Dive Brief:
- Stronghold Digital Mining and a subsidiary agreed to pay about $1.4 million for violating PJM Interconnection market rules, according to a settlement agreement approved Thursday by the Federal Energy Regulatory Commission.
- Stronghold and Scrubgrass Reclamation, which owns an 85-MW coal-fired power plant in Pennsylvania, agreed to return $678,635 in capacity revenues to PJM and pay a $741,365 penalty to the U.S. Treasury.
- The enforcement action comes as Stronghold and Bitfarms, which is buying Stronghold, see the potential to expand Stronghold’s two Bitcoin operations in Pennsylvania by up to 955 MW.
Dive Insight:
Stronghold buys power plants where it installs Bitcoin mining operations, and then makes money by mining Bitcoin or selling power into wholesale markets, whichever is more profitable, according to FERC. Stronghold also owns the 80-MW Panther Creek power plant in Nesquehoning, Pennsylvania. Like the Scrubgrass plant, it burns waste coal left over from mining operations.
The Scrubgrass plant was a capacity resource with a must offer requirement from 2018 to 2022, according to FERC. As a capacity resource, Scrubgrass was generally required to offer its installed capacity equivalent of the plant’s cleared unforced capacity into the PJM energy markets every day, according to FERC.
However, from June 2021 through May 2022, the plant failed to offer its available capacity into the PJM market in 67% of the day-ahead hours and 69% of the real-time hours, FERC said.
Scrubgrass used some of the electricity that wasn’t offered into PJM’s energy markets to run its Bitcoin mining rigs, FERC said. Also, Scrubgrass bought power from PJM at wholesale rates about a quarter of the time over the period covered by the agreement, with some of that power incorrectly categorized as “station power,” according to the agency. Station power is electricity used to run a power plant.
In June 2022, Stronghold and Scrubgrass determined that the Scrubgrass power plant should not participate in PJM’s capacity market and they used a bilateral transaction to exit the plant’s capacity obligations for the 2022/2023 delivery year, FERC said.
Scrubgrass must still submit capacity offers to PJM, FERC noted. Scrubgrass can be relieved of its capacity obligations through an exception or by becoming an energy-only resource, which it has not done, according to the agency.
Stronghold's Panther Creek and Scrubgrass plant cleared PJM’s last base capacity auction at $269.92/MW-day, the New York City-based company said in a Nov. 13 filing with the U.S. Securities and Exchange Commission.
The Panther Creek plant cleared 69.2 MW of capacity in the auction, which Stronghold said would increase its revenue by about $7 million. The Scrubgrass plant cleared 75.6 MW in the auction, but the company reduced the commitment through bi-lateral transactions, leaving it with 62.5 MW of cleared capacity that will yield about $6 million in revenue, Stronghold said.
Stronghold is considering exiting the additional clearing capacity for the Scrubgrass plant through additional bilateral transactions, “with a focus on maximizing the flexibility and long-term potential of its data center operations,” the company said. The two plants have must-offer requirements in the 2026/2027 base capacity auction set to be held in July, according to the filing.
Also, in April, Stronghold signed a “distributed energy resource and peak saver” agreement with Voltus, a demand response company, according to the SEC filing. Voltus will help Stronghold register for demand response and synchronized reserve programs in PJM that could increase the company’s revenue, Stronghold said.
The Scrubgrass and Panther Creek Bitcoin mining sites could be expanded by up to 955 MW by adding additional transmission capacity, according to a presentation by Bitfarms, a Toronto, Canada-based company that plans to buy Stronghold in the first quarter this year.
