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Fitch Ratings: Mining development creates risks for US power supply

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Fitch Ratings: Mining development creates risks for US power supply. Mining cryptocurrencies in the United States can create financial risks for energy supply companies, according to experts of the rating agency Fitch Ratings.

“Crypto mining operations are price-sensitive entities that may be quickly scaled back or shut down if mining becomes uneconomical,” they stressed.

Thus, electricity suppliers must balance the prospect of generating additional revenue from increased sales with commitments to purchase or generate large volumes, experts said.

The potential costs and benefits of adding new large loads for mining

Moreover, in regions with excess electricity, providers have the opportunity to meet the needs of miners at the expense of existing capacities. Such a situation exists in Washington State, where energy-intensive aluminum plants have been closed for the last two decades and wind generation has been growing in parallel. Combined with abundant and cheap hydroelectric power; this has made the state an attractive location for digital asset mining operations, Fitch recalled.

However, according to experts, energy companies should compare the potential costs and benefits of adding new large loads; for mining with other economic development opportunities. According to them, as a rule, cryptocurrency mining farms bring few benefits and jobs to local economies; while becoming the largest consumer of electricity.

In another mining center in the USA; the state of Texas there is no excess generating capacity, unlike Washington, Fitch noted. To connect a significant load for mining here, electricity suppliers can go three ways: invest in an additional generation; conclude a new long-term agreement for the purchase of electricity; buy it on the market in real-time.

Providing miners with payment guarantees

The first two options pose the greatest risk of financial losses for energy supply companies in the event of the termination of cryptocurrency mining operations. In the first case, they will find themselves with unnecessary assets. In the second – with encumbrances in the form of their own obligations.

The agency’s specialists recommend stopping these risks by providing miners with payment guarantees; credit lines or cash deposits back up the latter.

Earlier, the House of Representatives of the US Congress held the hearing on the mining of cryptocurrencies, according to Bloomberg. During the discussion, lawmakers cited data from a report according to which Bitcoin and Ethereum mining in 2021; contributed to emissions equivalent to 15.5 million cars.

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