China’s Sichuan province, known as the world’s bitcoin mining capital for its massive concentration of bitcoin mining operations as electricity is extremely cheap in the region, has recently revealed the second batch of demonstration enterprises for hydropower consumption.

The list includes several “big data” companies which are usually the cover of blockchain companies, or more bluntly bitcoin mining operations. Earlier this April, the region has encouraged blockchain companies to help consume excessive hydroelectricity in the rainy season and revealed the first batch of the model enterprises in hydropower consumption.

Located in southwestern China, Sichuan has a protracted rainy season in summer and is thus the country’s biggest producer of hydropower. The abundant and cheap hydropower has attracted millions of miners moving there to fuel their energy-hungry mining machines.

According to people close to local government, the government of Sichuan province’s intention of constructing the hydropower consumption demonstration zone is mainly to promote local economic development via the compliant use of hydropower.

In the past, most mining farms get cheaper electricity rates directly from hydropower plants nearby rather than from local or national grids, which have the issues of illegal construction and tax evasion. It can easily lead to security risks serious.

In June, Sichuan Electricity Trading Center Co., Ltd. said that the transacted electricity of hydropower consumption demonstration zone in the first four months of 2020 is about 1.371 billion kilowatt, which is equivalent to the annual power consumption of a large mining farm.  It is expected to reach a record high of 5 billion kWh for the whole year in the demonstration zone.

The annual power consumption of mining farms in Sichuan is estimated to be 30 billion kilowatt, and mining operations in the hydropower consumption demonstration zone will consume one-sixth of the total. This figure is expected to double next year as compliance progresses.

Sources tell us that the market electricity rates in the demonstration zone are about 0.065-0.075 yuan (about $1 cent) /kWh, plus 1 cent transmission and distribution fees, the actual electricity stands at a cheap price of 2 US cents, and hosting fee would be around 3 cents with land cost and other expenses included.

The local government’s support of compliant bitcoin mining operations will be an attraction for bitcoin miners. It also has positive significance for the legalization of bitcoin mining in the country where crypto mining operations were previously disfavored by Chinese authorities.