Cryptominers Admonish Higher Power Tariffs

EghtesadOnline: The Energy Ministry's recent move to raise electricity prices for cryptomining has drawn the indignation of miners who claim the measure will tempt illegal mining and capital flight.

News ID: ۷۸۶۳۱۳

11 April 2021

Those involved in the gradually growing business say setting (higher) power tariffs based on electricity export rates is “unfair”. Many miners have left the country for neighboring states such as Iraq, where there are less obstacles to their business, Peyvast magazine reported.

The Energy Ministry on Wednesday published new regulations for cryptomining. Miners will be charged 16,574 rials for one kilowatt-hour of electricity.

It said the base rate will be cut by half when household consumption is low and the national grid is not under pressure as usually is the case in the summer months.

The base rate, however, is four times higher than previous 4,800 rial for one kilowatt-hour. Prices are set based on power export tariffs based on currency rates at Nima -- a currency platform were forex is traded among importers and exporters.  Base rates will be updated at three-month intervals and subject to forex rates.

Rates will double during restrictions like when power plants do not receive enough gas as feedstock or the national grid struggles to meet household demand.

Mohammad Reza Sharifi, an official with Iran Blockchain Association, believes that the final price of electricity is much higher for mining units.

"It costs nearly 1,800 per kw/hour when tax and duties are included. If the government agrees, cryptominers are willing to import electricity from neighboring countries including Central Asia," he said.

Masih Alavi, a member of Iran ICT Guild, says that the government should not set power rates in accord with digital currency prices. "Policymakers are not aware of production costs."

Hamed Salehi, a member of IBA, said by restricting cryptomining (through high power rates) the government creates the conditions for a black market because "restrictive measures will not kill enthusiasm for the lucrative business."

Miners will soon find new ways to link to the national power grid illegally, he said. "Pushing the industry underground is not in the interest of the government because it would hurt its revenue base."

In July 2019 the government said it would accept cryptomining as a legal industry. The move was first welcomed by the miners but soon they started complaining about high power tariffs and took their business underground.

The steep rise in the price of cryptocurrencies in recent months apparently has made mining more tempting for miners in Iran and other countries. Tavanir reportedly shut 1,100 unlicensed crypto mining farms in the past several weeks.

According to Mostafa Rajabi Mashhadi, spokesman for the Iran Power Generation, Distribution and Transmission Company (Tavanir), 24 crypto mining units using 310 MW have permits from the Ministry of Industries, Mining and Trade.

Back in January, rising home gas consumption disrupted gas feedstock to power plants forcing utilities to switch to dirty fuel like mazut, a highly polluting and low quality fuel oil.

That caused unprecedented air pollution in big cities and rolling blackouts, including in Tehran. Tavanir said the power outages in the capital was due to shortage of feedstock for the power producers. It blamed cryptomining as one of the reasons that led to the power shortages.