOT pricing with a 100 MW hedge.

Day-ahead prices cleared $201/MWh (please see the chart on the next slide). As a miner, you would likely have turned operations off for 8 of the 24 hours, assuming breakeven was above $90/MWh and the day-ahead curve was accurate. There were some preliminary signs in the morning that the real-time price would likely be stronger than the day-ahead. As an ERCOT trader, there are many things to monitor, from load to wind to outages. The day-ahead is built based in part on those variables. Therefore, a bullish signal to the day-ahead is if the latest forecast has more load, less wind/solar, or more outages – all of these factors would drive the real-time to clear higher. In the morning, the wind forecast was much lower than the day-ahead. Wind changes near peak load time periods are worrisome. Load forecast was coming down, which was the one bearish factor.

In addition to these factors, traders can compare the day-ahead price curve with the actual real-time as time moves. By 12pm, the real-time was leading the day-ahead in pricing. A miner with a power hedge or a fixed PPA would be technically long financially. A likely power hedge could have resembled a term structure where the hedger was in-the-money (sub $90/MWh).The August on-peak 2023 contract before March 2022 and from May through June this year was under $90/MW.

If you did apply the hedge at $90/MWh, you would be holding a $90/MWh long contract, which means you have a financial obligation to buy EVERY on-peak hour (M-F excluding holidays – 7am-10pm) at $90/MWh given the volume you traded. If we assume 100 MW at $90/MWh, this amounts to a total of $3.3 million. On a single peak day, this amounts to $144k at $90/MWh. The day-ahead clears $201/MWh, which means now on the financial end the contract is up $178K. You could have traded this day-ahead, turned off your operation for those 8 hours, and used the $178K to balance the lower utilization of the assets.

On the trading screen in the morning, the bal-day ERCOT contract opened up at 350 traded to 420. By 1pm, it was 700. At 4pm, it traded to 850, then at 430pm it traded to $1045/MWh. If you played the contract into the day, you would have had a 10X gain while still shutting off for the same 8 hours as if you had traded the balance of the day at 430pm for $1045/MWh – this would have netted a $1.5 million gain.

You also could have just taken the contract to financial settlement hoping for even more gains vs. selling at 430 pm, since the contract is for 16 hours (7am -11pm) but the trading stops at 430 pm. The financial settlement for the day ended up at $551/MWh – this would be a net of $738K, which is still not bad! In addition, your operations still stayed the same in the sense that operations would have curtailed for 8 hours. How is that possible? It’s the shape that matters – those same 8 hours were just amplified as compared to the day-ahead curve – being higher than $90/MWh does not change the economics of the mining operation.

After a certain scale in bitcoin mining operations, it becomes a no-brainer to either outsource or internally create a power trading desk if your power contracts are connected to wholesale pricing. BitOoda’s team comes from the trading world and understands the immense potential that trading can add to an organization (and also how to avoid the pitfalls).

**Figure:** ERCOT Prices, 8/4/23
**Data source:** ERCOT

Miner WoW View

Mining economics improved week on week.
The S19JPro breakeven price is between $70-$80/MWh.

**Figure:** Weekly Average Cash Contribution After Power Expense
**Note:** Assumes a PUE of 1.12
**Source:** BitOoda, Bloomberg, Coinmetrics

Henry Hub WoW

Henry Hub is slightly down.

PJM WoW

For the PJM region, we use PJM-W hub as the benchmark. PJM-W is the most traded power hub in the US.
PJM winter prices are down.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
August futures are coming down, as the market is seeing that wind generation along with solar can create low real-time prices.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
This week saw only minor changes.

NYISO WoW: NY-G

This slide uses the NY-G hub as the benchmark for the NYISO region. NY-G is the most traded power hub in NYISO.
NY-G winter prices are slightly down.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices prompt year into winter are down.

Disclosures

Purpose

This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.

Analyst Certification

David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.

Conflicts of Interest

This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.

General Disclosures

Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.

The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.

All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.

BitOoda Technologies, LLC is a member of FINRA.

“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.

‍

As noted in our previous report, ERCOT prices continue to be strong, which opens an opportunity for miners with an active power trading desk. This week’s report will give you glimpse of what an ERCOT power trader in ERCOT would have seen on Friday and how it might have played out IF the trader had a mining operation tied to ERCOT pricing with a 100 MW hedge.

Day-ahead prices cleared $201/MWh (please see the chart on the next slide). As a miner, you would likely have turned operations off for 8 of the 24 hours, assuming breakeven was above $90/MWh and the day-ahead curve was accurate. There were some preliminary signs in the morning that the real-time price would likely be stronger than the day-ahead. As an ERCOT trader, there are many things to monitor, from load to wind to outages. The day-ahead is built based in part on those variables. Therefore, a bullish signal to the day-ahead is if the latest forecast has more load, less wind/solar, or more outages – all of these factors would drive the real-time to clear higher. In the morning, the wind forecast was much lower than the day-ahead. Wind changes near peak load time periods are worrisome. Load forecast was coming down, which was the one bearish factor.

In addition to these factors, traders can compare the day-ahead price curve with the actual real-time as time moves. By 12pm, the real-time was leading the day-ahead in pricing. A miner with a power hedge or a fixed PPA would be technically long financially. A likely power hedge could have resembled a term structure where the hedger was in-the-money (sub $90/MWh).The August on-peak 2023 contract before March 2022 and from May through June this year was under $90/MW.

If you did apply the hedge at $90/MWh, you would be holding a $90/MWh long contract, which means you have a financial obligation to buy EVERY on-peak hour (M-F excluding holidays – 7am-10pm) at $90/MWh given the volume you traded. If we assume 100 MW at $90/MWh, this amounts to a total of $3.3 million. On a single peak day, this amounts to $144k at $90/MWh. The day-ahead clears $201/MWh, which means now on the financial end the contract is up $178K. You could have traded this day-ahead, turned off your operation for those 8 hours, and used the $178K to balance the lower utilization of the assets.

On the trading screen in the morning, the bal-day ERCOT contract opened up at 350 traded to 420. By 1pm, it was 700. At 4pm, it traded to 850, then at 430pm it traded to $1045/MWh. If you played the contract into the day, you would have had a 10X gain while still shutting off for the same 8 hours as if you had traded the balance of the day at 430pm for $1045/MWh – this would have netted a $1.5 million gain.

You also could have just taken the contract to financial settlement hoping for even more gains vs. selling at 430 pm, since the contract is for 16 hours (7am -11pm) but the trading stops at 430 pm. The financial settlement for the day ended up at $551/MWh – this would be a net of $738K, which is still not bad! In addition, your operations still stayed the same in the sense that operations would have curtailed for 8 hours. How is that possible? It’s the shape that matters – those same 8 hours were just amplified as compared to the day-ahead curve – being higher than $90/MWh does not change the economics of the mining operation.

After a certain scale in bitcoin mining operations, it becomes a no-brainer to either outsource or internally create a power trading desk if your power contracts are connected to wholesale pricing. BitOoda’s team comes from the trading world and understands the immense potential that trading can add to an organization (and also how to avoid the pitfalls).

Miner WoW View

Mining economics improved week on week.
The S19JPro breakeven price is between $70-$80/MWh.

Henry Hub WoW

Henry Hub is slightly down.

PJM WoW

For the PJM region, we use PJM-W hub as the benchmark. PJM-W is the most traded power hub in the US.
PJM winter prices are down.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
August futures are coming down, as the market is seeing that wind generation along with solar can create low real-time prices.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
This week saw only minor changes.

NYISO WoW: NY-G

This slide uses the NY-G hub as the benchmark for the NYISO region. NY-G is the most traded power hub in NYISO.
NY-G winter prices are slightly down.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices prompt year into winter are down.

Disclosures

Purpose

This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.

Analyst Certification

David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.

Conflicts of Interest

This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.

General Disclosures

Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.

The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.

All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.

BitOoda Technologies, LLC is a member of FINRA.

“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.

‍

Related Research

Premium

Free

A Glimpse into ERCOT Trading on 8/4/23

Power Markets for Bitcoin Miners, 8/7/23

Key Takeaway #1

Key Takeaway #2

Key Takeaway #3

Key Takeaway #4

Premium Content

Table of contents

Research By

Miner WoW View

Henry Hub WoW

PJM WoW

ERCOT WoW

CAISO WoW

NYISO WoW: NY-G

NYISO WoW: NY-A

Disclosures

Table of contents

Research By

Miner WoW View

Henry Hub WoW

PJM WoW

ERCOT WoW

CAISO WoW

NYISO WoW: NY-G

NYISO WoW: NY-A

Disclosures

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