Kazakhstan Experiences Electric Energy Crisis Due To Flooding Of Crypto Mining Activities

Crypto mining in Kazakhstan results in an electrical energy crisis. (photo: doc. unsplash)

JAKARTA - Cryptocurrency mining consumes a lot of energy, and it is triggering a crisis in Kazakhstan. The Financial Times reported that the country's electricity grid operator, KEGOC, said it would start rationing electricity to 50 registered miners after their requests were reported.

This allotment used emergency shutdown mode at three power plants in October. They will also be the first to be disconnected in the event of a network failure, the quasi-public company said.

Reported by Engadget, Kazakhstan's Ministry of Energy also estimates that electricity demand has jumped eight percent so far in 2021 when compared to the more common one or two percent. Blackouts have been frequent in six areas since October.

Officials and observers have pinpointed the cause of the power outage at the growing number of unregistered crypto miners who illegally generate currency from their homes or even factories.

China's war on cryptocurrencies may be partly responsible for this crisis. Energy demand began to increase when mining companies moved from China in early 2021 to the country. It even jumped again when China made the mining business illegal since last May. Electricity is relatively cheap in Kazakhstan, making it a haven for companies hoping to make more profit from their crypto operations.

Kazakhstan is now trying to compensate for the electricity shortage. They are asking Russian energy companies to complete the national electricity grid, and will charge registered miners a compensation fee of 1 tenge (approximately IDR 32) for every kilowatt-hour starting in 2022. However, both efforts will take time, and this forces miners to reduce or move equipment.

There is also concern the government is dishonest about the problem. Luca Anceshi of the University of Glasgow argued to The Times that Kazakhstan was scapegoating miners for their own power grid reliability issues.

Whether that's true or not, then it's safer to say the mining demand hints at potential problems for other countries if their local crypto production takes off.