Aluminum manufacturers are among the most energy-intensive industries in the world. In 2010, the process used by smelters to refine primary aluminum from bauxite ore consumed approximately 3% of the entire world’s electricity supply. The vast amounts of energy used in this process have driven many aluminum manufacturers to locate their plants in parts of the world where bauxite is plentiful and electricity is relatively inexpensive. Today, there is a new energy-intensive industry that is driving demand for more electricity supplies: cryptocurrencies. According to the Cambridge Center for Alternative Finance, Bitcoin alone, one of the most well-known cryptocurrencies, uses 110 Terawatt-hours of electricity annually, or 0.55% of global electricity supplies. The fact that cryptocurrencies can use more electricity than some small nations has motivated companies that mine Bitcoin to find host locations where electricity is reliable, plentiful, and inexpensive. Bitcoin, Ethereum, Dogecoin, and others have used record amounts of electricity this year, raising concerns around the amount of energy these monetary systems use and the amount of carbon used to supply their facilities.
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Topics: Markets Demand Response Education Resiliency
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Too often I hear business leaders try to separate great work culture from peak performance. Since many people have never worked for an award-winning, certified Great Place to Work, lack the firsthand experience to understand the key elements and drivers of great company culture. Instead of recognizing the core tenets of intentional culture building, including clearly articulated values, common vision, individual autonomy, integrity, appropriate risk-taking, accountability, excellence, dignified communication, shared experience, and the power of teamwork, people believe that gimmicky office accessories, like ping pong tables and beer taps, are the signs of good culture. That is simply not true.
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On behalf of the team at 5, I am pleased to forward our market letter for the second quarter of 2021. The unusual weather that caused historic outages and extreme electricity and natural gas prices in Texas in Q1 surfaced in other markets in Q2. Both the Pacific Northwest and the Western US faced extreme weather conditions, namely, heat. In Death Valley, temperatures hit 130 degrees on July 9, a world record for the hottest reliably measured temperature in recorded history.
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With the clock ticking on the current legislative session in Texas, lawmakers are anxious to get some legislation passed that addresses and corrects some of what occurred during Winter Storm Uri. In the weeks following the storm, there were several pieces of legislation that were gaining traction. Senate Bill 3 (SB3) gathered the most attention, which, in its original draft, sought a complete ban on real-time, index-based products, put limits on wholesale electricity prices, and addressed issues related to the winterization of generating assets. After several votes and amendments, SB3 passed the Senate and is now with the House, but it is unclear if it will be signed into law before the current legislative session ends on May 31. House Bill 16 (HB16), however, passed both the Senate and House this month and will likely be signed into law by Governor Abbott in the coming days.
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There are several interesting developments in Washington D.C. that could impact the nation’s energy markets. With the death of Alcee Hastings (D-FL) last month, the Democratic majority in the House shrank to a mere six votes and the Senate remains split at 50/50. The razor-thin Democratic majority means it is unlikely that Congress will use the traditional legislative process to pass new energy-related legislation. Instead, as was the case with the stimulus bill, the Biden Administration is expected to use the budget reconciliation process to pass an energy bill at some point this calendar year.
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On behalf of the team at 5, I am pleased to forward our market letter for the first quarter of 2021. This letter focuses on the latest Black Swan event, Uri, the winter storm that hit Texas in mid-February. The storm caused a catastrophic loss of generation and triggered an extended period of extremely high energy prices. This letter provides: (i) a summary and chronology of the legal and regulatory proceedings that Uri has spawned; (ii) a snapshot of how the storm has impacted a variety of market participants including municipal utilities, wind farms, renewable purchasers, commercial and industrial buyers, and the natural gas market; and (iii) an overview of legislative efforts to address electric reliability in ERCOT.
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Despite the name, microgrids are a big deal. In fact, microgrids are a hot topic of conversation lately because of the crucial role they play in business continuity and resiliency planning. Thanks to a handful of unpredictable weather events, a wide variety of stakeholders are turning to microgrids to keep power flowing when natural disasters or catastrophic grid failures disrupt the utility grid’s normal operations.
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Since the dawn of electricity deregulation, most commercial and industrial clients have relied on brokers and sales reps as their primary source of education and strategy development. Clients meet with a different set of sales people to discuss procurement, engineering, demand-side management, sustainability, and resiliency, leading to a fractured decision-making process and piecemeal strategies that lack depth, diversity, harmony, and foresight. When energy prices are falling, the weather is following normal patterns, and suppliers are offering low bids in a race to the bottom, any sales rep or broker running a simple procurement process can appear to be adding value to your business.
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To all businesses and homes in Texas fortunate enough to still have power, please reduce electricity consumption throughout the rest of Monday and Tuesday. The Texas electric grid is experiencing unprecedented strain, and many have been without power since early Monday morning. You can help by reducing the setpoint on your thermostats, turning off and unplugging non-essential lights and appliances, closing shades and blinds, and avoiding use of large appliances (ovens, washing machines, etc).