It was a classic case of supply and demand that almost went out of control.
With abundant hydroelectric power contributing to the lowest energy prices in North America, frequent energy surpluses and a cool climate, the Canadian province of Quebec and its electricity utility, Hydro-Quebec, aggressively courted data centers in 2016. Somehow cryptocurrency miners got wind of all that available electricity. Interest grew and kept growing.
In January, Hydro-Quebec was , many from China, where recent restrictions hit cryptocurrency hard. Quebecois officials were sanguine about the prospects.
Flash forward a month: Over were expressing interest. That put the utility in a bind. After all, its residential and commercial customers have energy needs, too, and mining takes a lot of juice. One Quebec town and a regional council by June, the number of potential mining operations interested in coming to Quebec had ballooned to more than 300, potentially accounting for as much as one-third of the province’s entire electric capacity, according to published accounts.
Quebec is not alone. Many other places around the world are considering opening the power and development doors to cryptocurrency miners. Like Quebec, they have to balance their own energy needs with the desire to cultivate a new type of industry to help them economically.
Cities, counties and entire countries are weighing the potential benefits of enticing cryptocurrency mining operations. The most enticing candidates for miners? Places with cold climates.
Quebec, in just the past few weeks, has had to shift gears several times to adjust. First, there was a on new operations; then, the utility was allowed to temporarily for new miners. Recently, the utility to limit the overall allocation of energy to new mining operations, require prospective operators to specify what price they would be willing to pay and how many jobs they would create, and curb overall consumption during the winter months. The ultimate goal, when the government instituted the temporary moratorium, is to create a selection process to allow only “the best among the companies.”
Across the world, cities, counties and entire countries are weighing the potential benefits of enticing cryptocurrency mining operations. The most enticing candidates for miners? Places with inexpensive sources of natural energy and cold climates because cooling the computers that mine for bitcoin (BTC) and other currencies can account for up to 30 percent of overall energy costs. Iceland, for example, has abundant energy from geothermal and hydroelectric plants, and it anticipates energy consumption from rapidly growing mining operations to this year.
Help for Hurting Economies
At the same time, some local governments see in crypto mining operations an opportunity to reverse declining economic fortunes. Medicine Hat, in the Canadian province of Alberta, agreed in March to lease land and provide energy from a city-run, natural gas-powered electrical plant to Hut 8 Mining Corp., one of Canada’s largest mining operations.
In the U.S. the small town of Murphysboro, Ill., offered mining operation Solar Alliance a 165,000-square-foot former label-making factory, vacant since 2004, as a base of operations for a massive solar array. Along with using the sun’s energy for mining, Solar Alliance is tapping a different kind of star power: “Star Trek” actor William Shatner is the company’s spokesperson. But town officials are more focused on economic development than the allure of Hollywood.
“We, like a lot of Middle America, have seen job losses because of a change in the worldwide economy,” Mayor Will Stephens told . “From my perspective, we’re going to have someone who will occupy a previously derelict property, and whatever development comes out of it will just make it more marketable [even] if the project is not successful.”
Balancing Costs and Benefits
As with all economic development ventures, governments must weigh the costs and benefits of bitcoin mining operations. That’s particularly true because of mining’s massive energy consumption and carbon footprint. Morgan Stanley analysts estimate that miners’ electricity consumption this year could in 2025.
For most governments, however, job creation is the factor that matters most, and mining operations may offer mixed results. In two research studies, KMPG found that job creation from mining . For example, data centers create between five and 25 jobs per megawatt of energy they consume while mining operations create between 0.4 and 1.2 jobs per megawatt, depending on the size and scope of their operations.
One of the studies, which KPMG conducted for Hydro-Quebec, said economic benefits of crypto mining could increase if there were “spinoffs” such as the manufacture, assembly, repair and distribution of mining equipment; software development; research and development; and IT support.