To understand why China is cracking down on power use by bitcoin miners, have a look at curtailment.
The practice — where producers of wind and solar power cease generation because the entire electricity system is oversupplied — has been a major problem for the country in recent years. In the northwestern provinces of Xinjiang and Gansu, as much as one-third of wind generation and a quarter of solar was curtailed in the first half of 2017, according to Bloomberg New Energy Finance.
Fossil-fuel generating plants have been idle for more than half of the time, and across all fuels, utilization rates have barely broken above 12 hours a day since 2014.
Amid this glut, bitcoin has been a boon for generators.
Performing the code-cracking that creates the cryptocurrency requires vast amounts of electricity: Between 8.27 terawatt-hours a year and 37.22 TWh a year, close to the power consumption of Estonia or Peru, depending on whose sums you believe. That means the world’s digital-currency miners have gravitated to the regions where power is cheapest. In recent years, that’s been China.
Look at a recent Bloomberg News map of where such mines are located, and you see a picture remarkably like images of where the country’s grid is most oversupplied:
Along China’s northern border, there’s an excess of coal generation and, in Xinjiang, of wind. In the southwestern provinces of Sichuan, Yunnan and Guizhou, ambitious dam-building has left a glut of hydroelectricity. By offering cheap fuel to bitcoin’s crypto farms, generators have been able to improve the meager returns on their fixed assets…
Read Full: Bitcoin’s Cheap Energy Feast Is Ending