Is Bitcoin mining hurting Georgia?

The Republic of Georgia’s stature has grown within the crypto sector. As of November 2019, the nation is considered to be the third-largest Bitcoin miner behind the countries China and Venezuela. It houses two of the major players in Bitcoin mining: BitFury and Birtvi. 

Similar to China, Bitcoin miners in Georgia have harnessed hydroelectric power energy as their primary electricity source. The local government supports the development of Bitcoin mining operations, as evident by the tax exemption incentives for the operations, specifically in the region of Svaneti in Georgia. The support for Bitcoin mining is without its detractors. Lately, concerns are being raised due to the environmental impact on the use of hydroelectric power energy.

The environmental group, Green Energy, headed by David Chapashvili, in Georgia, complained regarding the high electricity consumption used by Bitcoin mining operators. The group provided documents to BBC Sounds podcast Business Daily, showing that one BitFury-owned mining farm is consuming around 4 percent of the country’s hydroelectric power energy. This consumption is equal to 389 million kilowatt-hours (kWh). 

Green Energy estimated that in total, the mining industry in Georgia consumes more than 10% of Georgia’s total hydroelectric power energy resource. Chapashvili argues the country has no real understanding of the full impact mining is having on Georgia’s energy consumption.

“There are lots of micro-miners,” Chapashvili said. “If you ask a very simple question to the ministry like which sector is consuming [energy] Georgia doesn’t have this kind of analysis. Actually, in reality, we don’t know what’s going on or how many consumers are mining Bitcoin.”

The mining companies have argued that their operations consume less hydroelectric power energy than other metal mining industries in Georgia. Aside from this, the International Energy Agency of Georgia claims that around 80 percent is provided by hydroelectric power in the country. Most of Georgia is powered by renewable energy.

According to government sustainable development group Invest In Georgia, there is an energy surplus in the country. The Republic of Georgia is only exploiting 25 percent of its potential when it comes to renewable energy production. These statements, however, do not address the power outage experienced by the local citizens, which have affected their lifestyles for almost an entire week.  

Governor of Mestia town in Svaneti, Kakha Zhorzholiani, said: “People were without power for almost a week because of Bitcoin mining that caused protests. We held talks with miners in one of the villages and agreed that they would stop working. But this can repeat tomorrow and the day after tomorrow.”

Mediations between the local citizens, environmental groups, and the crypto mining companies, local government officials are being conducted. Governor Zhorzholiani met with crypto miners to stop their operations, which have affected numerous industries due to the power outage. Aside from this, the Governor also states that the country experiences hydroelectric power production deficit during the winter. 

Crypto mining could be the reason behind the power outage experienced in the country. Hence, it is only reasonable to halt and limit mining operations to ensure that the hydroelectric power produced is sufficient enough to cover the demand by its citizens and other local industries in the region. Crypto mining companies can consider transferring their facilities close to hydroelectric power plants. 

The Ministry of Economy in Georgia plans to establish submarine high-voltage electricity cables to combine the Black Sea coasts of Georgia and Europe. The cable will help in incorporating the energy system of Georgia to Europe’s. Despite these plans and alternatives, Georgia must still consider the possible impact and environmental concerns that might ensue following its plan to develop hydroelectric power capacity in the country.

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