Large flexible loads (LFL) are helping the ERCOT system stabilize.
Beyond altruism, there is significant value to being a flexible load in ERCOT
Sophisticated miners can capitalize on the dynamic energy markets by trading financial instruments.
PJM was the only power market to respond to the gas surge.
ERCOT released an analysis on large flexible load and the voluntary load curtailment program. The analysis covers the response to the recent winter storm Elliot. The author presents the load changes as seen in the figure below.
There is a clear price motive to curtail generation. The author notes:
Potentially, even the 6 LFLs that curtailed for the entire duration were price responsive. What is missing from the analysis is what the futures market was pricing before the event. The futures market traded well over $1000/MWh for various contracts.
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ERCOT released an analysis on large flexible load and the voluntary load curtailment program. The analysis covers the response to the recent winter storm Elliot. The author presents the load changes as seen in the figure below.
There is a clear price motive to curtail generation. The author notes:
Potentially, even the 6 LFLs that curtailed for the entire duration were price responsive. What is missing from the analysis is what the futures market was pricing before the event. The futures market traded well over $1000/MWh for various contracts.
Understanding the futures market allows even greater optionality and maximization of value. The most common contract is a monthly on-peak contract, which specifies 16 hours on non-holiday M-F for days of that month. There is an off-peak contract that covers the remaining hours. As the contracts starts approaching the month, there are weekly on/off peak contracts. There is also a next day contract and finally a bal day and bal week contract. These distinct contracts allow a more fluid ability to maximize operations and cost.
Knowing that your facility can turn off and on within an hour or less will actually allow large loads to make money from these events. It is not that they are causing more burden to the rate payers, as some may suggest, but they are actually offering a service to stabilize the grid and hence can make money for that value.
A miner who locks in their load for the whole month at $60/MWh can then trade that $60/MWh lot throughout the whole month via these smaller tenured contracts. Obviously, a minor move up will not change operations, but a $1000+ move then questions the value from the operation vs. power market.
An active trading desk focused on your needs can help achieve this, although it does come with a cost. A power desk requires collateral, infrastructure, and experienced personal. Aligning the traders and operations requires forethought. Power is a very complex and easily misunderstood market, but with the right expertise and experience it could be very fruitful as risk and reward are commensurate. BitOoda has decades of experience in understanding the necessary ingredients that go into this, and can help guide your successful hedging and trading operations.
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
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ERCOT released an analysis on large flexible load and the voluntary load curtailment program. The analysis covers the response to the recent winter storm Elliot. The author presents the load changes as seen in the figure below.
There is a clear price motive to curtail generation. The author notes:
Potentially, even the 6 LFLs that curtailed for the entire duration were price responsive. What is missing from the analysis is what the futures market was pricing before the event. The futures market traded well over $1000/MWh for various contracts.
Understanding the futures market allows even greater optionality and maximization of value. The most common contract is a monthly on-peak contract, which specifies 16 hours on non-holiday M-F for days of that month. There is an off-peak contract that covers the remaining hours. As the contracts starts approaching the month, there are weekly on/off peak contracts. There is also a next day contract and finally a bal day and bal week contract. These distinct contracts allow a more fluid ability to maximize operations and cost.
Knowing that your facility can turn off and on within an hour or less will actually allow large loads to make money from these events. It is not that they are causing more burden to the rate payers, as some may suggest, but they are actually offering a service to stabilize the grid and hence can make money for that value.
A miner who locks in their load for the whole month at $60/MWh can then trade that $60/MWh lot throughout the whole month via these smaller tenured contracts. Obviously, a minor move up will not change operations, but a $1000+ move then questions the value from the operation vs. power market.
An active trading desk focused on your needs can help achieve this, although it does come with a cost. A power desk requires collateral, infrastructure, and experienced personal. Aligning the traders and operations requires forethought. Power is a very complex and easily misunderstood market, but with the right expertise and experience it could be very fruitful as risk and reward are commensurate. BitOoda has decades of experience in understanding the necessary ingredients that go into this, and can help guide your successful hedging and trading operations.
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.
Ooda Commodities, LLC is a member of NFA and is 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 2022 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.