Ethiopia rakes in substantial profits from Bitcoin mining, leveraging surplus hydroelectric power.
In a groundbreaking move, Ethiopia has been leveraging its surplus of renewable hydropower to generate significant revenue through Bitcoin mining. Over the past ten months, the country has earned approximately $55 million from this venture, representing about 18% of the power provider's annual revenue [1].
This excess energy, which would otherwise go unused due to limited transmission and low local demand, is now being sold to Bitcoin mining companies. This conversion of idle energy into income is financing the expansion of the electricity infrastructure, supporting national electrification efforts, and potentially boosting economic growth [1].
Ethiopia's abundant hydropower resources, such as those from the Grand Ethiopian Renaissance Dam, are making Bitcoin mining particularly profitable in the country. Around 80% of the involved companies are from China, with international investors, especially from China, Russia, and the US, providing a significant portion of the technical equipment and capital [2].
The strategy of using excess hydropower for Bitcoin mining can have global significance, as it demonstrates a potential model for other countries with abundant renewable energy and limited transmission infrastructure. Developing countries with similar resources, like Ethiopia, can also be competitive in Bitcoin mining [6].
However, there are trade-offs and challenges. Bitcoin mining consumes a substantial amount of power—around 600 MW or 11% of Ethiopia's total supply—and miners receive priority access to electricity. This dynamic may constrain electricity availability for sectors critical for job creation and industrialization, possibly limiting broader economic benefits [3]. Furthermore, mining companies benefit from low-cost electricity and operate in a regulatory gray area with limited taxation, which could reduce potential government revenues needed for public services and infrastructure [3].
Despite these challenges, the additional revenues from Bitcoin mining help finance the expansion of transmission lines, new substations, and decentralized power solutions for remote areas in Ethiopia. The Bitcoin project Bitcoin Hyper, using modern rollup technology, is making Bitcoin payments more efficient, and has already raised over 6 million US dollars in the presale, considered a strong candidate in the Layer-2 space [4].
Critics warn that the focus on mining should not hinder the expansion of power supply for all citizens. Jobs are being created both directly in data centers and indirectly through construction and maintenance work on power supply in Ethiopia. Yet, careful policy balance is needed to ensure mining activities do not crowd out investments in sectors with more direct and diverse socio-economic impacts [1][3].
Ethiopia's experience serves as a regional model showing how Bitcoin mining can use renewable surplus energy to enhance grid efficiency and foreign exchange earnings [5]. The revenues from Bitcoin mining are heavily dependent on the volatile Bitcoin price, but the potential benefits for national development are undeniable.
References: 1. The Verge 2. Bloomberg 3. The Conversation 4. Bitcoin Magazine 5. The Diplomat
- The surplus renewable energy generated from hydropower is being utilized in the finance sector through investments in the Bitcoin mining industry, bringing in approximately $55 million for Ethiopia in the past ten months.
- The revenue generated from Bitcoin mining is being used to finance expansions in the renewable-energy industry, specifically in the construction of electricity infrastructure, supporting national electrification efforts and potentially boosting economic growth.
- The Bitcoin industry's heavy dependence on renewable energy, along with its potential for enhancing grid efficiency and earning foreign exchange, serves as a regional model for other countries with abundant renewable energy resources.
