Announcements, Mining

An Update on the Power Supply in Kazakhstan

October 22, 2021

Kazakhstan has risen in recent months as the clear leader in crypto mining, following a migration of Bitcoin hashrate share from China as they continue to take on more of the global share that had gone offline. New data from the Cambridge Center for Alternative Finance’s Bitcoin Electricity Consumption Index suggests that Kazakhstan is one of the new Bitcoin mining hubs, commanding approximately 18% of the global hashrate which is up from 8% earlier this year. However, a new policy coming down the legislative pipeline from the nation’s parliament might be putting an end to its growth story. While mining operations have continued to boom, Kazakhstan’s popularity as a mining hot spot has resulted in some electricity supply disruptions.

Kazakhstan Over-Commits on Utility Level

As such a lucrative country for Bitcoin mining, a very significant number of Bitcoin miners took the initiative to get in on the action and make the most of the cheap electricity and crypto-friendly government that Kazakhstan has to offer. Due to the high demand, the region did end up selling 100% of its available capacity. With Kazakhstan only sharing a small amount of this capacity at the beginning, the existing equipment was not ready for the increased capacity and was overloaded as the rest came online, causing a chain reaction of disruptions that further overloaded the grid and resulted in the whole system shutting down several times.

To add fuel to the fire, some Bitcoin miners who were unlicensed to use the electricity began utilizing excess power. The country has announced that anyone operating whilst unlicensed will be put offline in order to stabilize the power supply in its cities.

Kazakhstan’s reputation to uphold commitments to mining operations in the region remains intact, and they continue to work diligently to turn around the current situation. This development affects the whole country, not just those involved in Bitcoin mining, and Kazakhstan maintains a desire for miners to stay and operations to continue as they play a significant role in generating profits for the country. As Kazakhstan continues to address the situation, current mining equipment remains stable and a solution is expected to be reached shortly.

Kazakhstan’s Outlook on Bitcoin Mining

Wattum is always proactive in our facility operations, and we have strategically chosen our partner Enegix, who is licensed to do Bitcoin Mining, with customer needs prioritized. Enegix has promised that the mining operations of Wattum customers will be minimally impacted in comparison to others. However, it is important to understand that Enegix does not have the final say in this ongoing development, and that many factors may influence its outcome.

Earlier this year, the local government announced amendments to Kazakhstan’s tax code. This means that, beginning in January 2022, crypto miners will have to pay an additional $0.0025/kWh.

However, all of this was before the global energy shortage threatened to put a chokehold on the world economy. Kazakhstan relies heavily on fossil fuels, which are set to be in high demand this winter given production challenges. As a result, the country is moving to put a hard ceiling on the Bitcoin mining industry within its borders.

Kazakhstan’s state power utility KEGOC has reported earlier this week that growth in power consumption is up by 11.8% as of September 2021, or approximately 1,500 MW — this is roughly the energy used by an entire province. Given that KEGOC claims the country’s aging grid needs more frequent repairs, including generating stations, the state utility says it is implementing regional power restrictions in order to preserve capacity.

Parliamentarians are also wary of the problem; a bill enacted by the country’s legislature, put forth by its Energy Minister, orders strict caps on the mining industry’s access to power, limiting its total draw from the grid to 100 MW with each new installation capped at 1 MW.

KZ has made a 180° turn in their approach to mining. It is not being made illegal, but they are looking to limit it due to the overly fast rate of growth. Their grid is being strained not just from the Bitcoin miner exodus from China, but also alongside the global energy crisis that is ongoing.

KEGOC provides power to Enegix, where most of Wattum customer operations reside. While you may hear news of power issues in Kazakhstan, every region is independent and does not have direct effects on another. KEGOC powers the Almaty District region and is considered one of the biggest power producers in the country. KEGOC has promised to do everything they can to stabilize the power distribution, and are consistently keeping all of their customers and shareholders updated.

There have been power issues at the KEGOC power grid company that powers Enegix, where the increase in consumption (due to an increase in mining) met an increased accident rate at power plants. As a result, cutting down the power available has become the immediate solution for KEGOC. This has led to restrictions being placed on the region, and it is having effects on the area’s mining.

October 5th - KEGOC released imposed restrictions to three large consumers, Enegix being one of them. KEGOC Press Release.

October 10th - We saw our first unplanned outage at the Enegix location which affected 100,000 customers. Enegix is deemed one of the largest platforms in the world.

October 14th - In Ekibastuz, large power units had to have an emergency shut down. The total volume of the emergency reduction of generation at the aforementioned three power plants exceeded 1000 megawatts. KEGOC Press Release

October 20th - KEGOC clarifies the situation regarding the restrictions and planned downtime during the winter months (November 2021 - January 2021). KEGOC Press Release

With the situation in Kazakhstan developing daily, it is possible that there may be further, randomized outages up until March 2022. At this point, we cannot rule out that further and longer issues may surface. Our commitment remains to keep you aware and in the loop, and to inform you that we are doing everything in our power to learn more about such disruptions and to implement protocols that will allow us to be prepared for such situations.

We thank you for your continued understanding while we navigate this ongoing development.

Options for Wattum Customers

If the situation in KZ deteriorates further, Wattum will be offering customers several options for their equipment. We are currently discussing the following options internally:

  1. Remain in KZ and wait out the situation before choosing another option.
  2. Relocate your units to our hosting partner in Russia (Learn More).
  3. Wattum can offer to purchase your KZ units.
  4. Ship the units to your own desired location.

We are not yet considering hosting in the US as the turn on date will be around the same time that Kazakhstan’s electrical issues are resolved. At the moment, this option is not in the best interest of our clients’ mining operations.

We remain dedicated to keeping you updated and will reach out should there be any further changes to the situation. Once again, we thank you for your understanding and apologize for the inconvenience. For more information on the current status of mining operations in Kazakhstan, contact our dedicated support team today - we are available 8am to 5pm EST for any questions or inquiries that you may have.

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