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Market Snapshot: Crypto-currency mining is booming in Canada. Here is why.
Release date: 2018-08-22
- Many crypto-currency miners have either started or have expressed interest in operating in Canada. Out of all provinces, Quebec has seen the highest number of requests for electricity to supply mining projects.
- The main reasons why crypto-currency miners are interested in operating in Canada are relatively cheap electricity, cold weather, and light regulation.
A crypto-currency is a form of virtual money where cryptography is used to secure transactions and to control how much money is available in the marketplace. Blockchain is a public database that lists transactions of a crypto-currency, where each transaction is a “block” and the list of transactions becomes the “chain”.Footnote 1
Essential to these transactions is mining, which is equivalent to auditing or verification. Miners verify new transactions by solving complex computational problems, after which the new transactions are added to the blockchain.
Mining is very energy intensive because it requires a large amount of computer power. The mining of Bitcoin, the most widespread crypto-currency, consumes an estimated 71.12 TW.h per year globally.Footnote 2 This is equivalent to 11% of the electricity generated in Canada in 2016. On average, one bitcoin transaction uses more electricity than a Canadian home for a month.
In the last few years, the crypto-currency market has experienced significant growth, both in terms of value and traded volume. This growth has mostly been supported by investors’ belief in the growth potential of this new asset class. This growth is now starting to pose a challenge to some electric utilities. As shown in the graph below, the estimated global Bitcoin electricity consumption largely surpasses Canada’s biggest power generation station’s capacity and amounts to a significant portion of Quebec’s electricity generation.
Source and Description
Source: Digiconomist, NEB Calculations
Description: The graph shows the estimated global energy consumption index of Bitcoin mining for every first day of the month between March 2017 and July 2018. On March 1st 2017, consumption was estimated at 28.04 GW.h. On July 1st 2018, consumption was estimated at 194.86 GW.h. The orange line represents the average daily power generation in Quebec (568 GW.h). The gray line represents the approximate average daily power generation of Robert-Bourassa hydroelectric power station over one year. It is Canada’s biggest power station.
In the last year miners increasingly decided to move to Canada, mostly to Quebec. According to Hydro-Quebec, the province received requests for about 9 gigawatts (GW) of energy in 2018 from crypto-currency miners (about 24% of Hydro-Quebec’s total generating capacity of 37 GW). There are three main reasons why Quebec is particularly attractive to crypto-currency miners:
- Cold weather
The computers of crypto-currency miners generate a significant amount of heat and require cooling to prevent overheating. Locating in a relatively cool climate like Quebec helps to reduce the costs of cooling the computers.
The Bank of Canada regulates currency in Canada. However, it doesn’t consider crypto-currencies a form of money. Therefore, crypto-currencies are still unregulated in Canada. Other countries have adopted or are considering adopting regulations to oversee the activity of crypto-currency miners.
- Low electricity prices
Power rates in Quebec are among the lowest in North America. For industrial consumers, rates are around 5 cents/kW.h. Energy consumption is the main cost of crypto-currency miners.
Although Quebec has seen the highest number of requests for electricity to supply mining projects, Manitoba is also, to a lesser extent, receiving significant amounts of requests.
In July 2018, following an increasing number of applications for electricity from miners, Hydro-Quebec tripled the price of electricity for new crypto-currency miners. This price increase is temporary, because Hydro-Quebec is currently proposing a new selection process to the Régie de l’énergie for future crypto-mining operations.
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