Published: September 22th, 2020
The energy crisis in Abkhazia, the de facto state in the South Caucasus, is continuing unabated. Now, the region's national energy provider is blaming increased cryptocurrency mining for the continuing woes. The government has banned cryptocurrency mining in place but it seems that the local authorities have not respected nor enforced the said regulation.
Abkhazia, a de facto state in the South Caucasus, continues to grapple with an energy crisis. And, now the head of the region’s national power utility company is blaming increased cryptocurrency mining for the electricity problems. Jam News reported that the year-old ban that the country ratified has received little or no respect from the local authorities who refuse to enforce it. And, miners keep mining as they strive to take advantage of the state’s low energy tariffs.
Ruslan Kvarchia, director of operation and technology management at Chernomorenergo, the state’s power utility company, said that the mining equipment operating in the country consume between 40 and 45 megawatts.
Such amounts of power, subject to round-the-clock consumption, amount to an annual consumption of 400 million kilowatt-hours. The projected deficit of power for Q4 of 2020 is about 700 million kilowatt-hours.
It is emerging now that instead of clamping down on miners, the state is considering a different approach. Authorities want to lift the ban on mining and allow firms to mine undisturbed.
The government thinks that doing so will improve communication among industry players and other stakeholders. According to a government official who requested anonymity, miners, energy providers, and local authority officials need to work closer now more than ever.
The government now believes that voiding the year-long ban is the most effective way to handle the energy crisis. Repealing the ban gives the government a better grasp of the industry by allowing it to closely monitor mining pools and better plan for an adequate supply of electricity.
The state has experienced a surge in cryptocurrency mining this year despite the activity being illegal since 2018. Abkhazia’s custom department is reporting that almost $600,000 worth of mining hardware has come into the state over the past six months alone.
Abkhazia is not the only country wrestling with cryptocurrency-related problems. Just last week, reports emerged out of India that it is planning a bill that will ban cryptocurrency trade. The proposed bill comes just a few months after the country’s supreme court overturned a decision by the Reserve Bank of India that restricted banks from lending certain services to cryptocurrency firms and exchanges.
Egypt and India have outlawed Bitcoin and cryptocurrency mining while China is increasingly making it harder for mining entities to operate in the populous Asian nation. Several other countries are also working on regulation, either to review the steps of mining crypto within their borders or outlaw the practice entirely.
While Abkhazia may make headway by providing a proper regulatory framework, its power deficit may need to be met before every household and business operating in the state can have an adequate supply. The shortage is about 700 million kilowatt-hours; meaning that even if cryptocurrency mining was not in the picture, then the state will need to source for another 600 million kilowatt-hours to adequately meet its needs for this quarter alone.
Also, the region’s power crisis is not a new phenomenon. An assessment carried out in January 2017 highlighted worn-out equipment, non-payments, and increased consumption as the critical problems affecting the national power utility provider, Chernomorenergo.
Besides, back then the state lacked enough resources to create an energy accounting system that operates efficiently. Chernomorenergo had estimated that it would need about $4.5 million to install such a system.
Abkhazia’s predicaments may take a lot more than just adequate power provision. Among the stopgap measures proposed include importing the deficit from Russia or Georgia. However, such an arrangement might come at a political cost that the state’s leadership is not enthusiastic about.
Besides, every country that is hosting a considerable amount of Bitcoin mining is looking at innovative solutions in the power provision industry. According to an article on Nature, cryptocurrency mining produces the same amount of carbon dioxide in three months as that emitted by a million cars over the same period. For this reason, many countries that want to host cryptocurrency mining firms are experimenting with environment-friendly sources of power.
The statement above points to the critical challenge associated with crypto mining; its ravenous appetite for power coupled with far-reaching environmental pollution. Experts are asking the industry to address these challenges now.
Umair Irfan, a Vox staffer, cited a report stating that the annual carbon footprint of Bitcoin mining is 22.9 million metric tons, the same amount Jordan produces. The report shows that Bitcoin mining alone accounts for about 0.2% of the world’s consumption.
The good news, however, is that the majority of the energy that powers crypto mining now comes from clean sources such as solar, wind, and hydropower. Umair said that this is the direction that Abkhazia should look to if it wants to address its acute power crisis.
He added that the state needs to address the critical issues first, which in this case is how to provide adequate power. He thinks the state is not being realistic by hoping that a good grasp of the industry will help it address the power problem.
Even if Abkhazia manages to address the situation, it faces even bigger challenges. The state is considered by many countries and the U.N. as part of Georgia. And while the state does not have adequate power, Georgia has enough cheap power that keeps attracting Bitcoin mining firms. As a result, keeping interested in the region at bay while working out the power issue is easier said than done.
Abkhazia, a de facto state in the Southern Caucasus is experiencing an unending power crisis. The state is now blaming cryptocurrency mining for the problem. It enacted a ban which local authorities neither respect nor are keen to enforce. The state is now looking at rescinding the Bitcoin mining ban to among other things, get a good grasp of the operation and gather adequate data to help it distribute power equitably.