No electricity grid in the US has added more renewable power over the past decade than the Texas grid has. Back in 2012, both California and the Midwest generated more power from wind, solar and other renewables than the Lone Star State. But in 2022, Texas was the winner. The future of the state’s grid is a study in supply, demand and uncertainty. One thing that is certain: Most of Texas’ renewable generation today is from wind. Last year, wind projects in the Electric Reliability Council of Texas (Ercot, the grid that covers most of the state) generated more than 107,000 gigawatt-hours of electricity; solar generated 24,000, less than a quarter of what wind produced. But solar is growing rapidly, and generating most during the hottest months, when the grid is under the greatest strain to meet high demand. Less certain, but still likely: Ercot expects only a slight expansion of the wind power fleet between now and 2025 while solar is expected to surge. Solar capacity could double from 2023 to 2025, if all projects with an interconnection agreement reach completion.
Still less certain: the weather. Texas had a punishingly hot summer last year. There were 61 days from the start of May to the end of September that were the hottest in the past five years. The grid set repeated peak demand records in the summer months of 2022, forcing Ercot to issue a so-called conservation appeal on July 11 and 13. Another very hot summer could push electricity demand up even further in 2023. Research group BNEF also reached another important finding about last summer: Demand was higher than what record temperatures alone would suggest. There were other factors contributing to it — in particular, Bitcoin mining. Bitcoin mines use electricity in such a quantity, and with such consistency, that we can express that in terms of electricity demand. Today there are 1.8 gigawatts of Bitcoin mines operating in Ercot, and BNEF tracks 10 gigawatts of potential projects. Not all of those will come online this year or next, but in BNEF’s base-case scenario, there will be 5.3 gigawatts of total demand from Bitcoin mining this year, and 5.9 gigawatts’ worth in 2024. The Briefing By Martin PeersHappy Sunday! What a weekend! The term “everything everywhere all at once” seems a better description for the turmoil sparked by Friday’s failure of Silicon Valley Bank than for an incomprehensible movie that’s up for an Oscar tonight. The good news is that the worst-case scenarios some on Twitter were broadcasting the past few days seem increasingly unlikely. A report on Bloomberg this afternoon suggested the Fed was poised to take steps to ensure the SVB collapse doesn’t spark a cascade of bank failures, which would be catastrophic. It’s unclear that the government will go as far as some people want, which would be to backstop all of SVB’s uninsured deposits. But that would look like a bailout, something Treasury Secretary Janet Yellen has ruled out. And it’s not clear that it’s necessary. There is a solid chance the Federal Deposit Insurance Corp. will sell the bank quickly, helping the depositors get their money back. As we reported today, smaller regional banks are the most likely buyers, as regulators don’t want to sell SVB to one of the big institutions. Getting a deal done in the next couple of days would go a long way to restoring confidence. (See below for a full list of The Information’s SVB coverage in recent days.) The bottom line is that regulators seem likely to do what they should do: stopping the spread of a contagion but not bailing out SVB itself. Of course, much of the panic over the past few days focuses on what startup customers of SVB do for cash. But as we and others have reported, various efforts are underway to ensure businesses affected by SVB’s failure can get money. Venture capitalists and others are arranging interest-free loans and Wall Street firms are offering to buy deposit claims at a discount. Some might say we’re looking at things through Lexapro-powered smart glasses—but we’re guessing a combination of those measures should help most startups cover payrolls in the coming days. The timing of SVB’s failure is worth noting. It occurred almost exactly three years after Covid-19 lockdowns went into effect in the U.S., a calamity that led to the zero interest rate regime and stock market bubble of 2020 to 2021. That in turn led to last year’s financial hangover as interest rates surged, which in turn paved the way for SVB’s failure, among other things. With any luck, we’re now seeing the worst symptoms of that hangover. At least, let’s hope so. Another symptom was the reversal of the 2021 hiring binge lots of tech companies engaged in. Firms far and wide have laid people off. This week Facebook’s owner, Meta Platforms, is expected to begin its second round of layoffs, following cuts of 11,000 in November. According to this report in The Wall Street Journal, the coming cuts would be of about the same magnitude as the last ones. But even that kind of cut might not be enough given the revenue levels Meta has projected. Consider this math: Meta’s headcount at the end of last September was 87,314. The first round should have reduced that to about 76,000. Another similar round would reduce it to about 65,000, taking the workforce back to where it was in the summer of 2021. But Meta has projected its first-quarter revenue will be “in the range of $26 [billion to] 28.5 billion.” While its quarterly revenue dipped a little below $28 billion a couple of times last year, it hasn’t been as low as $26 billion since the first quarter of 2021, when the company employed 60,654. To reduce expenses to match that level of revenue implies layoffs of 15,000 or more. Sure, the bottom of the revenue projection is a worse-case scenario. Meta’s business may do better and it should eventually rebound. But if the company is as focused on efficiency as it claims, it could cut more than it apparently plans to. No matter what happens in startup land this week, watch the crypto market for fallout from the SVB disaster. As we reported on Saturday, worries about USD Coin issuer Circle’s exposure to SVB sent USDC’s price tumbling to 88 cents at one point, below its $1 theoretical peg. USDC prices will be in the spotlight on Monday morning. Yes, crypto is meant to be a 24/7 operation, but major crypto exchanges like Coinbase temporarily suspended processing USDC redemption requests over the weekend. The question on Monday will be whether Circle has enough cash available to handle the volume of redemption requests it gets. Circle said in a statement Saturday that “our teams are well prepared to handle significant volume, built on the strong liquidity and reserve assets.” That’s a big promise. But it’s what underlies Circle’s business model: that USDC is backed 1:1 with U.S. dollars and that those dollars are always readily available. As roughly one-third of Circle’s $9.7 billion cash reserves are locked away in SVB, there has to be a question whether it can access enough dollars. Circle does have $32.4 billion in U.S. Treasury Bills, which it may need to lean on. On Monday, we’ll see what happens.—Akash Pasricha |
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 Last year’s question about all those new miners was, “Will they crash the grid?” Ask the miners themselves and they will say they’re helping the grid because their load is “interruptible” — that is, it can turn on and off depending on demand. Some of the miners have registered as a “controllable load resource” that can respond to electricity system signals instead of just running flat-out. The state has also established an interim program that pays Bitcoin mines to reduce their peak power. The answer is as complex as the question, but it hinges on an important idea: Bitcoin mines will only operate when the economics are favorable to do so. So if temperatures are lower than last year, and wind and solar generation is higher, power prices could be relatively lower and then miners might operate even during peak demand. But if there is less wind and solar, or higher temperatures, then Bitcoin mining might switch off due to higher power prices, keeping total demand lower.  This week on Zero, Bloomberg Green’s Akshat Rathi talks to Katie Rae, CEO of The Engine, an MIT-affiliated fund in Boston that invests in climate tech startups often led by scientists and engineers. Listen now to find out why she thinks that’s a better model than that of conventional entrepreneurs. Subscribe to Zero on Apple, Spotify or Google to get new episodes every Thursday. And with Bitcoin running consistently during off-peak periods, prices could be higher at times when they historically have been lower, such as at 11 p.m., when there is no solar to offset Bitcoin. One likely outcome for the Texas grid — factoring in renewables, weather and Bitcoin — is a significant change in “net load” profile. In the past, low wind speeds in the late afternoon meant that power was scarce during the hottest times of day and months of the year. Now with solar generating significantly at that time of day, the grid’s net load (the amount it requires after renewable generation) is falling. Not only that, the peak net load will likely shift to evening hours. But there is another possibility too — the bear case. With lower temperatures, ample solar and less Bitcoin mining, Texas peak power demand might be little different than it was in 2022. In that event, the net load tops out at 62 gigawatts, almost 12% lower than in it was in 2018. Rules govern markets, but uncertainties shape them. The one thing that is certain about the Texas power market? It is the US market to watch, a new postcard from the future of US electricity.  | | | OpenAI Rival Anthropic Raises Funding at $4.1 Billion Valuation | By Kate Clark | Spark Capital is leading a $300 million investment in artificial intelligence startup Anthropic, one of the primary startup challengers to OpenAI, at a pre-investment valuation of $4.1 billion, according to two people familiar with the matter. The deal follows a $400 million investment in the startup by Google, one of the people said. The valuation for the two-year-old company, which has made very little revenue, reflects the recent fervor in venture capital for stakes in generative AI companies fueled by the rise of OpenAI, the maker of chatbot ChatGPT. At the same time, bigger companies like Google and Microsoft are investing in AI startups either to gain access to cutting-edge technology or secure future customers of their cloud-server rental businesses. | |
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