Home » FTX Fiasco Shows Crypto’s No Green-Grid Hero

FTX Fiasco Shows Crypto’s No Green-Grid Hero

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Welcome to Elements. A daily energy and commodities newsletter. Today, Bloomberg Opinion’s Liam Denning examines the collapse of the FTX and crypto energy ties. Oil briefly rose in the market after a tanker was attacked off the coast of Oman, but a major pipeline to Europe was shut down on Tuesday after power was knocked out. If you haven’t signed up to receive Elements directly in your inbox, you can sign up here.

Take of the Day: Bitcoin Blackout

FTX’s epic blaze is a reminder that you can’t spell “cryptomania” without “pyromania.” Just as the seemingly $16 billion fund is unlikely to advance long-anticipated mainstreaming such as Bitcoin, it should prompt soul-searching about the relationship between cryptocurrencies and energy.

Plagued by criticism of Bitcoin’s greedy power consumption, some miners have repositioned themselves as green grid champions. They argue that mining adds demand, thereby driving new (renewable) capacity and helping when the network is under strain. Texas, with its instinctive experience of a strained power system, became the epicenter of this US, with enough miners applying for grid connections to boost demand by 33 gigawatts. That’s enough to power the entire state of New York.

Even before the latest cryptocurrency debacle, such thinking was problematic. As Severin Borenstein of the University of California, Berkeley writes, miners who promise to reduce demand when supply is tight, conversely consume most when supply is plentiful. So where are the incentives for new capacity? Instead, existing plants can be kept running longer than they actually are (as we’ve already seen in Pennsylvania).

Since FTX started imploding, bitcoin mining power consumption worldwide appears to have dropped by about a factor of six. Joshua Rhodes of the University of Texas at Austin, at Bitcoin’s current level of about $16,000, he estimates that the breakeven price for electricity for miners is about $100 per MWh. This is still significantly higher than Texas spot prices of around $60-70 per MWh, suggesting margins are shrinking rather than completely vaporizing.

Last week’s debacle, on the other hand, raised a bigger issue. The FTX drama, which calls for another crypto exchange to take over the balance sheet of so-called self-generated coins, demonstrates the inherent limitations of crypto’s closed and hollow ecosystem. ”. Which power producers have long-term supply contracts based on that? Which responsible grid operator would encourage it? Texas, with its vast wind and solar resources, is poised for some exciting technology to help keep the grid stable while going green. It is certain that I hear the battery works fine.

— Liam Denning, Bloomberg Opinion

Russian oil isn’t the only one doing haircuts. Heavy crude in Alberta trades at less than $60 a barrel. Western Canada Select’s discount to the West Texas Intermediate, in 2022, has ballooned to its widest since late 2018. This year, the most likely culprit is south of the border, but it’s also an offshoot of Russia’s turmoil, with heavy and sour barrels competing from its strategic oil reserves.

On Tuesday night, an oil tanker linked to an Israeli billionaire was hit with a rocket off the coast of Oman. Pacific His Zircon collided about 150 miles from shore, according to shipowners. Meanwhile, the Druzhba oil pipeline to Europe has been shut down after a strike to Ukraine led to a loss of power.

European Union officials are considering proposing a maximum price cap for one of the world’s largest natural gas hubs to contain the unprecedented energy crisis and meet government demands for the controversial tool. I’m here.

Two years of frenetic buying in the world’s largest lithium market show tentative signs of easing towards the end of 2022 as the massive increase in demand from China’s electric vehicle sector begins to ease. .

Oz Minerals Ltd. has closed its doors three months after the copper mining company rejected an A$8.4 billion ($5.7 billion) bid by BHP Group Ltd, pending the announcement of a transaction that could result in a change of control. , requested a suspension of trading.

David McLennan, CEO of Cargill, America’s largest private company, said food prices will probably fall next year even if global grain stocks remain very tight.

• The world needs to explore a climate ‘plan C’ that includes ocean and atmospheric geoengineering, in case the energy transition proves too slow, says former BP Plc chief executive John Brown writes in a Financial Times op-ed.

• Four wheels are better, two wheels are better. While everyone is obsessed with Teslas, F-150 Lightnings and Lucid Air, this feature of the Protocol draws attention to Taiwan-focused motorbike and scooter electrification opportunities.

• Andrew Campbell, University of California, Berkeley, Haas Energy Laboratory, deploying carbon capture technologies to address risks associated with pipelines, groundwater and seismic activity as US Inflation Reduction Act subsidies increase advocates for aggressive federal and state regulation of

This column does not necessarily reflect the opinions of the editorial board or Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist on energy and commodities. A former investment banker, he was the editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’ Lex column.

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