Power Markets

Power Rates Issues – Solar Alternative

Power Markets for Bitcoin Miners, 7/03/23

David Bellman

Key Takeaway #1

Overall since 2022, power rates have dropped for industrial and commercial users. However, rates are region-specific; some regions still have seen increases, while others have decreased.

Key Takeaway #2

Rates are a function of revenue and can be reduced as load rises, assuming the load rise does not add additional cost to the system.

Key Takeaway #3

Solar panels offer a push back to the utilities’ inefficiency to reduce cost.

Key Takeaway #4

Gas and power markets saw minor changes, other than ERCOT and NYA which both showed some strength.

Power rates continue to rise, particularly for the consumer. Industry and commercial are seeing a downward path since 2022, but this likely is not sustainable.

Of course, the devil is in the details: while the overall rates might be down, industrial rates in 18 states have risen since 2022. For example, Nevada’s industrial rate rose 18% from their 2022 average, whereas Lousiana‘s rates dropped 30%. Within each state, there are ranges among the utilities.

The ultimate objective of utility rates is to obtain enough revenue to cover costs, and for publicly traded entities earn a return on investment for shareholders.

Therefore, as long as load is rising and holding expenses, the rates can come down. If load is falling, they have to raise rates to achieve the target revenue.

They can lower rates for certain classes, but ultimately by doing so, some other class has to make up for that discount. Having too wide of a divide between classes will cause many issues.

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Power rates continue to rise, particularly for the consumer. Industry and commercial are seeing a downward path since 2022, but this likely is not sustainable.

Of course, the devil is in the details: while the overall rates might be down, industrial rates in 18 states have risen since 2022. For example, Nevada’s industrial rate rose 18% from their 2022 average, whereas Lousiana‘s rates dropped 30%. Within each state, there are ranges among the utilities.

The ultimate objective of utility rates is to obtain enough revenue to cover costs, and for publicly traded entities earn a return on investment for shareholders.

Therefore, as long as load is rising and holding expenses, the rates can come down. If load is falling, they have to raise rates to achieve the target revenue.

They can lower rates for certain classes, but ultimately by doing so, some other class has to make up for that discount. Having too wide of a divide between classes will cause many issues.

**Figure:** Average retail US electricity price, monthly
**Source:** EIA

Power Rates Issue – Solar Alternative

With load rising, the utilities (particularly publicly-traded utilities) can not help but add cost into the system. The only way to maintain or increase dividend is to have large capital investments. This incentive structure is not well aligned with achieving the lower cost of power for society.

Decision making by utility is supposed to be kept in check with the public utility commission (PUC). The other check is for the consumers to reduce load or find their own generation.

When utilities raise rates, consumers will look for alternatives. Wholesale solar levelized cost is near $30/MWh and retail is higher, likely closer to $150/MWh, largely due to fixed labor cost with small size install.

Miners with significant rooftop and adjacent land should consider incorporating a solar analysis into their power strategy, as it can offer some fixed cost structure to a variable power market. It also offers a direct clean power attribution.

BitOoda can help with the analysis, optimization, and execution of a comprehensive energy strategy to take advantage of the falling cost of solar.

**Figure:** Solar Install Cost
**Source:** NREL

Miner WoW View

Mining economics improved week on 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 was flat week on week in the near term, but did drop in the outer years.

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 minor changes week on week.

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 continues to move up along the curve as concerns remain over price formation.

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 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 throughhttp://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.

‍

Power rates continue to rise, particularly for the consumer. Industry and commercial are seeing a downward path since 2022, but this likely is not sustainable.

Of course, the devil is in the details: while the overall rates might be down, industrial rates in 18 states have risen since 2022. For example, Nevada’s industrial rate rose 18% from their 2022 average, whereas Lousiana‘s rates dropped 30%. Within each state, there are ranges among the utilities.

The ultimate objective of utility rates is to obtain enough revenue to cover costs, and for publicly traded entities earn a return on investment for shareholders.

Therefore, as long as load is rising and holding expenses, the rates can come down. If load is falling, they have to raise rates to achieve the target revenue.

They can lower rates for certain classes, but ultimately by doing so, some other class has to make up for that discount. Having too wide of a divide between classes will cause many issues.

Power Rates Issue – Solar Alternative

With load rising, the utilities (particularly publicly-traded utilities) can not help but add cost into the system. The only way to maintain or increase dividend is to have large capital investments. This incentive structure is not well aligned with achieving the lower cost of power for society.

Decision making by utility is supposed to be kept in check with the public utility commission (PUC). The other check is for the consumers to reduce load or find their own generation.

When utilities raise rates, consumers will look for alternatives. Wholesale solar levelized cost is near $30/MWh and retail is higher, likely closer to $150/MWh, largely due to fixed labor cost with small size install.

Miners with significant rooftop and adjacent land should consider incorporating a solar analysis into their power strategy, as it can offer some fixed cost structure to a variable power market. It also offers a direct clean power attribution.

BitOoda can help with the analysis, optimization, and execution of a comprehensive energy strategy to take advantage of the falling cost of solar.

Miner WoW View

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

Henry Hub WoW

Henry Hub was flat week on week in the near term, but did drop in the outer years.

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 minor changes week on week.

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 continues to move up along the curve as concerns remain over price formation.

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 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 throughhttp://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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Power Rates Issues – Solar Alternative

Power Markets for Bitcoin Miners, 7/03/23

Key Takeaway #1

Key Takeaway #2

Key Takeaway #3

Key Takeaway #4

Premium Content

Table of contents

Research By

Power Rates Issue – Solar Alternative

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

Power Rates Issue – Solar Alternative

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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