Cryptocurrency mining uses a lot of energy, which is causing a crisis in Kazakhstan.
According to the Financial Times, the country’s electrical grid operator KEGOC has announced that it will begin rationing electricity to 50 registered miners after their demand reportedly triggered an emergency shutdown mode at three power plants in October. They will also be the first to be disconnected if there are grid outages, according to the quasi-public company.
According to the energy ministry, electricity demand has increased by 8% so far in 2021, compared to the more typical one or two percent increase. Since October, six regions have experienced blackouts.
Power outages have been blamed on an increase in the number of unregistered crypto miners who are illegally generating currency from their homes or even factories, according to officials and observers. China’s anti-cryptocurrency campaign could be partly to blame. Energy demand began to rise in early 2021, when mining firms relocated from China, and it rose again this May, when China made mining illegal. Kazakhstan’s electricity has been relatively cheap, making it a haven for companies hoping to make larger profits from crypto operations.
Kazakhstan is attempting to make up for power shortages. It has asked a Russian energy company to supplement the national power grid, and starting in 2022, it will charge registered miners a compensation fee of 1 tenge (about $0.0023) per kilowatt-hour. Both efforts, however, will take time, forcing miners to either scale back or relocate equipment.
There are also concerns that the government is not being forthcoming about its problems. Luca Anceshi of the University of Glasgow told The Times that Kazakhstan was blaming miners for the country’s electrical grid’s reliability problems. Whether that’s true or not, it’s safe to say that the mining demand foreshadows potential problems for other countries if their domestic crypto production takes off.