Global credit rating agency Fitch Ratings is warning public power utilities across the United States to mitigate the risk crypto mining could post their production of power.
In a Monday notice, Fitch Ratings said that only utilities in states like Washington, which have excess generation capacity, may be capable of meeting the power requirements of many crypto mining operations. The agency claimed that though some crypto mining firms can become “the largest customer in a rural service territory,“ the operations typically bring in “very little additional economic benefits” from jobs or boosting the local economy.
“The volatile and unregulated nature of crypto mining and the large influx of load requests led a number of Washington utilities to adopt new practices beginning in 2014 to mitigate exposure to crypto mining entities, including crypto-currency load moratoriums, evolving rate structures to capture the departure risk of a high-risk industry, and defined customer concentration limits,” said Fitch Ratings.
In Texas, where many mining operations have set up shop following an exodus of firms in China, Fitch Ratings suggested utilities companies invest in new facilities, sign long-term power purchase agreements, or obtain power through market purchases in real time to handle the additional load. However, each option carries financial risk which may eventually be passed on to residents:
“Crypto mining operations are price-sensitive entities that may be quickly scaled back or shut down if mining becomes uneconomical.”
Many crypto mining companies are seeking the most cost-effective area to mine tokens, with some U.S. States, including Texas and Washington, offering more favorable conditions than others. Canadian mining firm Bitfarms announced in November that it was planning to build a data center in Washington State, citing its “cost-effective electricity” and production rates. Whinstone, later acquired by Riot Blockchain, set up shop in Texas, taking advantage of the state’s wind turbines and deregulated power grid.
Fitch Ratings has previously issued warnings related to the use of cryptocurrencies like Bitcoin (BTC) in local economies. In August, shortly before El Salvador implemented its Bitcoin Law making the crypto asset legal tender, the agency warned of the volatility and operational risks for citizens using crypto, adding that local insurance companies would likely be hesitant to adopt BTC for claims or benefits payments.