Power Markets

BTC Mining Increasingly Seen As a Benefit for Renewables

Power Markets for Bitcoin Miners, 11/27/23

David Bellman

Key Takeaway #1

Miners should be cautious about deals that could represent counterparty risk.

Key Takeaway #2

The best deals are those that represent a win-win situation where the value is shared between the parties

Key Takeaway #3

The EIA is showing that over 50 GW of solar and wind capacity is set to be added to the grid

Key Takeaway #4

A power arrangement for a call option or a profit sharing agreement would create a winwin situation.

The tide may be turning on public perceptions of bitcoin’s environmental impact. This is likely the result of a growing body of studies – such as a recent report from Cornell University – showing that mining can enhance the economics of renewable development. The study notes a significant challenge for renewable projects is that the queue to connect to the grid is extremely long. The EIA is showing that over 50 GW of solar and wind capacity is set to be added to the grid, meaning it could take years for a renewable project to connect to the grid due to administrative issues related to the ISO/RTOs.

There is the potential for a renewable project to put a power purchase agreement in place with a miner, which would allow the project to start producing power while waiting for ISO/RTO grid connection approval. The power terms would have to be better than the typical deal to attract a miner, as the miner is likely to be constrained by the capacity factor of the renewable project because grid power would be more expensive when the renewable power is not available. A levelized calculation could take the capacity factor into account to produce the effective power cost needed to make the deal worthwhile

Another aspect of the contract to consider is the tenure: given that the renewable project eventually would connect to the grid, the contract may be less useful for the miner. If the contract tenure extended beyond the grid connection schedule, and if the market price were higher than the PPA price at that point, then there could be a rift in the agreement. In that situation, a power arrangement for a call option or a profit sharing agreement would create a winwin situation.

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The tide may be turning on public perceptions of bitcoin’s environmental impact. This is likely the result of a growing body of studies – such as a recent report from Cornell University – showing that mining can enhance the economics of renewable development. The study notes a significant challenge for renewable projects is that the queue to connect to the grid is extremely long. The EIA is showing that over 50 GW of solar and wind capacity is set to be added to the grid, meaning it could take years for a renewable project to connect to the grid due to administrative issues related to the ISO/RTOs.

There is the potential for a renewable project to put a power purchase agreement in place with a miner, which would allow the project to start producing power while waiting for ISO/RTO grid connection approval. The power terms would have to be better than the typical deal to attract a miner, as the miner is likely to be constrained by the capacity factor of the renewable project because grid power would be more expensive when the renewable power is not available. A levelized calculation could take the capacity factor into account to produce the effective power cost needed to make the deal worthwhile

Another aspect of the contract to consider is the tenure: given that the renewable project eventually would connect to the grid, the contract may be less useful for the miner. If the contract tenure extended beyond the grid connection schedule, and if the market price were higher than the PPA price at that point, then there could be a rift in the agreement. In that situation, a power arrangement for a call option or a profit sharing agreement would create a winwin situation.

Lastly, miners should be cautious about deals that could represent counterparty risk. The best deals are those that represent a win-win situation where the value is shared between the parties. At BitOoda, we have worked on both sides of power deals – the generators (developers and utilities) and the power takers (miners and load serving entities). We are here to help clients develop winwin power arrangements.

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.

The tide may be turning on public perceptions of bitcoin’s environmental impact. This is likely the result of a growing body of studies – such as a recent report from Cornell University – showing that mining can enhance the economics of renewable development. The study notes a significant challenge for renewable projects is that the queue to connect to the grid is extremely long. The EIA is showing that over 50 GW of solar and wind capacity is set to be added to the grid, meaning it could take years for a renewable project to connect to the grid due to administrative issues related to the ISO/RTOs.

There is the potential for a renewable project to put a power purchase agreement in place with a miner, which would allow the project to start producing power while waiting for ISO/RTO grid connection approval. The power terms would have to be better than the typical deal to attract a miner, as the miner is likely to be constrained by the capacity factor of the renewable project because grid power would be more expensive when the renewable power is not available. A levelized calculation could take the capacity factor into account to produce the effective power cost needed to make the deal worthwhile

Another aspect of the contract to consider is the tenure: given that the renewable project eventually would connect to the grid, the contract may be less useful for the miner. If the contract tenure extended beyond the grid connection schedule, and if the market price were higher than the PPA price at that point, then there could be a rift in the agreement. In that situation, a power arrangement for a call option or a profit sharing agreement would create a winwin situation.

Lastly, miners should be cautious about deals that could represent counterparty risk. The best deals are those that represent a win-win situation where the value is shared between the parties. At BitOoda, we have worked on both sides of power deals – the generators (developers and utilities) and the power takers (miners and load serving entities). We are here to help clients develop winwin power arrangements.

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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BTC Mining Increasingly Seen As a Benefit for Renewables

Power Markets for Bitcoin Miners, 11/27/23

Key Takeaway #1

Key Takeaway #2

Key Takeaway #3

Key Takeaway #4

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