Paraguay to End Cheap Power Contracts for Bitcoin Miners as AI Tightens Electricity Supply
Paraguay, which became the world’s fourth-largest Bitcoin mining hub on the back of cheap hydropower, plans to end the special electricity contracts it signed with mining companies.CoinDesk reported on Nov. 13 that ANDE, Paraguay’s state power company, plans to let all special contracts for cryptocurrency miners expire on Dec. 31 next year. The authorities do not intend to change the deadline.Paraguay has drawn overseas mining companies with surplus electricity from the 14,000-megawatt Itaipu Dam on its border with Brazil. Power under the special contracts costs $44 per megawatt-hour, or less than 5 cents per kilowatt-hour.As of April, miners had contracted for about 944 megawatts of power, roughly 13% of the Itaipu generating capacity allocated to Paraguay. ANDE expects electricity sales to mining companies to bring in $350 million this year. Hashrate Index said Paraguay accounted for about 4% of global Bitcoin mining computing power in the second quarter.But the conditions that supported those cheap surplus-power supplies are changing as domestic electricity demand rises. The Itaipu Dam met about 88% of Paraguay’s electricity consumption last year. ANDE projects national power demand will rise about 8% a year through next year and about 5% annually after that.Competition from the AI industry for electricity is also poised to increase miners’ costs. Power is the biggest expense in Bitcoin mining. For companies that entered Paraguay despite cooling costs tied to its hot subtropical climate, the end of cheap power contracts stands to become a key factor in profitability.