Cheap Power Lures Bitcoin Miners. But Millions Wait for a Lightbulb Moment

Apr 6 , 2025.

Last week, the International Finance Corporation (IFC), part of the World Bank Group, announced a 100-million-dollar debt financing package for Raxio Group, a major data-centre operator in sub-Saharan Africa. Over the next three years, Raxio plans to use these funds to expand its carrier-neutral data facilities, meeting rising demand for digital infrastructure in underserved markets.

Undoubtedly, Ethiopia, one of the Group's operational hubs, would be an attractive destination for the company to consolidate. It can use these centres for artificial intelligence (AI), cloud services, and digital finance. Raxio also operates data centres in Uganda, Mozambique, the Democratic Republic of Congo (DRC), Côte d'Ivoire, Tanzania, and Angola, deliberately choosing locations rich in renewable energy.

Ethiopia has recently become a global magnet, not only for data centres like Raxio's but also for Bitcoin mining. With huge hydropower potential — currently 3,500 megawatts (MW) in use and another 7,300Mw planned — the country offers electricity at 0.036 dollars for a kilowatt-hour (KWh). This has attracted foreign Bitcoin miners who need cheap power to run the energy-intensive operation verifying transactions and minting new coins.

Federal authorities have granted licenses to 21 companies in an industry whose global power consumption totals around 160 terawatt-hours (TWh). Although Ethiopia can only supply about one pc of this demand, it ranks fourth globally as a Bitcoin mining destination, after the United States, Hong Kong, and the wider Asia. Russia’s Bitcluster opened Ethiopia’s first local mining facility, while Hashlabs Mining is establishing operations for international clients.

The cause for leveraging Ethiopia's hydropower capacity for Bitcoin mining is understandable. It generates desperately needed foreign exchange. However, there are legitimate concerns about the benefits disproportionately favouring miners, often at taxpayers' expense.

Bitcoin, often branded as a futuristic currency, carries substantial environmental costs. In 2024, Bitcoin mining in Ethiopia consumed approximately 2.25pc of the global Bitcoin network’s computing power, equal to around 600Wm of electricity, more than the combined output of the Tekeze and Melka Wakena dams.

At the heart of Bitcoin's heavy energy demand is its “proof-of-work” mechanism, a competitive process where powerful computers race to solve complex mathematical puzzles. Only the fastest machine wins the prize, and vast amounts of electricity are wasted by losing participants. As more computers join this race, the energy required rises sharply.

Miners regularly relocate in search of cheaper power. An alternative called "proof-of-stake" substantially cuts energy use, but Bitcoin remains committed to its original method, valued for its decentralisation and security.

Experts warn that, without change, Bitcoin’s energy consumption could rise dramatically. Between 2017 and 2019, Bitcoin's global electricity usage soared from about five terawatt hour to 55TWh, raising its global electricity share from 0.02pc to 0.24pc. Some miners now spend as much as 30pc of their earnings solely on electricity. Not all the energy comes from clean sources. Many mining rigs resort to cheap fossil fuels when renewable sources falter. One striking report revealed that a single Bitcoin transaction can emit as much carbon dioxide as 735,000 Visa card transactions.

The scale of mining operations is striking. A Russian warehouse reportedly houses 3,000 specialised mining computers known as ASICs, running continuously and producing heat comparable to a steel mill. Workers require ear protection against the noise of industrial-scale fans needed for cooling. Between 2017 and 2019, Bitcoin mining consumed the energy equivalent of 14.16 million tonnes of oil, often in regions lacking reliable renewable resources.

While some operators have begun moving towards greener options like hydropower in Africa, wind in Texas, or even flare gas from oilfields, these initiatives are still modest compared to the industry’s overall carbon footprint.

Despite the hefty cost to source energy and the environment, investors remain attracted by Bitcoin’s volatile but potentially high profits.

Host communities experience benefits and drawbacks from Bitcoin mining. Large mining operations offer local employment and can revive struggling industrial areas. However, they also strain domestic power grids, requiring expensive infrastructure upgrades. When markets shift, miners often leave quickly, leaving residents to bear higher electricity costs. China banned mining in 2021 during electricity shortages. Kazakhstan initially welcomed miners but faced severe power issues shortly thereafter. Iran, boasting some of the world's cheapest electricity, periodically restricts mining during periods of peak consumption.

Ethiopia faces similar issues. Electricity is heavily subsidised, with the actual cost reportedly around 0.10 dollars for a kilowatt-hour, triple what miners currently pay. Without subsidised electricity, Bitcoin mining may not be economically viable. Current subsidised electricity rates put the cost of mining one Bitcoin at about 38,480 dollars, roughly half its total production expense. At the actual electricity price, mining costs would rise to about 211,000 dollars per Bitcoin, making operations financially untenable.

Economists generally advise against prioritising Bitcoin mining, asserting that it currently generates negative economic value. Better regulation might yield revenues, but in practice, subsidies simply drain public resources. Redirecting these funds toward essential services, such as rural electrification and broader economic development, would provide more tangible long-term benefits.

Nevertheless, the state-owned Ethiopian Electric Power (EEP) reported earning 27 million dollars from sales to miners within a year, meeting 97pc of its revenue target. The company has contracts with 18 firms, four of which are already operational, each using between 10MW and 100MW of electric power.

Such large-scale consumption could limit power availability for critical sectors such as manufacturing and housing, despite half the population still lacking access to electricity. Expanding the national power grid costs billions of Birr, with a small substation requiring an investment of around five million dollars.

Launched in 2017, Ethiopia's National Electrification Programme aspires to connect 65pc of the country's geographic area by the end of this year, with off-grid solutions for the remaining 35pc. Achieving this target demands about six billion dollars, far beyond current available resources. The revenues the state utility company generated from Bitcoin miners could not have been more negligible. Regulatory oversight is also weak, and federal agencies like the Central Bank, the Information Network Security Agency (INSA), and the Ethiopian Investment Commission lack the expertise to monitor crypto activities adequately, enforce tax laws, or ensure regulatory compliance.

Globally, too, Bitcoin manifests technology outpacing regulation. Its massive energy demands risk overwhelming domestic resources, leaving host countries facing dire economic and environmental costs. Cheap electricity attracts foreign miners but heavily burdens public infrastructure, environmental sustainability, and taxpayer resources.

Policymakers' decisions now could either lay the foundations for broader economic growth and sustainability or present a dilemma: invest limited resources to expand electricity access for much of the country or continue subsidising a volatile industry with uncertain long-term benefits.

PUBLISHED ON Apr 06, 2025 [ VOL 26 , NO 1301]

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