The cryptocurrency mining boom has prompted a backlash in Quebec, where the province’s power agency has proposed a rate hike for the high-density power operations. Hydro-Quebec wants to raise the rate of energy-hogging bitcoin miners from its current level at around 5 Canadian cents per kilowatt.
Low electricity rates in Canada have attracted bitcoin miners whose energy-intensive computer networks enable transactions in the Blockchain’s global electronic ledger. This trend has increased following a crackdown on the new crypto economy in countries like China. But the influx has also caused some controversy as providers are concerned that cryptocurrency miners eager to set up shop in Quebec are taking too much power – possibly more than they can deliver.
Premier Philippe Couillard said at a conference in Montreal Friday: “If you want to come settle here, plug in your servers and do Bitcoin mining, we’re not really interested. There needs to be added value for our society; just having servers to do transaction mining and acquire new bitcoins, I don’t see the added value.”
Last year, the interest from the cryptocurrency sector went bananas. Hydro-Quebec received 100 inquiries, with some proposed projects seeking 100 megawatts of capacity. A spokesperson said Canada’s biggest electric utility is discussing the high consumption associated with the industry with Natural Resources Minister Pierre Moreau, but no final decision has been made over hiking rates.
While the proposed hikes are unlikely to pose a major challenge, they highlight global concerns over the growing energy consumption of bitcoin miners.
Cryptocurrency mining consumes large quantities of energy with electricity now counts the largest variable cost in the operation that uses computers to solve complex math puzzles in order to validate transactions.
Chinese miners, who are estimated to operate 75% of the machines plumbing the blockchain, dominated the scene thanks to the cheap coal-fired power and a system that allowed them to skirt taxes and grid fees. However, the mainlanders lost their edge after the authorities halted trading of digital coins, banned ICOs and shut down mining.
Some of the most influential companies went on a hunt in new markets, but the choices are narrowing to Canada and a handful of Nordic countries.
Bitcoin’s Boom Concerns
The explosion of mining requests in Quebec over the last few months was mainly tied to the extreme price jumps since Bitcoin value skyrocketed to nearly $20,000 late last year. However, the digital asset class remains a relatively new business with volatile economics.
Specifically, the volatility of cryptocurrencies raises a concern as mining operations may emerge just as quickly as they disappear. In other words, the utility producers might have to invest millions in new power stations for such a speculative business only to have miners close their doors when they can no longer compete with falling prices. Bitcoin’s price plunged by more than 50 percent from its record point hit earlier in December.
Those concerns proved well-founded a few years ago when the bitcoin price dropped to just above $200 in 2015, as the coin’s free fall wiped out many mining operations.
On the other hand, some commentators predict that cryptocurrency mining will soon enjoy the economies of scale and fears of rampant energy usage are therefore highly inflated. The mining centers have already evolved over the past few months to meet the need, growing in size and scale as well as energy efficiency.