Increased Mining Operations in Kazakhstan Causing Power Deficit

As Chinese miners migrate to Kazakhstan, this poses capacity challenges to the Kazakhstan grid, which could be supplemented by the Kremlin’s state-owned utility Inter RAO in the near future.

Chairman of AB Inter RAO Lietuva board Alexandra Panina has voiced her concern regarding Kazakhstan’s energy deficit. Inter RAO is the state-owned electricity utility in the Russian Federation with which Kazakhstan authorities are in talks to supplement Kazakhstan’s electricity deficits. Kazakhstan has a cap on electricity prices, which has led to aging infrastructure and generation capacity. This, however, has attracted miners to the country, increasing the total consumption to 83 million kWh from January 2021 to September 2021, for which the country was ill-prepared, according to Panini. Panini has further opined that Russian electricity exports should have a higher tariff.

The Central Asian country is home to mining farms run by BIT Mining, Canaan, KazDigital, Xive, amongst other companies. Regions in Kazakhstan that play home to mining operations include Karaganda, Pavlodar, Taraz, and Ekibastuz.

Kazakhstan taking steps to improve infrastructure

By law, Kazakhstan cannot procure energy from international sources unless a deficit exists. Kazakhstan is expected to experience a shortage of 600MW in the upcoming winter, and estimates could exceed 1GW in the future, according to Panini.

In addition to procuring power from the Russian Federation, the Kazakhstan energy minister Magzum Mirzagalieve recently outlined three new investments in the country’s power grid, state-owned power company Samruk Energy plans to rehabilitate a 4000MW coal plant, and President Tokayev said that Kazakhstan is in need of a nuclear power plant. Panini has opined that Russian exports should have a higher tariff.

Mining activity unlikely to decrease soon

It is important to bear in mind that miners can become convenient scapegoats during energy supply crunches, or power outages. Kazakhstan already imposed a surcharge of 1 Kazakhstan tenge ($0.00233) per kWh used by cryptocurrency miners in June 2021. A law that will come into effect on January 1, 2022, will see cryptocurrency mining taxed in Kazakhstan, to generate billions in tenge.

The Xive co-founder expressed his concern on Twitter recently that the government may cut power to miners altogether. Provided regulators don’t impose draconian measures to curb mining activities, it is unlikely that migrations will slow down. Kazakhstan, as of August 2021, has the third-highest hashrate in the world, according to the Cambridge Bitcoin Electricity Consumption Index. In August 2021, BIT Mining reportedly delivered 7849 bitcoin mining machines with a total hashrate capacity of 292.7 petahashes per second.

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