Whereas this added consumption guarantees elevated income for utilities, the demand may show fickle.
“Crypto mining operations are price-sensitive entities which may be shortly scaled again or shut down if mining turns into uneconomical,” Fitch famous.
Utilities which have the accessible capability to serve crypto miners should contemplate the prices and advantages of assembly a big, new demand as an alternative of retaining capability for different alternatives, it urged.
“Crypto mining operations sometimes usher in little or no extra financial advantages within the type of jobs or ancillary enterprise to a neighborhood financial system,” the report stated.
For utilities the place provide is constrained, the dangers are even greater. They might have to contemplate whether or not to put money into constructing new capability or procuring energy from different markets to satisfy demand which will in the end show ephemeral, Fitch stated.
Utilities that construct capability with a purpose to meet the demand from crypto miners take the danger that they are going to be left with stranded property and prices to get better (sometimes by elevating costs on remaining clients) if the mining operation shuts down.
This might result in damaging strain on credit score rankings “if working margins are compressed” or liquidity is weakened by prices inflicted by failed crypto mining.
To this point, utilities have addressed these dangers by limiting their commitments to crypto mining operations, or by structuring their preparations to guard the utility if a miner ceases operations, Fitch stated.
As an example, utilities in Washington have handled elevated demand from crypto miners by adopting practices akin to introducing new fee constructions, setting buyer focus limits, and imposing load moratoriums on crypto mining, it reported.