Banananomics: Volatility Rising In Energy Markets

Volatility Rising In Energy Markets

The World Bank released a report on June 20 showing that global natural gas flaring by oil and gas producers rose 7% last year.

Inputs that matter: PJM, the largest power market grid in the world (covering 65 million customers in the Mid-Atlantic region, including Pennsylvania, Ohio, and West Virginia), is seeing a massive increase in data centers.

• The PJM grid operator expects that 11 GW (gigawatts) of additional electricity will be needed for new data centers in northern Virginia alone by 2030, representing more than 40% of the state’s current peak demand.

• According to their data, natural gas is the only fuel source that will meet that demand in the next five years.

The opportunity: Shell CEO Wael Sawan stressed that market volatility is not only here to stay but will grow.

• Not only are there heightened geopolitical tensions to contend with, but as the energy transition progresses, the world will rely increasingly on renewables, making energy supply less stable.

• In response, U.S. battery storage capacity is set to nearly double in 2024 as developers plan to add 14.3 GW to the existing 15.5 GW this year.

Zoom in: In Texas, the Electric Reliability Council of Texas (ERCOT) expects more than 50% of new demand from increasing crypto-mining operations and data centers in the Permian Basin.

• Treasury Secretary Janet Yellen has issued a severe warning about the spiraling $34 trillion U.S. debt pile, which some think could catapult the Bitcoin price to $1 million over the next 18 months.

• As the price of Bitcoin goes up, the demand for mining also increases.

Between the lines: Adding to an already stressed grid is the electrification of lawn and garden tools.

• Lawnmowers, leaf blowers, and the like are increasingly becoming electric, with fewer options for gas models.

• Rising demand for nickel, lithium, and phosphates combined with the natural benefits of electrification are driving the adoption of electric mining machines.

Follow the money: Due to mining demand, Allied Market Research is forecasting that the global mining equipment market will grow from $141B in 2023 to more than $200B in 2040, based on a compound annual growth rate (CAGR) of 4.1%.

• But for now, AI and crypto-mining are driving an expansion of fossil fuel use, including delaying the retirement of some coal-fired plants.

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