Power Markets

Load Growth is Coming… but not from BTC Mining

Power Markets for Bitcoin Miners, 12/18/23

David Bellman

Key Takeaway #1

Electrical load is growing across the country, driven by high performance compute data centers, industrial load, and demand for electrical vehicles

Key Takeaway #2

Data center loads are higher than mining load and expected to grow faster.

Key Takeaway #3

BTC mining loads and climate issues should soften as data center loads grow further. However, data centers will be competing with miners for load and resources (transformers, switches, etc.).

Key Takeaway #4

Utility prices likely will be north of $50/MWh if they need to start building generation. • Mining economics declined as hash surged to 506 EH/s

Over the past few weeks, we have seen a number of articles and reports on the growing need for compute for AI projects. Friday’s WSJ article is a good example, and Grid Strategies put out a detailed piece flagging that near-term investment in large loads is boosting load growth projections, spurred by an increase in AI/data centers as well as industrial growth from the energy transition (e.g., the hydrogen economy) and electric vehicles.

This is generally good news for miners on the publicity front, as the use of high performance compute (HPC) for AI already surpasses the load being used by miners. The Grid Strategies report notes, “According to the Boston Consulting Group (BCG), data centers currently represent 2.5% of U.S. electricity consumption. By 2030, BCG expects energy use to grow from 126 TWh to 335 TWh, or demand of 17 GW to 45 GW.

These HPC loads are less price sensitive than BTC miners. Power price breakevens for BTC miners on the high end are under $100/MWh, and for HPC would be well north of $1000/MWh. Therefore, grid response and grid stability will not come from HPC centers – therefore the best load for the grid is still BTC miners.

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Over the past few weeks, we have seen a number of articles and reports on the growing need for compute for AI projects. Friday’s WSJ article is a good example, and Grid Strategies put out a detailed piece flagging that near-term investment in large loads is boosting load growth projections, spurred by an increase in AI/data centers as well as industrial growth from the energy transition (e.g., the hydrogen economy) and electric vehicles.

This is generally good news for miners on the publicity front, as the use of high performance compute (HPC) for AI already surpasses the load being used by miners. The Grid Strategies report notes, “According to the Boston Consulting Group (BCG), data centers currently represent 2.5% of U.S. electricity consumption. By 2030, BCG expects energy use to grow from 126 TWh to 335 TWh, or demand of 17 GW to 45 GW.

These HPC loads are less price sensitive than BTC miners. Power price breakevens for BTC miners on the high end are under $100/MWh, and for HPC would be well north of $1000/MWh. Therefore, grid response and grid stability will not come from HPC centers – therefore the best load for the grid is still BTC miners.

On the market front, this will bring a constraint. Eventually, the pace of load builds could outpace the capacity for generation builds. Using excess generation is the most cost effective approach to adding load to the grid. If the grid has to start building generation assets, this will likely be north of $50/MWh power if looking for the firm power that HPC would demand. Miners could potentially have locations that would be desirable for HPC, largely as a result of their access to power (not necessarily because of the price).

It is therefore possible for a miner to market a certain level of MW for hosting HPC sites. Hosting versus operating HPC would be an easier foray into compute. Operating HPC would require a level of customer acquisition that is very different from BTC mining. In mining, your final output is easily “usable.” In HPC, the final output is for another customer (biotech, streaming, defense users, etc.).

Hosting can be lucrative given that the HPC breakeven power is higher than mining power contracts. This also threatens the future price of power contracts, as many power contracts are only 5 years long. If the utilities reset after 5 years, this could be significantly higher than the contracts you have now if the future unfolds as these pundits are projecting.

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 11 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

Over the past few weeks, we have seen a number of articles and reports on the growing need for compute for AI projects. Friday’s WSJ article is a good example, and Grid Strategies put out a detailed piece flagging that near-term investment in large loads is boosting load growth projections, spurred by an increase in AI/data centers as well as industrial growth from the energy transition (e.g., the hydrogen economy) and electric vehicles.

This is generally good news for miners on the publicity front, as the use of high performance compute (HPC) for AI already surpasses the load being used by miners. The Grid Strategies report notes, “According to the Boston Consulting Group (BCG), data centers currently represent 2.5% of U.S. electricity consumption. By 2030, BCG expects energy use to grow from 126 TWh to 335 TWh, or demand of 17 GW to 45 GW.

These HPC loads are less price sensitive than BTC miners. Power price breakevens for BTC miners on the high end are under $100/MWh, and for HPC would be well north of $1000/MWh. Therefore, grid response and grid stability will not come from HPC centers – therefore the best load for the grid is still BTC miners.

On the market front, this will bring a constraint. Eventually, the pace of load builds could outpace the capacity for generation builds. Using excess generation is the most cost effective approach to adding load to the grid. If the grid has to start building generation assets, this will likely be north of $50/MWh power if looking for the firm power that HPC would demand. Miners could potentially have locations that would be desirable for HPC, largely as a result of their access to power (not necessarily because of the price).

It is therefore possible for a miner to market a certain level of MW for hosting HPC sites. Hosting versus operating HPC would be an easier foray into compute. Operating HPC would require a level of customer acquisition that is very different from BTC mining. In mining, your final output is easily “usable.” In HPC, the final output is for another customer (biotech, streaming, defense users, etc.).

Hosting can be lucrative given that the HPC breakeven power is higher than mining power contracts. This also threatens the future price of power contracts, as many power contracts are only 5 years long. If the utilities reset after 5 years, this could be significantly higher than the contracts you have now if the future unfolds as these pundits are projecting.

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 11 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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Load Growth is Coming… but not from BTC Mining

Power Markets for Bitcoin Miners, 12/18/23

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