Russia & Belarus to Charge Higher Tariffs for Crypto Miners Due to High Energy Usage

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In Brief
  • Recent spikes in energy consumption in Russia have prompted government officials to look into increasing electricity costs for miners.

  • Belarus has implemented a tiered system for firms with energy usage greater than or equal to 25 million kWh.

  • American mining companies have made efforts to decouple their power usage from the grid.

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The sheer amount of energy used by miners has caught the attention of governments in Russia and Belarus, prompting them to consider alternate tariffs.

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In an announcement last week, Russian energy minister Nikolai Shulginov indicated that higher tariffs could be on the cards for miners, who exploit the subsidized tariffs that apply to the general populace for mining operations. Shulginov responded to complaints made by Igor Kobzev, the governor of Irkutsk Oblast, about illegal crypto miners. Kobzev said that electricity usage reached 4.7 billion kWh in the first half of 2021, compared to 5.7 billion kWh for the whole of 2020. His region has the lowest electricity tariffs in Russia, at under $0.02 per kWh in cities, and slightly above $0.01 in rural areas.

In September 2021, the Russian Financial Market Committee chairman voiced his support for the legal registration of firms taking part in mining activities, in order to tax them fairly.

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Belarus already charges separate tariffs for miners, if their annual consumption is greater than or equal to 25 million kWh, and firms can fall into any one of four tariff groups. The cost per kWh for each group has not been disclosed. Mining has been legal in Belarus since March 2018, and the president has expressed a positive attitude toward mining, as opposed to picking strawberries on a foreign farm. In 2019, he dangled the prospect of nuclear power as a source to miners.

Kazakhstan grid under pressure from exiled Chinese miners

Power producers in China found to be selling power to miners face legal penalties, after China’s recent crackdown. Chinese miners have flocked to Kazakhstan, the U.S., and Russia. Kazakhstan now hosts 18% of the global hashrate (collective mining power), which is no coincidence, considering its proximity to mainland China. However, the country’s grid has seen an increase of 7% in annual consumption, 5% more than the expected annual increase. The national grid operator said on Oct 15, 2021, that it was cutting off customers who use excessive electricity, and has said that it will tax miners from 2022.

Different stakeholders weigh in on mining energy usage

Elon Musk, CEO of Tesla, said that the company will not accept bitcoin for payment until bitcoin mining’s power consumption reduces by 50%. In Iran, mining was temporarily banned but has now been reinstated, albeit only 50 mining operations have a legal license to operate. 

Stronghold Digital Mining has implemented an emission-controlled burning of abandoned coal stockpiles in Pennsylvania, which were unfit for the steel industry that flourished in the nineteenth century. During times of increased demand, they are able to sell power to the grid, and when there is less demand, they use the energy generated for mining activities. In this way, no power is sourced directly from the grid for mining activities.

In Texas, flared natural gas is proving a viable source of energy for miners since combusted methane releases carbon dioxide into the atmosphere, which is better than releasing pure methane. The use of flared natural gas decouples the miners from the grid.

The power grid is unregulated in Texas, and spot-price purchases of electricity help miners mine at the lowest possible tariff. Electricity costs and availability like that found in Texas may draw yet more miners away from Russia and Belarus, should they be charged at significantly higher tariffs in months and years to come, as per recent government deliberation.

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