Ethiopia's New Super Dam Powers Bitcoin Mining Operations

In ten months, the state-run Ethiopia Electric Power (EEP) has made $55 million in revenue from power-purchase contracts with about 25 Bitcoin mining companies, most of them from China.

Cheap Clean Energy

The East African nation sources 90% of its energy from the Grand Ethiopian Renaissance Dam (GERD), which opened in 2022 on the banks of the Nile close to the country's border with Sudan. GERD is the largest hydropower plant on the continent, producing around 5,300 megawatts of renewable energy.

Ideally, the power generated would be used to satisfy the population's needs, but the lack of public infrastructure means half the country's population has no access to electricity.

Since GERD started operations, Ethiopia has become a significant net exporter of electricity to its neighboring countries of Kenya and Djibouti.

The country has been welcoming mining companies looking for cheap renewable power. According to local media, the EEP charges Bitcoin miners a fixed rate of $0.0314/kHw, while the world average is estimated to be around $0.05/kHw.

According to the Cambridge Centre for Alternative Finance, at the average mining rate, mining one Bitcoin costs around $44,232. At the Ethiopian going rate of 0.03 cents/kWh, assuming the hardware is the same, that price tag will be, on average, $27,846.

With electricity accounting for 80% of mining firms' costs, Ethiopia's renewable energy is a game-changer.

Chinese Miners

A Bloomberg report indicated that by February this year, 21 contracts had been signed between EEP and Bitcoin miner firms, only two of which were with non-Chinese companies.

Since the Chinese government banned Bitcoin mining in 2021, miners have been looking for new places to host their business.

They first moved operations to Kazakhstan, but the amount of energy consumed by mining rigs quickly caused the price of fuel in the country to soar and widespread power outages. The government imposed taxes on miners in late 2021, effectively killing the industry.

Some companies, such as Bit Mining, tried their luck in the United States. The country is responsible for 38% of the global Bitcoin hash rate—the computing power needed to mine tokens in a PoW network.

During the presidential campaign, Donald Trump pledged his support for miners, saying that "with low energy costs, America will become the world's undisputed mining powerhouse." But the billionaire's reelection isn't exactly good news for Chinese mining firms.

During his first term, Trump started a trade war with China, and this time around, the relationship isn't likely to get any better as the president-elect has already picked anti-Chinese hawks for key cabinet and administration positions.

China's relationship with Ethiopia is entirely different.

China And Ethiopia

Ethiopia is a central hub for the Belt and Road Initiative, China's international development program. Over the last decade, China has financed several public infrastructure plans in Ethiopia, including the GERD.

"China sees the building of infrastructure, usually at a profit for Chinese state-owned companies, as a way to increase influence within African governments," noted former American ambassador to Ethiopia Dr David Shinn.

Political influence, however, doesn't need to be exerted from the get-go. The East African nation desperately needs foreign currency to keep its economy participating in international markets and, therefore, welcomes most foreign investments.

While not yet responsible for a significant share of the global Bitcoin hash rate, in 2023, Ethiopia ranked fourth as one of the top destinations for Bitcoin mining rigs, according to data from Bitcoin mining services company Luxor Technologies.

And, the willingness to tap into this sector is not exclusively for foreign companies. Earlier this year, the Ethiopian Sovereign Wealth Fund signed a $250 million deal with Hong Kong's Data Center Service to start mining Bitcoin using Canaan Avalon miners.