Cryptocurrency mining is an energy-intensive operation, and miners are facing an electricity shortage in Kazakhstan. The energy crisis was exacerbated by the arrival of many China miners in the European country. The Asian miners were fleeing the crackdown on crypto by the Chinese government, with a ban on crypto transactions in September.
With the influx of miners, the power demand in Kazakhstan rose a significant eight percent, which was more than the two percent annual increase the country had been witnessing. According to the research by the financial times, about 90,00.0 power-hungry mining rigs have descended on the country from China alone, which has catapulted Kazakhstan to the position of the second hottest crypto mining location, behind the US. It now accounted for more than 18 percent of global crypto mining operations in August 2021.
The effect of the strain on Kazakhstan’s power grid is starting to show, as three of Kazakhstan’s crucial coal power plants experienced emergency shutdowns within a single month. In a reaction, the Ministry of Energy announced it would cap energy supply to new mining farms to 100 MW for two years, but the move was later abandoned for legal miners.
The Kazakhstan Electricity Grid Operating Company (KEGOC) has tried to ameliorate the energy problem by announcing it would start rationing power to 50 government-recognized miners. However, some Kazakhstan officials have put the blame for the power crunch on the boom in grey miners, which refers to unregistered miners that illegally mine crypto. This group has been estimated to account for 1200 MW, which is tasking on a power grid that is already strained.
In reaction to the energy crisis, Kazakhstan will begin requesting payment from registered miners, a move that will separate and identify legitimate miners from illegal operators. The miners will pay the equivalent of $0.0023 per kWh.
Kazakhstan relies on energy company RAO, from Russia, for extra power during the winter months when energy demand will increase.
The effect of the energy crunch has not been uniform in the country, as the southern part has been more hard hit. This is because the south does not have as many power plants as the rest of the country. In addition, that part of the power grid has been known to struggle with power demand.
Companies providing facilities for crypto mining have been feeling the effect of the energy crisis. For example, Xive has had to put more than 2,500 mining machines out of operation. A co-founder of the company lamented that the hope of many people had been dashed. He tweeted a video of the mining machines being loaded into a truck.
Kazakhstan is not the only country to suffer energy problems linked to crypto mining. For example, Iran resorted to banning crypto mining for four months earlier this year to prevent blackouts. The country also licenses miners but faces the problem of illegal miners too.
Texas, in the US, is rapidly becoming a crypto mining hotspot, as miners are attracted by the cheap power costs and less restrictive regulations on cryptocurrencies. But experts have started warning of troubles ahead as demand from crypto mining could soon reach 5,000 MW, which is a strain on the state that has been experiencing blackouts for some time.
Meanwhile, Kazakhstan is ready to entertain nuclear power to solve the energy problems it is facing. Feelings about nuclear plants are understandably skeptical, as the country was used as a testing ground for the Soviet atomic weapons in the past. People kicking against nuclear plants also point to the disasters in Chernobyl, in Soviet Ukraine in 1986 and Fukushima, Japan, in 2011.
The President of Kazakhstan, Kassym-Jomart Tokayev, made it clear that there is no option other than to build nuclear power plants in the face of the energy problems bedeviling the nation.
“Looking into the future, we will have to make an unpopular decision about building a nuclear power plant,” President Tokayev said. “But, as they say, the role of a leader is to make unpopular decisions.”
Kazakhstan gets about 70 percent of its electricity from coal-fired plants. The nation has discussed shifting to renewable energy sources, but there has been no concrete action yet.
With no reserve capacity, energy shortages were only a matter of time.