Fitch Ratings: Rise of crypto mining creates risks for US electric utilities

Cryptocurrency mining in the United States could pose financial risks to power utilities, believe Fitch Ratings’ analysts.

“Cryptocurrency mining centres are price-sensitive assets that can quickly scale back or shut down operations if mining becomes unprofitable,” they noted.

Electric utilities must balance the prospect of additional revenue from higher sales with obligations to purchase or generate large volumes, the analysts noted.

In regions with abundant electricity, providers have the ability to meet miners’ demand from available capacity. This is the case in Washington state, where over the past two decades energy-intensive aluminum smelters closed and wind generation expanded, and, combined with plentiful cheap hydropower, this has made the state an attractive base for digital asset mining operations, Fitch noted.

However, in the view of the experts, utilities should weigh the potential costs and benefits of adding new large loads for mining against other economic development options.

According to them, cryptocurrency mining farms typically offer little in the way of profits or jobs to local economies, even as they become the largest consumers of electricity.

In another mining hub in the United States, Texas, there are no excess generating capacities, unlike Washington, Fitch noted. To connect a significant load for mining, electricity providers here can pursue three paths:

• invest in additional generation capacity;
• enter into a new long-term power purchase agreement;
• buy it on the real-time market.

The first two options pose the greatest risk of financial losses for power providers in the event of mining operations winding down. In the first case they would be left with stranded assets, and in the second — with obligations tied to those commitments.

The agency’s specialists recommend mitigating these risks by miners providing payment guarantees backed by lines of credit or cash deposits.

Earlier in the U.S. Congress, expressed concerns about mining’s impact on power consumption.