B.C. Hydro’s recently expressed friendliness to power-hungry cryptocurrency miners could bode well for the province. But courting this new industry is a fine art that the utility should start learning, if it wants to have any chance of success.
In November, B.C. Hydro laid out the welcome mat for cryptocurrency miners, saying it would seek to grant them discounts. Such discounts will make the province more attractive to the miners, B.C. Hydro’s business development manager Dina Matterson said at an energy conference. “We need to get in the game.”
The utility’s open-mindedness to an emerging industry is commendable. Its recognition of the business opportunity is shrewd.
Mining — minting cryptocurrencies such as Bitcoin — has emerged as a billion-dollar industry in recent years, as the main underlying asset surged in value from its initial few cents to the thousands it is worth now.
Miners use computers to solve mathematical puzzles, helping to facilitate Bitcoin transactions and earning newly generated units in the process. Because of the complexity of the puzzles, the activity uses a lot of power. A large operation uses megawatts of electricity, which translates easily to thousands of dollars per day.
Miners are ideal customers for utilities. Their computers run 24/7. Unlike most other large power consumers, a mining company guarantees continuous, uninterrupted usage. They also do not care about location or availability of infrastructure. As long as the power is cheap, miners will move anywhere and will erect their own buildings if that becomes necessary.
B.C. is well-positioned to welcome them. The province is littered with struggling resource towns, which once played host to lumber or pulp mills or mineral-mining companies. Those players used a lot of power and as they closed shop, they left behind valuable substations and transmission lines that largely sit idle.
By attracting cryptocurrency miners to B.C., the province’s utility gets a stable buyer for power in places that it would otherwise find challenging to sell, and the economies of those struggling small towns get new life.
It is true that cryptocurrency mines do not create many jobs. The machines run themselves, and beyond setting up, the only work required is day-to-day maintenance. But they create jobs nonetheless.
Toronto’s Hut 8 Mining Corp., which says it is the biggest of its kind to be publicly listed, created 100 temporary construction jobs and 42 full-time positions in Medicine Hat, Alta. That is easily 142 families — a small town.
But for B.C. to reap such benefits, it needs to know what it is doing. Utilities in general have not had a good track record in dealing with cryptocurrency miners.
Consider the case of Quebec, which, too, laid out the welcome mat for miners last year. It ended up bombarded by applications, and the province reacted by tripling the price of electricity for new miners to 15 cents per kilowatt-hour.
That is an absurd notion because nobody can make money at such a price.
Electricity price is the dominant variable when determining profitability. It is entirely black and white — based on mathematics and without nuance.
It is not a matter of highest bidder wins or being more efficient. There is absolutely nothing a miner can do to make 15 cents work.
Quebec’s reaction showed a fundamental lack of understanding of cryptocurrency mining.
In December, Ontario’s securities regulator sought out blockchain and cryptocurrency experts for an advisory committee. That was not related to minting coins, but perhaps B.C. should consider the same if it is serious about bringing miners into the province.
Coal-burning China currently dominates cryptocurrency mining, but that dirty power is increasingly being shunned as the world musters the will to fight climate change.
There will be more demand to come from miners for clean power. B.C. is well-positioned to take advantage of that, but it needs to do its homework.
Ethan Lou was an early Bitcoin investor and is senior partner at the cryptocurrency firm Ocuis in Calgary.