Energy Crisis In Iran — Is Bitcoin Mining To Blame?

Bitcoin mining, while a largely profitable venture for mining companies and individuals, can cause plenty of problems. The rise of crypto mining can raise rates, weaken grids, and even cause power blackouts in certain countries like Thailand, Venezuela, and Kazakhstan. Iran’s capital and its nearby provinces are also reporting rolling power blackouts in the last two months, disrupting businesses and the locals’ everyday lives. 

While the local authorities have floated several underlying factors for the recurring problem, they may suspect that crypto mining played a crucial role in it. Tehran’s latest problems with rolling power outages have raised concerns among local officials, calling for an inquiry into crypto miners’ potential culpability.

Iran Faces Increasing Demand For Power

Iran has historically struggled with increasing power demands, primarily due to international sanctions over its nuclear program. It also didn’t help that its government sold some of its power reserves to augment its budget while addressing regional conflicts and even mismanagement. To help address the concern, many Iranians have stopped using their air conditioners as weather conditions improved in the fall.

The country’s rolling power outages coincided with Bitcoin’s massive price surge in early November. Immediately after Republican Donald Trump’s election, Bitcoin’s price started to surge above $70,000, finally hitting the $100k mark for the first time in the first week of December.

Some local Iranian authorities have suspected that Bitcoin’s surge in price and attention to crypto developments in the US may have a hand in the capital’s frequent power outages.

Residents And Local Industries Suffer From Power Outages

The increasing strain on the country’s power grid has caught the attention of policymakers. According to Mostafa Rajabi, CEO of the government-owned power firm, some opportunistic individuals took advantage of the country’s subsidized electricity and other resources for crypto mining activities without authorization.

Power outages are common in Iran, reflecting its failure to sustain the growing demands and the aging power equipment at its plants. Last summer, industrial parks near the capital city were hit with power outages. Then, in October and November, Tehran’s neighborhoods were hit with power outages.

Facing regular power outages, Iran’s President Masoud Pezeshkian has instructed some plants to stop using mazut, a high-polluting fuel popular among Soviet countries. Iran has approved the use of this fuel in the past to address the power shortage. Pezeshkian also admitted that it’s time to offer the public a fair and transparent assessment of the current situation.

Currently, electricity in this country is largely subsidized, which helped spur the growth of crypto mining. These Bitcoin mining facilities need large amounts of power, which drain the country’s reserves. 

According to Masih Alavi, CEO of Viraminer, it’s challenging for the government to identify how much power unauthorized mining facilities consume. He added that these miners use VPNs and rent apartments to hide their rigs from public view. Alavi said that these operators distribute the rigs across several flats, making it difficult for authorities to track them.

Featured image from DALL-E, chart from TradingView