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China’s Sichuan Encourages Bitcoin Mining Operations to Consume Excessive Hydropower

A city in China’s Sichuan province known for bitcoin mining has recently issued a notice encouraging the blockchain industry to help consume the excessive hydroelectric energy there ahead of the rainy season usually starting in May.

Bitcoin mining is supported for the first time

According to the document issued by the Ya’an city, the local government, aiming to set the city as an example in utilizing excessive hydropower and build itself into “an impactful blockchain industry hub” in the country, is calling to seize the strategic opportunity brought by the blockchain sector and inviting leading blockchain companies with the city’s advantages in hydropower resources.

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“Blockchain companies should construct factories near power plants that have excessive power and are integrated with the State Grid,” the guidance says. “For blockchain companies that use electricity privately generated from power plants (without integration to the State Grid) should be rectified in due time.”

Though it is not specifically mentioned what blockchain-related operations are supported, bitcoin mining is an activity in the blockchain industry that is known for its reliance on electricity.

It is the first time a local government has explicitly issued a document to support bitcoin mining since 2018 after the central government expressed its negative attitude towards the “resource-wasteful” operation.

With bitcoin halving (where bitcoin reward halves) drawing near and rainy season (when electricity cost “halves”) approaching in the meanwhile, the news is bullish for the mining industry in the country.

Locals want it

The Sichuan province has been establishing itself as a global bitcoin mining capital since 2017, mostly due to its cheap hydropower (less than $0.03/kWh), low population density and cool climate for its mountainous terrain. It is estimated that the Sichuan province alone accounts for over 50% of global bitcoin hashrate by 2019.

While the region has the issue of excessive hydropower electricity being wasted every year during the rainy summer season. Data shows that Sichuan has abandoned 9.2 billion kilowatt-hours of hydroelectricity in 2019, which could power more than 820,000 S9 miners running around the clock for a year.

In 2019, policy advisors have suggested the region to attract the bitcoin mining industry in an aim to explore new economic opportunity and growth force, but it led to no policy changes at that time, given the country’s tough stance on quashing the crypto market.

However, in terms of the actual situations of the mountainous and poor regions, the bitcoin mining industry, which utilizes renewable energy without pollution and creates jobs for locals in these isolated mountainous areas, is an economic opportunity that local governments and residents there are not willing to let go. Therefore, local governments often choose to turn a blind eye even give implicit support to the mining operations which is usually running under the name of blockchain or cloud computing.

Following the practice of Ya’an, it is believed that more cities in the hydropower-abundant southwestern China (provinces including Sichuan, Yunan, Guizhou, etc) may open up for bitcoin mining in the rainy seasons.

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