The promise of cheap, hydroelectric power for Bitcoin miners in Washington state has started to fade.
A 29% rate hike for hydroelectric power in Chelan County, created specifically for cryptocurrency miners, went into effect on June 1. The miners used to pay a lower, high-density load rate for their electricity. Now they’ll pay a newly-created cryptocurrency rate, known as Rate 36.
“What we did as a commission, and what we did as a utility was industry-leading, to create a new rate for this type of demand,” Gary Arseneault, a Chelan County Public Utility District (PUD) commissioner, told local news outlet KPQ.
Washington state accounted for about two-thirds of all hydroelectric power generated in the U.S. in 2020, according to the Energy Information Administration.
Bitcoin mining in the United States
The cheap and renewable hydropower has made Washington state a popular destination for Bitcoin miners too. Washington state accounted for 4% of the total U.S. hashrate in December, according to the Cambridge Centre for Alternative Finance.
Hashrate is a measure of total computer power on a blockchain. Each hash represents a "guess" at a cryptographic string. On proof-of-work blockchain networks, like Bitcoin, the miner that correctly guesses it wins the right to verify a block worth of transactions and receives a reward. One exahash represents one quintillion such guesses and requires a lot of power.
Washington's share of U.S. hashrate isn't the biggest by a long shot.
Georgia accounts for 31%, Texas and Kentucky for 11% each, and New York generates 10%. Although that could soon change if New York Governor Kathy Hochul signs a two-year crypto mining moratorium into law. She's expected to veto or sign the bill next week.
Last year, publicly-traded Canadian Bitcoin miner Bitfarms (BITF) acquired a 24-megawatt (MW) Washington facility that's powered by the Grant County Public Utility District.
The facility generates 17% of the power required to run Bitfarms' entire 3.4-exahash operation, which includes Quebec, Canada, and Paraguay.
Energy transition on the table
But now there's been some pushback.
KPQ also reported that nearby Douglas County has stopped allowing new Bitcoin miners to set up operations there because they already consume 25% of the county's available energy.
Still, the Chelan County rate hike won't ban crypto miners. For companies that have made substantial investments in their mining facilities, officials have approved transition plans to gradually increase energy rates over the next two years.
"We need to have some sort of transition. That's important for business," PUD Commissioner Ann Congdon told the Wenatchee World on Tuesday. "I understand how businesses need that in order to plan."
Even with transition plans in place, there's been criticism from the crypto industry.
Malachi Salcido, CEO of Salcido Enterprises, told the local news outlet that the new rate will force him to reconfigure his three Chelan County crypto mining facilities into data farms. He has four other crypto mining facilities, two in Douglas County and two in Grant County.
Under the new pricing plan, Salcido can keep his Chelan facility on the lower, high-density energy rate if he processes data instead of mining crypto. The data processing uses the same amount of power as crypto mining, he told the Wenatchee World.
"Do you really want to be in the business of regulating what kind of processing happens on servers in your territory," Salcido said.