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The Nordic region has once again become a lucrative place to mine for cryptocurrencies, thanks to falling electricity prices.
The wettest weather in at least 20 years has boosted output from hydropower plants, leaving Sweden and Norway with some of the lowest electricity prices in the world.
The resulting glut of the most important raw material for making virtual coins coincided with a year in which the price of bitcoin tripled.
Photo: Reuters
Currencies are made in giant computer farms that process complex algorithms in halls as large as airport hangars. This makes electricity one of the main inputs, with operations sometimes consuming as much energy as that used by 70,000 households.
Current market dynamics offer big miners alternatives to places where bitcoin is typically created, such as China, Kazakhstan, and Canada.
Their luck follows several years of low margins due to higher electricity costs and lower prices for most virtual currencies. Many minors attracted to the area during the last rally in 2017 have left.
“Those who have stayed through the tough times like us are pretty happy now,” said Philip Salter, operations manager at Hong Kong-based Genesis Mining Ltd., which operates a data center in Boden, Sweden. “There were times when we didn’t make any profit, but over the past year our profitability has more than tripled.”
Unusually humid weather and mild temperatures have propelled hydroelectric reservoirs in the Nordic region to the highest level in more than 20 years, leaving the region inundated with generating capacity.
The result is electricity prices close to zero for long periods of time. Average prices this year are around a third of those in Germany, Europe’s largest electricity market.
Norway had the lowest electricity prices for industrial users last year among the 30 member countries of the International Energy Agency.
It also had the lowest prices for non-households in the EU during the first half of this year, just ahead of Iceland, another cryptocurrency hotspot.
“These prices are among the lowest you can find in the world if you don’t factor in fees and taxes,” said Tor Reier Lilleholt, head of analysis at Norwegian consultant Wattsight AS. “What we have seen this summer is that the low levels recorded over such a long period.”
The main environmental benefit of the mining base in the Nordic region is that electricity is almost carbon-free, consisting mainly of hydro, nuclear and wind power.
This is becoming increasingly important to the many institutional investors drawn to cryptocurrencies and one of the main factors behind the latest price spike.
Having coins from the Nordic region helps reduce the political risk profile of bitcoin.
“There is a very important strategic shift from mining in China to mining in western countries like Sweden as bitcoin investors become more public and want more stability and critical security,” said Salter. “This is one of the biggest developments in bitcoin mining to watch out for.”
It is difficult to compare electricity prices around the world as they vary between industries and regions due to taxes, fees and subsidies.
An attempt by the World Bank, which measures bills from an imaginary warehouse in each nation’s capital, places Sweden and Norway far below China, but above other centers of cryptocurrency manufacturing , like Kazakhstan and Mongolia.
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