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BC Hydro puts out welcome mat for bitcoin miners, but experts urge caution

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In the last year, cryptocurrency firms have talked about adding as much as 5,000 megawatts to BC Hydro’s electrical load. That’s about 40 per cent of the power it currently generates, and four times the maximum capacity of the yet-to-be-completed Site C dam.

Just a tiny fraction of that business has materialized so far, but BC Hydro is keen to attract it and wants to offer discounted rates on electricity.

What these firms do is known as cryptocurrency mining, which uses powerful, automated computers to solve the complex math puzzles that are necessary to produce digital currencies like Bitcoin.

Companies that specialize in this process fill warehouses with these specially designed machines, which consume a tremendous amount of electricity.

In recent years, cryptocurrency firms have become increasingly interested in Canada, where energy is relatively green and cheap, governments are stable and the climate is temperate — saving on the cost of cooling the machinery. 

In B.C., they’re eyeing struggling resource towns, moving in long after mills and mineral mines have closed up shop.

Few economic benefits

But some say BC Hydro should be cautious about engaging with the crypto-mining industry.

“We really want to create jobs and create economic activity and benefit communities, and it’s far from clear that is the case with bitcoin operations because they employ very few people, and basically all the benefits go to those companies,” said Werner Antweiler, an economics professor at the University of British Columbia.

Critics say the industry brings few economic benefits to the communities where it sets up shop, especially at a time when B.C. could be using its ample renewable energy to meet climate change goals.

The process eats up electricity without creating many employment opportunities, they say, and produces a product that’s not in general use.

Quebec has already experimented with throwing open the doors to crypto-mining firms, and is now pulling back on its initial enthusiasm. Some towns in that province have temporarily halted approval of new operations, saying they take up too much space and electricity, make too much noise and produce too few jobs

But in B.C., the industry is still in its infancy, and BC Hydro is keen to attract new buyers for its energy surplus.

The plan is to connect these crypto-mining firms with resource companies in the hope of making a deal that benefits both sides. These failing lumber, pulp and mineral mining companies have invested in substations and transmission lines they no longer need, and could rent out to crypto-mining firms.

Plans for discounted rate

All this for a final product that could be very, very valuable, or ultimately worth nothing at all.

“I know I’m keeping my eye on that bitcoin price,” BC Hydro’s business development manager Dina Matterson told an audience of energy professionals at the Generate 2018 conference last week.

She said the crypto-mining industry accounts for about half of the 10,000 megawatts in new load inquiries BC Hydro has received in the last year. Other potential new customers include LNG producers, cannabis growers and data centres.

Individually, the requests from crypto-mining firms amount to an average of between 10 and 30 megawatts per site, but only a tiny fraction of that business is online now. To date, BC Hydro has connected just six megawatts to the grid — though the utility believes many more crypto-miners are operating in the province.

One site is up and running in the tiny central coast community of Ocean Falls, formerly home to a paper mill, another is in development in a shuttered lumber mill in Houston in northern B.C., and there are a few small enterprises in the Lower Mainland.

Bitcoin mining computers generate cryptocurrency by solving complicated algorithms. (Jemima Kelly/Reuters)

That’s a long way from the 5,000 megawatts of new load these crypto companies have requested, but BC Hydro insists it has the capacity to serve all of those potential new customers.

And Matterson said the utility will be submitting a proposal to the B.C. Utilities Commission early next year for a “load attraction rate” — an initial discount on electricity for new corporate customers, including cryptocurrency companies.

“This rate would help BC Hydro compete with clean jurisdictions that have lower power rates than us,” she said. “We need to get in the game.”

Québec triples rate for cryptocurrency mining

It’s an approach Hydro-Québec has already tried.

The plan backfired because the utility says it was quickly overwhelmed with requests from crypto-mining companies for a whopping 10,000 megawatts of new load.

In June, Hydro-Québec announced it was reversing course on offering these firms the lower rate that large-power customers enjoy, opting instead to triple the price it charges to new crypto companies. The utility says the higher rate is a temporary measure while it figures out a final rate and conditions for the emerging industry.

Meanwhile, close to two dozen Québec towns placed moratoriums on approving new crypto-mining operations, saying they take up too much space, use too much energy and generate too much noise from cooling fans.

A technician inspects the equipment at Bitfarms in Saint Hyacinthe, Quebec. (AFP/Getty Images)

The lack of jobs was also a major factor. This spring, Hydro-Québec released a study from KPMG showing the industry has little positive impact on employment — and the larger the crypto-mining operation, the fewer jobs are created.

For example, a 250-megawatt mining operation would create about 100 jobs, according to the report. Compare that to a data centre, which houses computer systems and servers. Consuming about the same amount of electricity, it could generate up to 6,250 jobs.

Those numbers worry Antweiler, the UBC economist, who disagrees with subsidizing the cryptocurrency industry.

“It’s taking money out of our pockets that could be more beneficially spent on lowering our electricity rates, or allowing us to use our local electricity to facilitate the population growth we will be experiencing in the next few years, as well as allowing us to shift from fossil fuels to electrifying our vehicle fleets,” he said.

Firm predicts ’employment boom’

But Kevin Smith, president of Vancouver’s Maas Blockchain, said he’s frustrated by those arguments.

“When a plant is being shuttered and there are zero alternative jobs, is it better to shun all industries that don’t match that opportunity employment wise, or do you look at it regaining some kind of economic benefit for the community better than simply nothing at all?” he wrote in an email.

Smith argues there will be a “huge employment boom for this sector” once the infrastructure is in place at crypto-mining operations, though the number of new jobs he cites is modest.

“Our larger sites will employ 20-30 trades[people] for four to six months and those trained and specialized trades can move on to our other sites, as well as competitors,” he wrote in an email.

Right now, his company has four sites in B.C., including three that are up and running in the Lower Mainland and a fourth in development at a sawmill in central B.C. Maas employs nine people, including Smith, and contracts with 11 tradespeople.

Bitcoin prices have plummeted since a record high last year. (Christophe Morin/Bloomberg)

The company has also signed letters of intent with several potential landlords for other sites in B.C., but Smith said those will depend on if BC Hydro comes through with the discounted rate.

Whether those sites will be profitable is another question entirely. Bitcoin has proven to be a volatile investment and its value has plunged in recent months, from a high of about $20,000 US in December 2017 to about $4,000 US now.

Chris Rowell, a postdoctoral research fellow at UBC’s Sauder School of Business, says there are several estimates for the break-even point for large mining operations, usually ranging from about $5,000 to $9,000 US.

“It’s been lucrative this whole year, basically,” he said. “But now we’re seeing it drop below around $4,000 US, and you start to see now these miners drop out of the network.”

He said it’s impossible to predict where the price is headed.

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7 Tips For First-Time Home Buyers In Calgary

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Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market

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The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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10 Tips For First-Time Home Buyers

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Buying a home for the first time is exciting and a commitment to the future. It’s often challenging, too, and the process requires a lot of steps, many of which can be tricky to navigate as a first-time home buyer.

What are some things you should keep in mind as a first-time home buyer?

First-Time Home Buyer Tips

Here are 10 tips to keep in mind as you begin your journey toward homeownership.

1. Have Your Finances in Order

It’s wise to begin saving as early as possible once you’ve made the decision to purchase a house. You’ll need to consider the down payment, closing costs (which often range from 2% to 5% of the down payment), as well as move-in expenses.

You also need to understand the other costs of homeownership, such as mortgage insurance. property taxes, utilities, homeowner’s insurance, and more.

2. How Much Can You Afford?

Knowing how much you can realistically afford in a home is another important financial consideration. Look for the home of your dreams that fits your budget.

One way to avoid future financial stress is to set a price range for your home that fits your budget, and then staying within that range. Going through the preapproval process will help you understand what price range is realistic for your budget.

3. Make Sure Your Credit is Good

Another thing to keep in mind as a first-time home buyer is your credit score because it determines whether you qualify for a mortgage and affects the interest rate that lenders offer. 

You can check your credit score from the three credit bureaus – Experian, Equifax, and TransUnion.

This is another good reason for getting preapproved before you start your search. Learn more about the preapproval process and your credit score.

4. Choose The Right Real Estate Agent

A good real estate agent guides you through the process every step of the way. He or she will help you find a home that fits your needs, help you through the financial processes, and help ease any first-time buyer anxiety you may have.

Interview several agents and request references.

5. Research Mortgage Options

A variety of mortgages are available, including conventional mortgages – which are guaranteed by the government – FHA loans, USDA loans, and VA loans (for veterans).

You’ll also have options regarding the mortgage term. A 30-year fixed-rate mortgage is popular among many homebuyers and has an interest rate that doesn’t change over the course of the loan. A 15-year loan usually has a lower interest rate but monthly payments are larger.

6. Talk to Multiple Lenders

It’s worth your time to talk to several lenders and banks before you accept a mortgage offer. The more you shop around, the better deal you’re liable to get – and it may save you thousands of dollars.

7. Get Preapproved First

Getting a mortgage preapproval (in the form of a letter) before you begin hunting for homes is something else to put on your checklist. A lender’s preapproval letter states exactly how much loan money you can get.

Learn more about the preapproval process and how preapproval provides you with a significant competitive advantage in our article How Preapproval Gives You Home Buying Power.

8. Pick the Right House and Neighborhood

Make sure to weigh the pros and cons of the different types of homes based on your budget, lifestyle, etc. Would a condominium or townhome fit your needs better than a house? What type of neighborhood appeals to you?

9. List Your Needs and Must-Haves

The home you purchase should have as many of the features you prefer as possible. List your needs in order of priority; some things may be non-negotiable to you personally.

10. Hire an Inspector

Hiring an inspector is another crucial step in the home buying process. An inspector will tell you about existing or potential problems with the home, and also what’s in good order. You can learn more about home inspections and how to find a home inspector through the American Society of Home Inspectors website.

Buying a home for the first time is a challenge, but it’s one you can handle with the right planning and preparation.

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