Power Markets

The Role of Active Power Traders

Power Markets for Bitcoin Miners, 8/21/23

David Bellman

Key Takeaway #1

ERCOT brought some excitement on Thursday and Friday, creating two drastically different outcomes.

Key Takeaway #2

An active trading strategy could have brought an added value of $1m in two days by trading just 100MW.

Key Takeaway #3

Fundamental market drivers changing throughout the day require continuous monitoring to capture the best trade.

Key Takeaway #4

ERCOT futures are now absorbing “permanent” price spikes into the forward curve.

Once again, ERCOT brought some excitement on Thursday and Friday, similar to our previous analysis of opportunities to hedge August 23 at $90/MWh for 100MW on-peak.

Last week’s two days had drastically different outcomes. On Thursday, the Day-Ahead cleared under the Real-Time by over $385/MWh. On Friday, it cleared by over $300/MWh. Monitoring these market dynamics in real-time throughout the day would have allowed you to maximize your outcome through trading. A passive trading system likely would have left money on the table, whereas an active trader might have been able to produce an additional $1 million for a 100MW trade in just two days. The financial trade, assuming a starting point of a $90/MWh hedge, ranged from $2.9 to $1.8 million.

The ability to trade this market is easier for a miner than a power trader without an asset. This is because if the power crashed – which it could have easily done, for example to $25/MWh – the loss on the financial trade would have been $104k, but mining operations at that lower price would have made up for the trading loss. A power trader without an asset would essentially have to absorb this loss.

In terms of operations, on Thursday your operations would have shut down likely for 9 hours, as compared to 5 hours on Friday. However, the PNL from this trade/hedge should have fully compensated for the curtailed hours.

Making good decisions is the role of the active power trader. Not included in the decision tree was whether to trade ancillary services. This is an added layer of complexity that price contracts may or may not have available. Wholesale power variability is a more common option, whether through a fuel clause or indexation.

Power strategists for miners should continuously present the outcomes of their decisions, for better or worse. Great traders know that can’t always hit the top/bottom with total accuracy, but continuously reviewing past decisions will improve future outcomes. Designing the appropriate incentive structure for the trading group will keep risk minimized and still offer significant upside for your organization. BitOoda has decades of experience trading energy products to help you create an optimal energy strategy.

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Once again, ERCOT brought some excitement on Thursday and Friday, similar to our previous analysis of opportunities to hedge August 23 at $90/MWh for 100MW on-peak.

Last week’s two days had drastically different outcomes. On Thursday, the Day-Ahead cleared under the Real-Time by over $385/MWh. On Friday, it cleared by over $300/MWh. Monitoring these market dynamics in real-time throughout the day would have allowed you to maximize your outcome through trading. A passive trading system likely would have left money on the table, whereas an active trader might have been able to produce an additional $1 million for a 100MW trade in just two days. The financial trade, assuming a starting point of a $90/MWh hedge, ranged from $2.9 to $1.8 million.

The ability to trade this market is easier for a miner than a power trader without an asset. This is because if the power crashed – which it could have easily done, for example to $25/MWh – the loss on the financial trade would have been $104k, but mining operations at that lower price would have made up for the trading loss. A power trader without an asset would essentially have to absorb this loss.

In terms of operations, on Thursday your operations would have shut down likely for 9 hours, as compared to 5 hours on Friday. However, the PNL from this trade/hedge should have fully compensated for the curtailed hours.

Making good decisions is the role of the active power trader. Not included in the decision tree was whether to trade ancillary services. This is an added layer of complexity that price contracts may or may not have available. Wholesale power variability is a more common option, whether through a fuel clause or indexation.

Power strategists for miners should continuously present the outcomes of their decisions, for better or worse. Great traders know that can’t always hit the top/bottom with total accuracy, but continuously reviewing past decisions will improve future outcomes. Designing the appropriate incentive structure for the trading group will keep risk minimized and still offer significant upside for your organization. BitOoda has decades of experience trading energy products to help you create an optimal energy strategy.

**Figure**: ERCOT Prices, 8/17-18/23
**Data source:** ERCOT

Miner WoW View

Mining economics weakened 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 saw minor changes WoW.

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 saw minor changes.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
ERCOT futures are now absorbing “permanent” price spikes into the forward curve.

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 saw minor changes.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices saw minor changes.

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.

‍

Once again, ERCOT brought some excitement on Thursday and Friday, similar to our previous analysis of opportunities to hedge August 23 at $90/MWh for 100MW on-peak.

Last week’s two days had drastically different outcomes. On Thursday, the Day-Ahead cleared under the Real-Time by over $385/MWh. On Friday, it cleared by over $300/MWh. Monitoring these market dynamics in real-time throughout the day would have allowed you to maximize your outcome through trading. A passive trading system likely would have left money on the table, whereas an active trader might have been able to produce an additional $1 million for a 100MW trade in just two days. The financial trade, assuming a starting point of a $90/MWh hedge, ranged from $2.9 to $1.8 million.

The ability to trade this market is easier for a miner than a power trader without an asset. This is because if the power crashed – which it could have easily done, for example to $25/MWh – the loss on the financial trade would have been $104k, but mining operations at that lower price would have made up for the trading loss. A power trader without an asset would essentially have to absorb this loss.

In terms of operations, on Thursday your operations would have shut down likely for 9 hours, as compared to 5 hours on Friday. However, the PNL from this trade/hedge should have fully compensated for the curtailed hours.

Making good decisions is the role of the active power trader. Not included in the decision tree was whether to trade ancillary services. This is an added layer of complexity that price contracts may or may not have available. Wholesale power variability is a more common option, whether through a fuel clause or indexation.

Power strategists for miners should continuously present the outcomes of their decisions, for better or worse. Great traders know that can’t always hit the top/bottom with total accuracy, but continuously reviewing past decisions will improve future outcomes. Designing the appropriate incentive structure for the trading group will keep risk minimized and still offer significant upside for your organization. BitOoda has decades of experience trading energy products to help you create an optimal energy strategy.

Miner WoW View

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

Henry Hub WoW

Henry Hub saw minor changes WoW.

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 saw minor changes.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
ERCOT futures are now absorbing “permanent” price spikes into the forward curve.

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 saw minor changes.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices saw minor changes.

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.

‍

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The Role of Active Power Traders

Power Markets for Bitcoin Miners, 8/21/23

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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