EghtesadOnline: The Energy Ministry has agreed on a tariff for electricity used in cryptocurrency mining, the head of Iran Electrical Industry Syndicate said.
“The ministry has proposed the rate of 7 cents for each kilowatt-hour of electricity consumed in cryptocurrency mining to the government for making the final decision,” Ali Bakhshi was also quoted as saying by Fars News Agency.
Cryptocurrency mining in Iran has become a lucrative business in recent years, thanks to the extremely low-cost electricity. Each kilowatt-hour currently costs as low as 0.5 cent in the country. Electricity is even cheaper in the industrial and agricultural sectors.
Bitcoin mining is a kind of energy arbitrage. Miners make their money when the cost of producing coins is lower than the operation of the mine itself, including electricity, Financial Tribune reported.
With cryptocurrency mining taking a toll on Iran’s electricity industry, energy authorities have voiced concerns over the past few months about the enormous pressures exerted by such activities on the electrical grid.
They say the mining of cryptocurrency using cheap electricity is an evident example of wasting national resources.
According to Energy Ministry's reports, electricity consumption in the country jumped by 7% in the month ending June 21, a part of which pertains to bitcoin mining.
A deputy energy minister had earlier proposed that crypto miners should pay their power bills as per the same rate considered for electricity export.
Bakhshi noted that the electricity syndicate has no objection to crypto mining and trading.
“Bitcoin miners’ use of cheap electricity is what we are concerned about,” he said, adding that cryptocurrency mining is an opportunity to bypass sanctions.
“We believe that a reasonable mechanism should be devised for cryptocurrency miners,” he emphasized.
Blockchain Community Reaction
Reacting to the news, Mohammad Sharqi, the head of Iran Blockchain Community, said there is no ground for the tariffs and the proposed price is way higher than that set for electricity exports.
“The declared tariff is 14-fold higher than the rate set for industrial consumption. It is even four times higher than the tariff charged for commercial electricity, the most expensive electricity in the country,” he told a press conference on Tuesday, IRNA reported.
“Instead of adding to the burden already saddled on the crypto mining industry, we should help promote the business, if we truly recognize it a as an industry,” he said.
He dismissed claims that the activities of crypto miners caused power outage in the country, reiterating that the miners turn off equipments during the peak hours of electricity consumption.
“If all crypto miners across the world were gathered in Iran, they would use only 12% of the country’s total electricity,” he said.
Citing earlier statistics by an electricity official, Sharqi spoke of 148,000 mining equipment operating in the country, adding that they barely use 0.5% of the overall electricity power.
Mostafa Rajabi Mashhadi , the ministry’s spokesman for the power department, had earlier said that the production of a single unit of bitcoin uses about 200 million rials ($1,400) in state subsidies.
The official said the production of each bitcoin uses the equivalent of the annual consumption of 24 buildings in Tehran, or one building’s consumption of electricity for 24 years.
According to media reports, the government annually pays close to $1 billion in subsidies to plug the huge gap in real energy costs and the bills sent to consumers.
Experts say consumers pay a fraction of the real cost and are oblivious to prudent energy use and unending government appeals for reducing high consumption and waste.
Cheaper electricity, combined with the devaluation of the rial against foreign currencies due to the US sanctions, has made crypto mining even more lucrative for overseas miners.
It is said that miners in countries commonly seen as bitcoin mining powerhouses–China in particular–are looking at Iran for potential opportunities.
An informed source had earlier told CoinDesk news website that China has already deployed myriads of miners in Iran.
This is while trading in cryptocurrencies is legally banned in Iran. The Central Bank of Iran officially prohibited all financial institutions from dealing in cryptocurrencies in April 2018 on mounting concerns over money laundering and lack of transparency.