These days with the summer heat arriving in Iran, once again the issue of electricity consumption and balancing the country’s power supply and demand has come under spotlight.

Although at the first glance, basic principles of electricity generation and consumption are just like previous years, however this year, among the variables pertain to electricity consumption, a new notion has emerged: “mining crypto-currencies”.

Generating (experts use the term “mining”) digital or virtual currency (dubbed cryptocurrency) with cheap electricity in Iran has become one of the major problems in big cities.

On Sunday, Iran’s Power Generation and Distribution Company (known as TAVANIR) announced that the country’s electricity consumption in the past Iranian calendar month (May 22-June 21) increased by seven percent compared to the same period last year. 

Tavanir blamed the illegal activities of cryptocurrency miners for the sudden jump in the country’s electricity consumption.

Now, considering Iran’s long-lasting electricity problems, mostly in the hot season, the question is how exactly cryptocurrencies are to blame for the current situation and what solutions can be offered to remedy the issue without ignoring the problem all together.

Heaven of cryptocurrency miners

Although, the issue of over-consumption of electricity by cryptocurrency miners has come to surface just recently, however studies show that such activities in Iran have been going on at least in the past three years.

Cryptocurrency mining is a significantly energy-consuming process and in many of the advanced countries the governments impose huge tax fees and certain electricity tariffs for people or companies which are active in this area. In Iran, however, the situation is quite different. 

On one hand, the gap between the value of rial and the U.S. dollar is increasing day by the day and the global demand for trading with cryptocurrencies, especially Bitcoin is increasing drastically and this has made the area ever more attractive for companies and people to join in. On the other hand, no regulation or law has been defined for such electricity subscribers.

So Iran, which has a much cheaper electricity than most of the advanced countries in the world, is becoming the heaven of cryptocurrency miners.

Consumption

As I mentioned before, mining cryptocurrencies is, in nature, a very energy-consuming process. Some scholars even believe that due to its exponential growth it might consume the world's entire electrical energy by 2020. 

If we consider the seven-percent growth of Iran’s electricity consumption to be merely due to bitcoin mining processes, we can easily estimate the huge impact that such activities could have on the country’s electricity consumption patterns in the near future.

The seven percent in Iran’s electricity consumption which we mentioned, might seem a small number but considering the peak consumption of 3300 megawatts for the past Iranian month of Khordad, the figure nearly equals the total consumption of East Azarbaijan, West Azarbaijan and Ardebil provinces together.

Government approach

In addressing this problem, recently the ministry of energy has proposed that the costs of electricity for cryptocurrency miners should be determined based on electricity export tariffs.

This means that companies and people that are mining cryptocurrencies should pay a price as if they are importers of electricity. This proposal will only be valid and implemented if approved by the cabinet. 

Tavanir has also announced that using electricity for mining cryptocurrencies is illegal and those household or commercial subscribers that use electricity for such activities will be cut off from the national grid.

Although the proposed solutions can somehow be considered ways of tackling the problem but they are not best solutions for the long run.

Since Iran is even planning to launch its own cryptocurrency for countering U.S. sanctions, imposing inhibiting rules and regulations won’t help in this regard and will even discourage the future usage of such currencies, if realized.

The Iranian government said in April that it had developed an experimental domestic cryptocurrency.

According to Press TV, “This currency would facilitate the transfer of money (to and from) anywhere in the world. Besides, it can help us at the time of sanctions.”

So if Iran is serious about moving forward with this plan, the government should consider a more considerate approach in this regard to both manage the electricity consumption and encourage people to engage with the new digital currencies.

Solutions

Although an ultimate solution for quenching this electricity-thirsty giant may not yet be out there, but there are at least some practical options that can be explored and implemented to manage the issue for the time being.

First, as many major companies in the technology world like Google, Facebook and Microsoft has done, the cryptocurrency mining community can also purchase clean energy from renewable plants to mitigate the impact on the national grid. 

However, since all miners are not working under one single executive entity, the government should make necessary arrangements to bring them together or at least provide this option to big companies which are active in this field.

Another option would be providing capable private power supplying companies, which have their own renewable power plants, with network and infrastructure to act as ESP or electricity Service Providers for such subscribers.

Miners can also use eco-friendlier power source like Vienna-based HydroMiner, who uses renewable hydroelectric power to mine Bitcoin. But the perquisite for this solution is also developing more renewable power plants across the country.

EF/MA