New APPA Reports Outlines Public Power Strategies for Cryptocurrency, Cannabis Operations

April 13, 2023

by Paul Ciampoli
APPA News Director
April 13, 2023

A new report issued by the American Public Power Association details strategies that public power utilities can utilize in response to cryptocurrency mining operations and cannabis grow facilities.

APPA enlisted Utility Financial Solutions to develop the report, “Managing New Electric Loads in a Changing Industry: A Look at Cryptocurrency Mining and Cannabis Grow Facilities.”

“An increasing number of public power utilities have received inquiries from cryptocurrency miners or cannabis grow facilities on the cost to provide electricity,” the report noted. “In addition to the increased demand, electric load from such facilities raise considerations for utilities, including legal questions, customer stability, and community perception.”

Cryptocurrency mining operations and cannabis grow facilities are being built throughout the U.S. Cryptocurrency miners often seek to locate in communities where electricity prices are relatively low because of the high amount of electricity they use. Due to limited building needs, miners can locate almost anywhere, the report said.

“Cryptocurrency operations often have a consistent usage pattern and may have flexibility in their operations to shift usage if needed. Cannabis grow facilities locate in states where cannabis has been legalized for medical or recreational use and have load patterns similar to commercial or general service customers,” according to the report.

Before a cryptocurrency miner or cannabis grow facility chooses a location, it will often inquire about the cost for electric service. Most utilities, including public power utilities, have procedures in place to provide guidance when speaking with a prospective customer. The utility typically assesses its ability to provide the service, estimates the connection costs, and determines what rate structures are available, the report said.

“Additionally, for public power, a key consideration is a prospective business’ value to the community. Cryptocurrency miners and cannabis grow facilities may present potential benefits, such as additional employment or increased tax base for the community, but could also create adverse impacts, such as noise, odor, or negative community perception.”

The report said that utilities might consider developing new rates and policies or updating existing rates and policies when adding cryptocurrency mining or cannabis grow facilities to their system to ensure that this new growth does not adversely impact existing customers. “When rates and policies are designed according to the utility’s cost structure, they often result in more efficient use of infrastructure and lower rates for existing customers.”

The paper reviews key aspects of rate tariff development, potential rate offerings, characteristics of cryptocurrency operations and cannabis grow facilities, considerations for managing cryptocurrency mining and cannabis grow facility loads, and utility experiences with these types of customers.

Utilizing a marginal cost recovery approach to rate design, requesting the ability to interrupt service, and putting in place a formal line extension or contribution margin policy are tools for electric utilities to manage cryptocurrency miners, cannabis grow facilities, and other emerging loads, the report said.

“As individual utilities strive for growth, resiliency, and reliability, work at the state and federal levels is being done to better understand the effects of cryptocurrency mining and cannabis grow facilities on the electric grid. Even with new loads and progression toward the ‘grid of the future,’ the goal of utilities remains to maintain reliable and affordable electricity for the communities they serve.”

The following public power utilities contributed to the report: City of Hamilton, Ohio; City of Shasta Lake, Calif.; Denton Municipal Electric, Texas; Electric Cities of Georgia; Stanton County Public Power District, Nebraska. A public power utility in Michigan also contributed but wished to remain anonymous.

Click here for the report.