Power Markets

EIA Annual Energy Outlook

Power Markets for Bitcoin Miners, 3/20/23

David Bellman

Key Takeaway #1

The EIA released the Annual Energy Outlook (AEO) with a focus on the Inflation Reduction Act (IRA).

Key Takeaway #2

The AEO presents the impact of the IRA, which it assesses is equivalent to half the impact of the economic high and low cases.

Key Takeaway #3

Solar and storage growth is a key driver in the outlook.

Key Takeaway #4

Missing elements are the flattening of EV adoption and the lack of discussion on mining and compute demand.

The Energy Information Agency released its Annual Energy Outlook (AEO) last week. The key new part of the forecast is the impact of the Inflation Reduction Act (IRA). Not all the pieces of the IRA are addressed in the outlook, as there are some nuances in modeling some of the legislation, but nonetheless the bill is shown to have a significant impact on the energy outlook.

The IRA certainly altered how the EIA presents the AEO. In years past, the starting focus was the energy balance, typically starting with oil & gas related issues. This report begins with the power sector, then focuses on electrification of the system. In other words, power is now leading the AEO, as opposed to being an afterthought as it was for so many years.

**Source:** *https://www.eia.gov/outlooks/aeo/*

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The Energy Information Agency released its Annual Energy Outlook (AEO) last week. The key new part of the forecast is the impact of the Inflation Reduction Act (IRA). Not all the pieces of the IRA are addressed in the outlook, as there are some nuances in modeling some of the legislation, but nonetheless the bill is shown to have a significant impact on the energy outlook.

The IRA certainly altered how the EIA presents the AEO. In years past, the starting focus was the energy balance, typically starting with oil & gas related issues. This report begins with the power sector, then focuses on electrification of the system. In other words, power is now leading the AEO, as opposed to being an afterthought as it was for so many years.

CO2 Emissions

The chart below shows CO2 emissions and the impact of the IRA legislation, which is quite significant: it is half of the impact of the economic high and low cases.

**Figure:** Total energy-related carbon dioxide emissions (million metric tons)
**Source:** Energy Information Administration

Renewables Growth

The greatest impact for the future power world, with or without the IRA, will be the adoption of solar power generation and storage.
As noted in the below graphic, the only source with significant growth potential is solar. Power demand is increasingly met by renewables. This growth is based not only on incentives from the government, but also the natural economics of the reduced cost of solar when compared with the alternative cost of grid power.
The grid/utility power cost structure is now surpassing the economics of solar installation in several parts of the country.

**Figure:** US electricity generation by select technologies for all cases (billion kWh)
**Source:** Energy Information Administration

Value of Storage

With the increase in renewable energy, the AEO correctly concludes that the value of storage is growing, and hence storage installations will be increasing.
Storage offers value beyond just the price incentives, also offering backup power for grid reliability.

**Figure:** Hourly US electricity generation and load by fuel for selected cases and representative years (billion kWh)
Source: **Energy Information Administration**

EV Adoption & Compute Power

One the biggest points of divergence in our view is the EV adoption curve.
Past 2030, new EV sales in the report flatten out below 20%. There has never been a technology that flattens out like that, considering the benefits and scale of adoption. Looking at other technologies that enter the consumer space and offer benefits, we typically don’t see a plateau at 20%.
Another gap in the AEO is the fact that there is no mention of compute or bitcoin mining. A discussion of power without a discussion of growth related to compute power leaves a glaring hole.

**Figures:** Market share of electric light-duty vehicles (% of sales) & Share of US households using specific technologies (% of sales)
**Source:** Energy Information Administration, Our World In Data

Oil & Gas

By chapter three, the report finally gets to oil and gas. The oil discussion is quite brief compared to the natural gas discussion.
The key takeaway is that the US will continue to be a net exporter of petroleum products through 2050, including being a natural gas exporter via LNG.
Our shift from being an importer to exporter changes the economic drivers of our policies.

**Figure:** Petroleum and other liquids consumption, production, and net exports (million barrels / day)
**Source:** Energy Information Administration

LNG Exports & Consumption

Liquefied natural gas exports drive production.
Domestic consumption remains stable.

**Figure:** Natural gas consumption & production, Liquefied natural gas exports (trillion cubic feet)
**Source:** Energy Information Administration

Miner WoW View

Mining economics improved and will likely continue with the recent rally in BTC.
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

The curve is slightly down in the near term. Past 2025, we see it climbing.

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.
Power is slightly down in the prompt.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
Similar to PJM, ERCOT power prices moved up, increasing HR.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
Not much changed in CAISO over the past week.

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.
NYISO saw only minor changes.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A is up and moving on its own again.

‍

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.

Ooda Commodities, LLC is a member of NFA and is 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.

‍

The Energy Information Agency released its Annual Energy Outlook (AEO) last week. The key new part of the forecast is the impact of the Inflation Reduction Act (IRA). Not all the pieces of the IRA are addressed in the outlook, as there are some nuances in modeling some of the legislation, but nonetheless the bill is shown to have a significant impact on the energy outlook.

The IRA certainly altered how the EIA presents the AEO. In years past, the starting focus was the energy balance, typically starting with oil & gas related issues. This report begins with the power sector, then focuses on electrification of the system. In other words, power is now leading the AEO, as opposed to being an afterthought as it was for so many years.

CO2 Emissions

The chart below shows CO2 emissions and the impact of the IRA legislation, which is quite significant: it is half of the impact of the economic high and low cases.

Renewables Growth

The greatest impact for the future power world, with or without the IRA, will be the adoption of solar power generation and storage.
As noted in the below graphic, the only source with significant growth potential is solar. Power demand is increasingly met by renewables. This growth is based not only on incentives from the government, but also the natural economics of the reduced cost of solar when compared with the alternative cost of grid power.
The grid/utility power cost structure is now surpassing the economics of solar installation in several parts of the country.

Value of Storage

With the increase in renewable energy, the AEO correctly concludes that the value of storage is growing, and hence storage installations will be increasing.
Storage offers value beyond just the price incentives, also offering backup power for grid reliability.

EV Adoption & Compute Power

One the biggest points of divergence in our view is the EV adoption curve.
Past 2030, new EV sales in the report flatten out below 20%. There has never been a technology that flattens out like that, considering the benefits and scale of adoption. Looking at other technologies that enter the consumer space and offer benefits, we typically don’t see a plateau at 20%.
Another gap in the AEO is the fact that there is no mention of compute or bitcoin mining. A discussion of power without a discussion of growth related to compute power leaves a glaring hole.

Oil & Gas

By chapter three, the report finally gets to oil and gas. The oil discussion is quite brief compared to the natural gas discussion.
The key takeaway is that the US will continue to be a net exporter of petroleum products through 2050, including being a natural gas exporter via LNG.
Our shift from being an importer to exporter changes the economic drivers of our policies.

LNG Exports & Consumption

Liquefied natural gas exports drive production.
Domestic consumption remains stable.

Miner WoW View

Mining economics improved and will likely continue with the recent rally in BTC.
The S19JPro breakeven price is between $70-$80/MWh.

Henry Hub WoW

The curve is slightly down in the near term. Past 2025, we see it climbing.

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.
Power is slightly down in the prompt.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
Similar to PJM, ERCOT power prices moved up, increasing HR.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
Not much changed in CAISO over the past week.

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.
NYISO saw only minor changes.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A is up and moving on its own again.

‍

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.

Ooda Commodities, LLC is a member of NFA and is 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.

‍

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EIA Annual Energy Outlook

Power Markets for Bitcoin Miners, 3/20/23

Key Takeaway #1

Key Takeaway #2

Key Takeaway #3

Key Takeaway #4

Premium Content

Table of contents

Research By

CO2 Emissions

Renewables Growth

Value of Storage

EV Adoption & Compute Power

Oil & Gas

LNG Exports & Consumption

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

CO2 Emissions

Renewables Growth

Value of Storage

EV Adoption & Compute Power

Oil & Gas

LNG Exports & Consumption

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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