Power Markets

Mining and Power Market Synergies

Power Markets for Bitcoin Miners, 12/04/23

David Bellman

Key Takeaway #1

Miners offer load to the grid in a relatively portable and precise way.

Key Takeaway #2

Excess generation is a standard state for the grid and can be higher with renewable generation when it does not sync with load.

Key Takeaway #3

Developers should consider using miners to help with congestion and accelerate capital deployment.

Key Takeaway #4

The intersection of mining and power offers an opportunity to create value by developing new strategies.

As we mentioned in last week’s power report, a key value of a mining operation for a developer or utility is that it can use excess generation. Power generation can be chunky because of the fixed costs involved; regardless of whether you build 1 MW or 1 GW, there are similar fixed costs that incentivizes the developer to increase size to optimize the spend. Load and generation must be in sync; however, with load spiking because of weather, there is a need for peaking capacity, which makes excess generation inevitable. This is the reason that in several markets, the demand charge is just as large as energy charge.

Excess generation results in under-utilized assets. Miners, as well as power generators, of course understand the economic inefficiency here, as assets naturally depreciate. In addition, power generators are less efficient and have higher emissions if they are cycling vs constantly running.

Another reason excess generation occurs is congestion. Power market participants have looked at transmission upgrades to batteries to solve congestion, but miners can now also be used in areas where there are under-utilized assets.

We also have previously discussed the integration of renewable generation with mining. This comes in two forms. The first occurs when renewable generation peak times (solar middays and wind in the late evening and early mornings) are not tied to the load shape, leading to generation curtailment – hence negative pricing. Miners have the capability to absorb power during those times.

The second issue is the high volume of power generation and transmission projects that have requested to connect to the electric grid. Grid operators need to study these projects to ensure they are safe and add value to the system. FERC has modified the process to speed it up, but there are currently over 27,000 projects in the queue in the US. Developers typically would not buy equipment for projects until they are approved, but if the developer believes their project is viable, they could build the project before receiving approval and use miners to be their load. This accelerates deployment of capital. The good news is that deploying miners is easier than power generation technology, and once the project connects to the grid, the miners can be redeployed to another project

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As we mentioned in last week’s power report, a key value of a mining operation for a developer or utility is that it can use excess generation. Power generation can be chunky because of the fixed costs involved; regardless of whether you build 1 MW or 1 GW, there are similar fixed costs that incentivizes the developer to increase size to optimize the spend. Load and generation must be in sync; however, with load spiking because of weather, there is a need for peaking capacity, which makes excess generation inevitable. This is the reason that in several markets, the demand charge is just as large as energy charge.

Excess generation results in under-utilized assets. Miners, as well as power generators, of course understand the economic inefficiency here, as assets naturally depreciate. In addition, power generators are less efficient and have higher emissions if they are cycling vs constantly running.

Another reason excess generation occurs is congestion. Power market participants have looked at transmission upgrades to batteries to solve congestion, but miners can now also be used in areas where there are under-utilized assets.

We also have previously discussed the integration of renewable generation with mining. This comes in two forms. The first occurs when renewable generation peak times (solar middays and wind in the late evening and early mornings) are not tied to the load shape, leading to generation curtailment – hence negative pricing. Miners have the capability to absorb power during those times.

The second issue is the high volume of power generation and transmission projects that have requested to connect to the electric grid. Grid operators need to study these projects to ensure they are safe and add value to the system. FERC has modified the process to speed it up, but there are currently over 27,000 projects in the queue in the US. Developers typically would not buy equipment for projects until they are approved, but if the developer believes their project is viable, they could build the project before receiving approval and use miners to be their load. This accelerates deployment of capital. The good news is that deploying miners is easier than power generation technology, and once the project connects to the grid, the miners can be redeployed to another project

The intersection of mining and power offers an opportunity to create value by developing new strategies. At BitOoda, we are constantly in the process of innovating new ways in which mining can add value to power markets.

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 10 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 through http on or ://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. Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.

As we mentioned in last week’s power report, a key value of a mining operation for a developer or utility is that it can use excess generation. Power generation can be chunky because of the fixed costs involved; regardless of whether you build 1 MW or 1 GW, there are similar fixed costs that incentivizes the developer to increase size to optimize the spend. Load and generation must be in sync; however, with load spiking because of weather, there is a need for peaking capacity, which makes excess generation inevitable. This is the reason that in several markets, the demand charge is just as large as energy charge.

Excess generation results in under-utilized assets. Miners, as well as power generators, of course understand the economic inefficiency here, as assets naturally depreciate. In addition, power generators are less efficient and have higher emissions if they are cycling vs constantly running.

Another reason excess generation occurs is congestion. Power market participants have looked at transmission upgrades to batteries to solve congestion, but miners can now also be used in areas where there are under-utilized assets.

We also have previously discussed the integration of renewable generation with mining. This comes in two forms. The first occurs when renewable generation peak times (solar middays and wind in the late evening and early mornings) are not tied to the load shape, leading to generation curtailment – hence negative pricing. Miners have the capability to absorb power during those times.

The second issue is the high volume of power generation and transmission projects that have requested to connect to the electric grid. Grid operators need to study these projects to ensure they are safe and add value to the system. FERC has modified the process to speed it up, but there are currently over 27,000 projects in the queue in the US. Developers typically would not buy equipment for projects until they are approved, but if the developer believes their project is viable, they could build the project before receiving approval and use miners to be their load. This accelerates deployment of capital. The good news is that deploying miners is easier than power generation technology, and once the project connects to the grid, the miners can be redeployed to another project

The intersection of mining and power offers an opportunity to create value by developing new strategies. At BitOoda, we are constantly in the process of innovating new ways in which mining can add value to power markets.

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 10 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 through http on or ://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. Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.

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Mining and Power Market Synergies

Power Markets for Bitcoin Miners, 12/04/23

Key Takeaway #1

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Key Takeaway #4

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