Kentucky regulator cancels planned power subsidies for Chinese BTC miner

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Kentucky’s public utilities regulator has rejected the proposed plan to offer electricity subsidies to a BTC block reward miner. The miner, Ebon International, was set to invest $50 million in a mining facility under the promise that its power consumption would be subsidized for the next decade.

The Kentucky Power Company entered into a contract with Ebon last October to supply the Chinese company with power at discounted prices for the next ten years. A month later, the Kentucky Public Service Commission opened an investigation into the contract. A key consideration for the PSC was whether the contract would significantly impact residents’ electricity costs.

In a recent order, the PSC has rejected the proposal. The commission says the potential risks, including high costs and possible blackouts when power demand peaks, exceed the benefits.

PSC dismissed a marginal cost study submitted by the grid operator outlining how the mining facility would benefit the state. It claimed that Ebon would invest $50 million—rising to $250 million—and create between 50 and 100 jobs. The marginal cost summary showed that the power company would rake in between $62 million to $487 million.

“Based on these risks, and their likelihood of occurring due to the terms of the Contract, the Commission finds that the marginal cost study does not demonstrate the marginal costs associated with Ebon will be appropriately recovered by Ebon,” PSC said.

The BTC miner would have been covered by Kentucky’s Demand Response Service tariff. This tariff would have permanently assigned the facility 25MW, with the remaining 225MW subject to interruption depending on state power demand. Ebon would receive monthly credit for being subject to interruptions and has the right to refuse to give up its power when requested.

This arrangement has come under scrutiny elsewhere. In Texas, legislators are advancing a bill that will cut off miners from the demand response program, which some miners like Riot Platforms (NASDAQ: RIOT) have minted millions of dollars.

PSC’s decision has received the support of environmental conservation organizations and local groups.

Kentucky regulators wisely rejected a proposal to give millions in discounted electricity to a cryptomining facility. Cryptomining uses a ton of energy & often raises rates for everyone else. KY already produces more CO2 from crypto mining than any state. https://t.co/Dun8ZNS3BO

— Earthjustice (@Earthjustice) August 31, 2023

In a statement, the Kentucky Resources Council said the subsidies, if granted, would have gone to “wasteful facilities.”

“We hope the Commission will continue to place consideration on the impacts of its decisions on the average ratepayers already struggling with high electric utility bills,” it said.

Greenpeace and Earth Justice voiced their support for the decision as well, with the latter calling on the PSC to “reject the wasteful subsidies in the other case they are weighing now.”

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