Power Markets

NERC Summer Assessment Concerns

Power Markets for Bitcoin Miners, 5/22/23

David Bellman

Key Takeaway #1

This year’s NERC summer assessment is relatively alarmist, with over half the country at elevated risk of outages.

Key Takeaway #2

The NERC assessment highlights all of the key variables to be aware of, with each market having its own unique key variable (e.g., NW is hydro sensitive).

Key Takeaway #3

The NERC report is not all encompassing, as the large flexible load and weather concerns such as El Nino seem to be not covered in much depth.

Key Takeaway #4

Mining economics slightly declined, and power and gas showed slight changes other than NY-A.

The North American Electric Reliability Council (NERC) published its summer reliability assessment for 2023. The NERC assessment seems to be relatively alarmist this year, relative to previous reports. This year, over half the country is at elevated risk of outages. The positive finding is that there is no region in high risk. NERC justifies the elevated risk assessment by reviewing the main factors that drive this issue: weather and generation supply. In this case, NERC notes that the weather will be above normal across much of the US. However, weather forecasting is typically a fool’s game.

**Figure:** Summer Reliability Risk Area Summary
**Source:** NERC

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The North American Electric Reliability Council (NERC) published its summer reliability assessment for 2023. The NERC assessment seems to be relatively alarmist this year, relative to previous reports. This year, over half the country is at elevated risk of outages. The positive finding is that there is no region in high risk. NERC justifies the elevated risk assessment by reviewing the main factors that drive this issue: weather and generation supply. In this case, NERC notes that the weather will be above normal across much of the US. However, weather forecasting is typically a fool’s game.

Weather has so many variables, and betting on weather is random. One of the most discussed is the El Nino / La Nino, which is basically dependent on the temperature in the Pacific Ocean near the equator. In theory, conditions are moving toward an El Nino this year based on the above-normal temps in the Pacific, which should lead to wetter Southern states – which would not correspond with the NERC assessment. This is why a risk assessment approach using ranges is more valid approach when dealing with weather. NERC uses a range of load outcomes as depicted in the below regional graphs.

**Figure:** US and Canada Summer Temperature Outlooks
**Source:** NOAA

The below ERCOT graph shows the range of peak demand potential from 78.9GW to 82.3GW. The risk is elevated because if the load achieves the high end of 82.3 GW, this would likely result in rolling blackout events IF all was true from forced outages, derates, low wind, and operational mitigation. The large flexible load (LFL) is likely higher than most analysts are estimating, since most analysts are using history for the calculation. Miners plus players from other industries are now aware of the opportunity to profit from responding with flexible loads, and likely have added processes to be able to capture this opportunity. With 3 GW of mining in ERCOT, there is likely 3GW of load that can respond at peak. This would be sufficient to handle the high load case depicted in the figure below.

This shows the value of LFL: to mitigate peak demand shown below, a suggestion by generators would be to add 1.7 GW, which would likely cost nearly a billion dollars just for the equipment. An important distinction between data centers and miners is that the current data center margins would not result in a curtail of data center operations until prices are around $5000/MWh – whereas miners will start reacting at sub $100/MWh. As Compute evolves, the curtail price will drop.

**Figure:** 2023 Risk Period Scenario
**Source:** NERC

Hydro generation is the key in the Northwest. The NERC report notes the WECC NW issues due to drought. The latest drought maps show a relatively mild drought situation in the NW compared to years past.

**Figure:** US Drought Monitor
**Source:** droughtmonitor.unl.edu

There has been significant snow in the NW this year, and the hydro conditions that drive the NW look ample, as shown on the Northwest Forecast River Center. The NERC report highlights how unique each power market is. Hydro conditions are not important for most parts of the country, but for the NW it is impactful. In ERCOT, large growth of load can be balanced with the same load being added to the system, which is not as common in other parts of the country.

BitOoda has in-depth experience in power modeling across the North American markets. Please consider incorporating us into your power strategy, as we can help you navigate these unique markets.

**Figure:** Northwest Forecast River Center
**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 strengthen 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 saw only minor changes WoW.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
ERCOT saw only minor changes WoW.

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 minor changes outside the winters.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices back to moving on its own path – up this week.

‍

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 North American Electric Reliability Council (NERC) published its summer reliability assessment for 2023. The NERC assessment seems to be relatively alarmist this year, relative to previous reports. This year, over half the country is at elevated risk of outages. The positive finding is that there is no region in high risk. NERC justifies the elevated risk assessment by reviewing the main factors that drive this issue: weather and generation supply. In this case, NERC notes that the weather will be above normal across much of the US. However, weather forecasting is typically a fool’s game.

Weather has so many variables, and betting on weather is random. One of the most discussed is the El Nino / La Nino, which is basically dependent on the temperature in the Pacific Ocean near the equator. In theory, conditions are moving toward an El Nino this year based on the above-normal temps in the Pacific, which should lead to wetter Southern states – which would not correspond with the NERC assessment. This is why a risk assessment approach using ranges is more valid approach when dealing with weather. NERC uses a range of load outcomes as depicted in the below regional graphs.

The below ERCOT graph shows the range of peak demand potential from 78.9GW to 82.3GW. The risk is elevated because if the load achieves the high end of 82.3 GW, this would likely result in rolling blackout events IF all was true from forced outages, derates, low wind, and operational mitigation. The large flexible load (LFL) is likely higher than most analysts are estimating, since most analysts are using history for the calculation. Miners plus players from other industries are now aware of the opportunity to profit from responding with flexible loads, and likely have added processes to be able to capture this opportunity. With 3 GW of mining in ERCOT, there is likely 3GW of load that can respond at peak. This would be sufficient to handle the high load case depicted in the figure below.

This shows the value of LFL: to mitigate peak demand shown below, a suggestion by generators would be to add 1.7 GW, which would likely cost nearly a billion dollars just for the equipment. An important distinction between data centers and miners is that the current data center margins would not result in a curtail of data center operations until prices are around $5000/MWh – whereas miners will start reacting at sub $100/MWh. As Compute evolves, the curtail price will drop.

Hydro generation is the key in the Northwest. The NERC report notes the WECC NW issues due to drought. The latest drought maps show a relatively mild drought situation in the NW compared to years past.

There has been significant snow in the NW this year, and the hydro conditions that drive the NW look ample, as shown on the Northwest Forecast River Center. The NERC report highlights how unique each power market is. Hydro conditions are not important for most parts of the country, but for the NW it is impactful. In ERCOT, large growth of load can be balanced with the same load being added to the system, which is not as common in other parts of the country.

BitOoda has in-depth experience in power modeling across the North American markets. Please consider incorporating us into your power strategy, as we can help you navigate these unique markets.

Miner WoW View

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

Henry Hub WoW

Henry Hub strengthen 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 saw only minor changes WoW.

ERCOT WoW

For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
ERCOT saw only minor changes WoW.

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 minor changes outside the winters.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A prices back to moving on its own path – up this week.

‍

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.

‍

Related Research

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NERC Summer Assessment Concerns

Power Markets for Bitcoin Miners, 5/22/23

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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