Crypto Miners Blamed For Kazakhstan’s Power Problems

By Eurasianet - Feb 14, 2023

• Seven regions across Kazakhstan were knocked off the country’s aging power grid due to the failure of a high-voltage insulator on a power line.
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• The incident is the latest to underline a chronic problem with the country’s Soviet-era infrastructure.
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• Authorities have placed significant responsibility for the crisis on cryptocurrency miners, many of which have tapped the grid illegally. 

Households and enterprises in seven regions across Kazakhstan were temporarily knocked off the power grid as temperatures dropped to around -14 degrees Celsius over the weekend in fresh evidence of how the country is struggling to cope with inexorably mounting demand for electricity.

State-run power grid operator KEGOC said in a statement on February 13 that the need to  effect an emergency suspension of transmissions on a high-voltage power line led to a 10 percent reduction in capacity.

Power officials said their quick work prevented a more serious outcome.

Shutdown of the power line “avoided the complete cut-off of users in southern and central regions of Kazakhstan,” KEGOC said in their statement.

Phosphorous miner and processor Kazphosphate and metals companies Arcelormittal and Kazakhmys were among the companies left without power.

Electricity supplies had been restored to the affected areas by February 13.

The Energy Ministry said the outage that triggered this breakdown was caused by the failure of a high-voltage insulator on a power line. Following an earlier breakdown in the western city of Atyrau earlier this month, officials cited a snowstorm as the cause.

The frequent recurrence of power outages is serving to underline a chronic problem. Demand is growing, Soviet-vintage infrastructure is showing its age, and refurbishments are not happening fast enough.

The issue has implications for the whole region. A blackout that plunged Kyrgyzstan and Uzbekistan into darkness, for anywhere up to several days in some areas, was blamed by the Uzbeks on a failure in the Kazakh power grid.

Since then, Kazakhstan appears to have experienced power shortages on a systemic basis.

First Deputy Prime Minister Roman Sklyar said at a meeting of the Energy Ministry in early February that they have been compelled to paper over deficits by buying electricity from Russia, and at high prices. He chided the Energy Ministry for its passivity in solving the problem.

“This situation needs to be radically changed in the near future. The Ministry and the [National Welfare Fund] Samruk-Kazyna must by February 15 address the issue of reducing the time spent commissioning new generating capacities,” Sklyar said.

The authorities have placed significant responsibility for the crisis on cryptocurrency miners. When Beijing imposed a mining ban in 2021, many farms moved from China to Kazakhstan, which at the time boasted favorable regulatory conditions and cheap electricity. By the fall of that year, Kazakhstan unexpectedly became the second largest cryptocurrency miner in the world, going from a position wherein it accounted for 1.4 percent of the global industry in September 2019 to over 18 percent in August 2021.

That fall, Kazakhstan experienced an 8 percent surge in electricity consumption, leading to severe power shortages and blackouts across the country. Soon, miners began to leave the country as well amid pressure from the government in the form of energy cuts and steep tax increases.

Sapar Akhmetov, head of the Kazakhstan Association of Blockchain Technologies, a lobbying organization, said at the Kazakhstan Blockchain Day 2023 forum in early February, that since the end of 2021, 70 percent of miners, mostly the illegal ones, had left Kazakhstan. As a result, Kazakhstan’s share in global mining has fallen from 18 percent to 6 percent, he said.

By Eurasianet.org