Power Markets

Near-term Weather Impacting Long-term Forwards

Power Markets for Bitcoin Miners, 6/5/23

David Bellman

Key Takeaway #1

Near-term weather and commodity fundamentals impact outer-year prices. For example, calendar strip 2024 has already fallen $3/MWh in PJMW.

Key Takeaway #2

There is no better time to start a power hedging strategy than now, so that you can focus on your core competency.

Key Takeaway #3

Bitcoin mining economics weakened, as did most of the natural gas and power strip.

Key Takeaway #4

ERCOT forwards continue to be resilient – if real time prices do not hold up, the forward strip is likely to drop.

The weather outlook for the US is mild for the next 10 days. NYC observed its lowest temperatures since 1976 of 49F. The forward curve typically is influenced by current events. The 2024 power calendar strip in the past month has fallen $3/MWH in PJM, $2/MWH in NY, and $6.5/MWH in CA, but is still flat in ERCOT at $41/MWh. For context related to power, a one-dollar drop in a calendar year strip is a large move. For context related to miners, a -$1/MWh move for a 25 MW facility would amount to 8760*1*25 = $219K change to the power cost. As we have noted in the past, having a power hedging strategy is important when you are a large consumer of power and your contract has a variable component, which is more likely than not.

Hedging strategies (similar to AI training) should be back-casted with reality, and the risk of the hedge should be clear. The strategy needs to involve timing, volume, and risk tolerance. Business continuity is a prime objective of any hedging plan, as well as managing volatility, allowing you to focus on your core competency (e.g., mining). Power volatility will always exist, as weather is random and other market fundamentals also carry inherent volatility, such as natural gas inventories, coal piles, and power plant maintenance.

All of this volatility makes it more reasonable to want to hedge/manage power cost, whether you are a miner, data center, or large industrial customer. The difference between a typical industrial customer and the miner/data center is the ability to respond to market conditions timely. This is where these loads can bring additional value and minimize the hedge cost, and potentially can profit on the hedge as well.

The ability to have a sustainable and effective hedging program requires skill sets in risk management and power fundamentals, as well as of course a thorough understanding of your operations. BitOoda is well positioned to help large miners and datacenter loads, given our team of former power traders and brokers and our in-depth research and knowledge of mining and Compute. Please reach out to discuss how best to develop a sustained and effective hedge program.

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The weather outlook for the US is mild for the next 10 days. NYC observed its lowest temperatures since 1976 of 49F. The forward curve typically is influenced by current events. The 2024 power calendar strip in the past month has fallen $3/MWH in PJM, $2/MWH in NY, and $6.5/MWH in CA, but is still flat in ERCOT at $41/MWh. For context related to power, a one-dollar drop in a calendar year strip is a large move. For context related to miners, a -$1/MWh move for a 25 MW facility would amount to 8760*1*25 = $219K change to the power cost. As we have noted in the past, having a power hedging strategy is important when you are a large consumer of power and your contract has a variable component, which is more likely than not.

Hedging strategies (similar to AI training) should be back-casted with reality, and the risk of the hedge should be clear. The strategy needs to involve timing, volume, and risk tolerance. Business continuity is a prime objective of any hedging plan, as well as managing volatility, allowing you to focus on your core competency (e.g., mining). Power volatility will always exist, as weather is random and other market fundamentals also carry inherent volatility, such as natural gas inventories, coal piles, and power plant maintenance.

All of this volatility makes it more reasonable to want to hedge/manage power cost, whether you are a miner, data center, or large industrial customer. The difference between a typical industrial customer and the miner/data center is the ability to respond to market conditions timely. This is where these loads can bring additional value and minimize the hedge cost, and potentially can profit on the hedge as well.

The ability to have a sustainable and effective hedging program requires skill sets in risk management and power fundamentals, as well as of course a thorough understanding of your operations. BitOoda is well positioned to help large miners and datacenter loads, given our team of former power traders and brokers and our in-depth research and knowledge of mining and Compute. Please reach out to discuss how best to develop a sustained and effective hedge program.

**Figure:** 6-10 Day Temperature Outlook, US
**Source:** NOAA

Miner WoW View

Mining economics declined this 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 weakened along the entire strip last week.

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 dropped, mostly in line with gas.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
The ERCOT power market is still holding strong, but will likely falter if real-time does not show strength.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
CAISO 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 only minor changes.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices went up again.

‍

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.

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.

‍

The weather outlook for the US is mild for the next 10 days. NYC observed its lowest temperatures since 1976 of 49F. The forward curve typically is influenced by current events. The 2024 power calendar strip in the past month has fallen $3/MWH in PJM, $2/MWH in NY, and $6.5/MWH in CA, but is still flat in ERCOT at $41/MWh. For context related to power, a one-dollar drop in a calendar year strip is a large move. For context related to miners, a -$1/MWh move for a 25 MW facility would amount to 8760*1*25 = $219K change to the power cost. As we have noted in the past, having a power hedging strategy is important when you are a large consumer of power and your contract has a variable component, which is more likely than not.

Hedging strategies (similar to AI training) should be back-casted with reality, and the risk of the hedge should be clear. The strategy needs to involve timing, volume, and risk tolerance. Business continuity is a prime objective of any hedging plan, as well as managing volatility, allowing you to focus on your core competency (e.g., mining). Power volatility will always exist, as weather is random and other market fundamentals also carry inherent volatility, such as natural gas inventories, coal piles, and power plant maintenance.

All of this volatility makes it more reasonable to want to hedge/manage power cost, whether you are a miner, data center, or large industrial customer. The difference between a typical industrial customer and the miner/data center is the ability to respond to market conditions timely. This is where these loads can bring additional value and minimize the hedge cost, and potentially can profit on the hedge as well.

The ability to have a sustainable and effective hedging program requires skill sets in risk management and power fundamentals, as well as of course a thorough understanding of your operations. BitOoda is well positioned to help large miners and datacenter loads, given our team of former power traders and brokers and our in-depth research and knowledge of mining and Compute. Please reach out to discuss how best to develop a sustained and effective hedge program.

Miner WoW View

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

Henry Hub WoW

Henry Hub weakened along the entire strip last week.

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 dropped, mostly in line with gas.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
The ERCOT power market is still holding strong, but will likely falter if real-time does not show strength.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
CAISO 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 only minor changes.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices went up again.

‍

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.

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.

‍

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Near-term Weather Impacting Long-term Forwards

Power Markets for Bitcoin Miners, 6/5/23

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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