Miners in Kazakhstan face tough winter as power goes out

Recently, due to the power shortage in Kazakhstan and the lack of electricity in winter, a large number of mines have been affected by power rationing. The south is focusing on cleaning up illegal mining based on electricity consumption data and IP addresses. Some organizations have decided to move from Kazakhstan to the United States.

According to the latest report by Neftegaz.ru, kazakhstan’s national grid operator has started to limit power rationing to crypto miners. Magzum Mirzagaliyev, the energy minister, has proposed capping electricity supply at 1 megawatt per mine and 100 megawatts for the entire industry. The proposal has drawn criticism from miners, with the Blockchain and Data Center Industry Association arguing that the government should crack down on illegal mining rather than restricting companies that pay taxes. On October 15th KEGOC, the national grid operator, made a similar statement to the energy minister after announcing the cuts, saying it would cut off customers who “consume excessively”.

According to Kazakhstan Today, Kazakh Energy Minister Magzum Mirzagaliev told local media that electricity consumption in 2021 increased by 7% compared to last year, with the surge in demand mainly due to the increasing number of data centers dedicated to cryptocurrency mining.

He stressed that “it’s a very big increase” and that the activities of crypto miners now have no significant positive impact on socio-economic indicators. Mining consumes cheap electricity generated in Kazakhstan, but the cryptocurrency mined is often sold elsewhere and the profits are accumulated abroad. Still, he said Kazakhstan needed to develop its crypto mining industry, expressing confidence in the sector’s development, which had “very good opportunities,” and highlighting the country’s potential to expand its use of renewable energy. The ministry has prepared proposals on how to deal with power shortages caused by miners. These include limiting power consumption in existing mining data centres and suspending approvals for new crypto mines.

Winter power shortages are the norm in Kazakhstan and should be considered in advance of mine construction in Kazakhstan. The north of Kazakhstan is rich in coal resources and has relatively sufficient electricity supply, while the south is mainly powered by natural gas, so there is a large gap in winter. The lack of electricity from the north to the south is one reason why shortages in the south are hard to improve.

At the heart of kazakhstan’s power shortage is also the small size of the country’s overall electricity supply. Data show that in 2020, Kazakhstan’s annual electricity generation was 106 billion KWH, and electricity consumption was about 105 billion KWH, with a slight surplus of electricity supply. Kazakhstan currently has 155 power stations, of which 69 percent are coal-fired and 9 percent hydroelectric.

As of the end of August, the most recent data available, the United States accounted for 35.4% of the world’s bitcoin computing power, more than double its 16.8% share at the end of April, according to the CCAF Financial Center in Cambridge. Kazakhstan and Russia follow with 18.1% and 11%, respectively (up from 8.2% and 6.8% in April). Considering that bitcoin consumes between 100 and 150 billion kilowatt hours of electricity a year, Kazakhstan has added about 10 billion kilowatt hours of electricity (10% of the total network capacity), which is also close to the 7% increase in electricity consumption that the energy minister said.

By comparison, China generated 7.779 trillion KWH in 2020, the U.S. 4.287 trillion KWH and Russia about 1.0854 trillion KWH. In other words, kazakhstan generates only 42 times as much electricity as the United States, and bitcoin mining in Kazakhstan consumes half as much electricity as in the United States. Therefore, for Kazakhstan, the short-term increase in computing power is indeed “unbearable”.

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