Crypto mining to double Ethiopia's energy use

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Abu Dhabi-listed blockchain & crypto mining company, Phoenix Group, has signed an 80 MW power purchase agreement with Ethiopia Electric Power (EEP). It joins a list of over 25 crypto mining companies that have entered Ethiopia. Most of the companies are Chinese-owned, which emigrated after China banned crypto mining in 2021.

• Phoenix's entrance into Ethiopia is part of its broader expansion plans targeting countries with strong energy projects and operations are set to commence in the second quarter of 2025. Founded in 2017, it enjoys backing from well-endowed Abu Dhabi’s International Holding Company.

• Ethiopia's crypto mining industry is experiencing rapid growth, with power consumption expected to more than double by the end of 2025. Currently, these companies operations consume an estimated 600 MW, contributing to EEP's $55 million revenue from Bitcoin miners in 2024. This figure is projected to surge to $123 million in 2025 as the industry expands.

More details

• Ethiopia generates about 5,200 MW of electricity, with hydropower accounting for over 90%. This abundance of renewable energy, coupled with some of the lowest electricity tariffs in Africa, makes it a prime destination for crypto miners. Experts estimate that crypto mining could contribute up to $4 billion annually to Ethiopia’s GDP.

• It costs approximately $0.01 per kWh in Ethiopia, but crypto miners are charged three times this amount at $0.032 kWh. However, even this higher rate is still about three times cheaper than in South Africa, four times cheaper than in Morocco, and six times cheaper than in Kenya for the commercial category.

• Ethiopia has a significant energy surplus, with only half of the population currently having access to electricity. The government sees crypto mining as an opportunity to utilise this surplus effectively and generate revenue. However, regulations for the sector lack clarity although the Information Network Security Administration (INSA) took on the task of regulating the sector in 2022 in an interim capacity awaiting full regulations.

• Crypto mining is not unique to Ethiopia. Other African countries like Kenya, Malawi, and the Democratic Republic of Congo (DRC) have also attracted crypto companies. In Kenya, Gridless, a company focused on Bitcoin mining using renewable energy, secured $2 million in seed investment to expand its operations in the country and currently has 5 mining sites.

• What is interesting about these crypto-mining companies is that they are not only mining but also providing electricity to their nearby communities. A village in Malawi gained access to electricity through a Bitcoin mining project. In the DRC, Bitcoin mining in Virunga National Park supports conservation efforts by providing revenue for park management and contributing to local economic development.

• Crypto mining can offer direct benefits to local communities if people are prioritised. By incorporating electricity access initiatives into their operations, crypto mining companies can ensure they not only consume electricity but also support broader development goals. This could include funding electrification projects, supporting community outreach programs, and investing in local infrastructure. 

• Cryptomining is a big opportunity for African utility companies, which often experience low consumption rates, especially at night. This excess capacity can be utilised for crypto mining. However, there's a risk that increased consumption could endanger grid stability. Kazakhstan, for example, suffered frequent blackouts due to this issue. China recognised this risk and banned mining before it escalated.

Our take

• Crypto mining presents both an opportunity and a challenge for Ethiopia. It offers a way to utilise surplus electricity and generate much-needed foreign currency revenue. However, this comes with drawbacks. Crypto mining is energy-intensive, and its growth might hinder electrification efforts. Additionally, it consumes significant energy without offering substantial economic benefits to Ethiopia, particularly in job creation. Since most mining companies are foreign-owned, profits largely flow back to their countries of origin.

• A single crypto miner can consume around 100 MW of power, which could instead power over 10 factories. These factories have the potential to generate more jobs and revenue for the country compared to a single miner that only employs a few people for maintenance.

• Looking at the bigger picture, there is an opportunity for African countries to generate off-grid electricity to power crypto mining and utilise excess grid capacity at night. This is especially relevant given that many African countries lack a fully functional 24-hour economy. The excess electricity generated at night can support crypto mining for more revenue generation.