Power Markets

Operations of Coal Plants in PJM

Power Markets for Bitcoin Miners, 4/24/23

David Bellman

Key Takeaway #1

Load (businesses/society) have no operational control of coal generators

Key Takeaway #2

This past January, many coal plants ran outside economic parameters.

Key Takeaway #3

Emissions from these coal plants cannot be tied to load, as their actions are uneconomic as demonstrated in the EIA-923 forms and PJM power prices. Those wanting to reduce emissions need to focus on government regulators, utility executives, and commissioners – not businesses who just take what is available.

Key Takeaway #4

Gas and power prices have moved up slightly week on week – still not much direction, as weather remains a big unknown.

To blame load for generation emissions is not a logical way to think about the power markets, since resource planning is in control of the utilities, not the loads. Another important area of concern other than load customer control is the day-to-day operations of generation plants. Economics are not always the drivers of operational decisions by power plants. Much of the utility landscape is cost recovery, meaning they can make uneconomical decisions to serve load relative to the market, and the loads will pay for it. This can be seen by looking at the Energy Information Agency 923 forms, which collect electric power data on electricity generation, fuel consumption, fossil fuel stocks, and receipts at the power plant level.

Case in point: the coal purchase price in the EIA-923 forms is reported for 50% of the plants in PJM for January 2023 and the average price is $3.16/mmbtu. However, more than 30% of the coal cost is over $4/mmbtu with some over $8/mmbtu. Most of the higher-priced coals were made under spot contract, which is indicated on the form.

**Figure:** PJM Jan 2023 – Coal Purchases in $/mmbtu Buckets
**Source:** EIA

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To blame load for generation emissions is not a logical way to think about the power markets, since resource planning is in control of the utilities, not the loads. Another important area of concern other than load customer control is the day-to-day operations of generation plants. Economics are not always the drivers of operational decisions by power plants. Much of the utility landscape is cost recovery, meaning they can make uneconomical decisions to serve load relative to the market, and the loads will pay for it. This can be seen by looking at the Energy Information Agency 923 forms, which collect electric power data on electricity generation, fuel consumption, fossil fuel stocks, and receipts at the power plant level.

Case in point: the coal purchase price in the EIA-923 forms is reported for 50% of the plants in PJM for January 2023 and the average price is $3.16/mmbtu. However, more than 30% of the coal cost is over $4/mmbtu with some over $8/mmbtu. Most of the higher-priced coals were made under spot contract, which is indicated on the form.

Therefore, an interesting question if you own a coal plant would be: what price do you use for dispatching your power plant? Most economic rules would indicate the replacement cost price. However, if that were the case, the coal plants would not dispatch much given the incremental displacement cost of spot purchases is over $5/mmbtu. This would place the bid price at over $55/MWh, based on a typical coal plant heat rate efficiency of 10mmbtu / MWh + ~$5/MWh to cover Variable Operations & Maintenance costs + environmental / emissions costs.

However, in January 2023 the power prices averaged $35/MWh. If we look on an hourly basis, only 7% of hours were above $55/MWh. Several coal plants make the decision to submit the lower cost knowing they will be made whole, as fuel cost are typically pass-through costs. The fact is that load on the system does not cause high emissions, as it is the utility who not only controls the resource mix but also how they operate it. There has not been any miner or compute company stating they want to emit.

Those opining in the media about the power system needs to understand that the landscape is quite complex, with many moving parts and a multitude of actors. Unless you have worked in the industry, it is very unlikely you can fully understand all the nuances and complexity that keeps the power running. There are also independent power producers (IPPs) on the system, but the bulk of the power producers still come from utility-run operations – particularly when it comes to coal. Academics who study the industry on paper can easily make assumptions that do not translate to reality. At BitOoda, we have hands-on experience in many parts of the power world – we can help you navigate this complex world and avoid erroneous takeaways from these misguided reports.

**Figure:** Count of Hours within price buckets ($/MWh)
**Source:** EIA

Miner WoW View

Mining economics declined this week.
The S19JPro breakeven price is between $80-$90/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 reversed last week’s move, and then some.

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 change WoW.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
CAISO rebounded from last week’s move.

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.
NYISO is up slightly in the summer and winter.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A is 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.

‍

To blame load for generation emissions is not a logical way to think about the power markets, since resource planning is in control of the utilities, not the loads. Another important area of concern other than load customer control is the day-to-day operations of generation plants. Economics are not always the drivers of operational decisions by power plants. Much of the utility landscape is cost recovery, meaning they can make uneconomical decisions to serve load relative to the market, and the loads will pay for it. This can be seen by looking at the Energy Information Agency 923 forms, which collect electric power data on electricity generation, fuel consumption, fossil fuel stocks, and receipts at the power plant level.

Case in point: the coal purchase price in the EIA-923 forms is reported for 50% of the plants in PJM for January 2023 and the average price is $3.16/mmbtu. However, more than 30% of the coal cost is over $4/mmbtu with some over $8/mmbtu. Most of the higher-priced coals were made under spot contract, which is indicated on the form.

Therefore, an interesting question if you own a coal plant would be: what price do you use for dispatching your power plant? Most economic rules would indicate the replacement cost price. However, if that were the case, the coal plants would not dispatch much given the incremental displacement cost of spot purchases is over $5/mmbtu. This would place the bid price at over $55/MWh, based on a typical coal plant heat rate efficiency of 10mmbtu / MWh + ~$5/MWh to cover Variable Operations & Maintenance costs + environmental / emissions costs.

However, in January 2023 the power prices averaged $35/MWh. If we look on an hourly basis, only 7% of hours were above $55/MWh. Several coal plants make the decision to submit the lower cost knowing they will be made whole, as fuel cost are typically pass-through costs. The fact is that load on the system does not cause high emissions, as it is the utility who not only controls the resource mix but also how they operate it. There has not been any miner or compute company stating they want to emit.

Those opining in the media about the power system needs to understand that the landscape is quite complex, with many moving parts and a multitude of actors. Unless you have worked in the industry, it is very unlikely you can fully understand all the nuances and complexity that keeps the power running. There are also independent power producers (IPPs) on the system, but the bulk of the power producers still come from utility-run operations – particularly when it comes to coal. Academics who study the industry on paper can easily make assumptions that do not translate to reality. At BitOoda, we have hands-on experience in many parts of the power world – we can help you navigate this complex world and avoid erroneous takeaways from these misguided reports.

Miner WoW View

Mining economics declined this week.
The S19JPro breakeven price is between $80-$90/MWh.

Henry Hub WoW

Henry Hub reversed last week’s move, and then some.

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 change WoW.

CAISO WoW

For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
CAISO rebounded from last week’s move.

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.
NYISO is up slightly in the summer and winter.

NYISO WoW: NY-A

This slide adds NY-A for the NYISO region.
NY-A is 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.

‍

Related Research

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Operations of Coal Plants in PJM

Power Markets for Bitcoin Miners, 4/24/23

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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