Power Markets

The Winter Freeze of January 2024

Power Markets for Bitcoin Miners, 01/15/24

David Bellman

Key Takeaway #1

Wind generation is a crucial metric for ERCOT. It is important to monitor wind speed and precipitation, as this can cause icing on the wind blades which could shut the units down

Key Takeaway #2

Current weather shows there is no precipitation in West and South TX where most of the wind generation resides.

Key Takeaway #3

Monday reserves show a tight market due to wind generation expected to be only 5 GW. Tuesday is tighter, as peak load is higher and the extended cold increases potential issues.

Key Takeaway #4

Hedging becomes more apparent when conditions like this occur, and sound management of forward power contracts can optimize your assets. Hedge when you can, not when you have to!

In our report this week, we offer a glimpse of the various factors power traders need to track, particularly for ERCOT. Weather is obviously the most important factor. Wind generation is the key metric to watch because it represents such a large amount of the potential generation. These numbers are directly determined by wind speed. When it is cold, we also need to pay attention to conditions in which ice builds up on the wind blades, requiring the wind units to be shut down.

Currently, we can see that West and South Texas will likely be spared from any precipitation. Monday’s wind forecast is showing 5 GW at peak load. Peak load in ERCOT is showing 83.5 GW. This is a very tight market IF these conditions unravel as forecasted.

ERCOT now releases monthly adequacy reports (MORA) that are different from their seasonal reports. January’s monthly results show they expect 15 GW of wind at peak. Obviously if the forecast comes out at 5 GW and the load is 83.5 GW, there is just a slight buffer of 1 GW. Is it possible the other generation sources have more outages than forecasted?

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In our report this week, we offer a glimpse of the various factors power traders need to track, particularly for ERCOT. Weather is obviously the most important factor. Wind generation is the key metric to watch because it represents such a large amount of the potential generation. These numbers are directly determined by wind speed. When it is cold, we also need to pay attention to conditions in which ice builds up on the wind blades, requiring the wind units to be shut down.

Currently, we can see that West and South Texas will likely be spared from any precipitation. Monday’s wind forecast is showing 5 GW at peak load. Peak load in ERCOT is showing 83.5 GW. This is a very tight market IF these conditions unravel as forecasted.

ERCOT now releases monthly adequacy reports (MORA) that are different from their seasonal reports. January’s monthly results show they expect 15 GW of wind at peak. Obviously if the forecast comes out at 5 GW and the load is 83.5 GW, there is just a slight buffer of 1 GW. Is it possible the other generation sources have more outages than forecasted?

Tuesday shows similar conditions, forecasting more wind of 8.9 GW as peak load is expected to be 86GW. The longer the cold, the higher the chance of more issues to happen to operational units

Outages can easily cause issues for ERCOT. Obviously, miners in ERCOT can save the system if the mining load is 3GW. The key question is how much of the 3GW is responsive to price. We have seen many contracts with limited incentives to curtail. For miners with rate-based contracts, the only incentive comes from the demand side, which is really a cost savings strategy. Miners on wholesale pricing will likely turn off, but even in this situation the incentive is just cost savings. Those that hold a financial forward instrument have a large opportunity to add value and not just be a cost saver. As we noted last week, a financial contract purchased last month for 100 MW could have been monetized and sold for over $1m for just 1 day. On the operational side, the curtailment could be just a few hours of the day

BitOoda can help you in your power contract negotiations and help implement a comprehensive trading/hedging strategy to fully optimize your assets. We are excited to make 2024 a year of growth by working with you to add trading/hedging and asset optimization to your corporate strategies

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. January 14, 2024 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 2024 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda

In our report this week, we offer a glimpse of the various factors power traders need to track, particularly for ERCOT. Weather is obviously the most important factor. Wind generation is the key metric to watch because it represents such a large amount of the potential generation. These numbers are directly determined by wind speed. When it is cold, we also need to pay attention to conditions in which ice builds up on the wind blades, requiring the wind units to be shut down.

Currently, we can see that West and South Texas will likely be spared from any precipitation. Monday’s wind forecast is showing 5 GW at peak load. Peak load in ERCOT is showing 83.5 GW. This is a very tight market IF these conditions unravel as forecasted.

ERCOT now releases monthly adequacy reports (MORA) that are different from their seasonal reports. January’s monthly results show they expect 15 GW of wind at peak. Obviously if the forecast comes out at 5 GW and the load is 83.5 GW, there is just a slight buffer of 1 GW. Is it possible the other generation sources have more outages than forecasted?

Tuesday shows similar conditions, forecasting more wind of 8.9 GW as peak load is expected to be 86GW. The longer the cold, the higher the chance of more issues to happen to operational units

Outages can easily cause issues for ERCOT. Obviously, miners in ERCOT can save the system if the mining load is 3GW. The key question is how much of the 3GW is responsive to price. We have seen many contracts with limited incentives to curtail. For miners with rate-based contracts, the only incentive comes from the demand side, which is really a cost savings strategy. Miners on wholesale pricing will likely turn off, but even in this situation the incentive is just cost savings. Those that hold a financial forward instrument have a large opportunity to add value and not just be a cost saver. As we noted last week, a financial contract purchased last month for 100 MW could have been monetized and sold for over $1m for just 1 day. On the operational side, the curtailment could be just a few hours of the day

BitOoda can help you in your power contract negotiations and help implement a comprehensive trading/hedging strategy to fully optimize your assets. We are excited to make 2024 a year of growth by working with you to add trading/hedging and asset optimization to your corporate strategies

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. January 14, 2024 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 2024 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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The Winter Freeze of January 2024

Power Markets for Bitcoin Miners, 01/15/24

Key Takeaway #1

Key Takeaway #2

Key Takeaway #3

Key Takeaway #4

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