Quebec was fishing technology giants, but it caught bitcoin miners.
David Vincent, director of business development at Hydro Quebec, describes the results of a campaign launched in 2016 to encourage users like Facebook, Amazon and Microsoft to build their data centers in the Canadian province.
The point of sale was simple: the province offers abundant, cheap and renewable electricity, as well as cold weather and a politically stable environment.
Although Hydro Quebec received many bites from traditional data center operators, the company quickly discovered that these same features were equally attractive for cryptocurrency mining operations.
Just six months ago, Quebec's interest in bitcoin miners on a commercial scale exploded, Vincent said, as cryptographic prices rose and political uncertainty prevailed in others. country.
For Hydro Quebec, 35 cryptocurrency mining organizations are asking the company for information on the connection to the electricity grid there. These companies now represent 70% of the total wattage capacity of Hydro-Québec's development portfolio.
In an interview, Vincent said:
“I have so much demand right now there’s no need for marketing. Pretty much every day I have a new one.”
And the feelings of others suggest that what Hydro-Quebec sees now is just the tip of the iceberg.
"From what I've seen buying equipment, real estate and energy offers, things are booming in Quebec," said Austin Hill, former CEO of Blockstream, who is now investing and supporting some of the mining projects. looking for Quebec.
Cheap and abundant
Cryptocurrency extraction, a high-energy process by which new transactions are added to a blockchain, typically requires specialized hardware (ASIC or GPU) to solve complex mathematical puzzles. Due to the large amount of computing power used, mining equipment generates a significant amount of heat, so mining operations are looking for cooler environments to install.
But it's not just the cold weather that attracts Quebec. The government's energetic effort during the post-war period of the Second World War to build dams in its northern regions proved sufficiently attractive to move mining operators away from existing bases that already have the climate of their own. side.
Thanks to this work, Quebec has become one of the largest hydroelectric power producers in the world. Hydro Electric, with its installed capacity of 37,000 megawatts, regularly produces excess levels and, as a result, can offer some of the lowest rates in North America to its commercial customers.
For the data centers, Hydro-Québec will charge 2.48 cents (in US dollars) per kilowatt-hour and 3.94 cents per kilowatt-hour for bitcoin miners (the slight increase for the latter due to the weakest creation of jobs and the economic development footprint). Vincent said. According to the data compiled by Hydro-Québec, these rates are 50 to three times lower than in comparable regions in North America.
Historical consistency of prices over time, and the assurance that fares are not just overnight hooks, are a key part of the value proposition for cryptocurrency mining operations, said Vincent. He added:
"We always succeed at staying below inflation. It’s been like that since 1963 and it’s not going to change."
And while some have argued that cryptocurrency extraction is degrading to the environment, these mining operations tend to find a competitive advantage through better energy efficiency and value for money.
"In some warmer environments, the current ASIC equipment ends up having a very short life span, six to nine months, because it's so hot and the cost of cooling is not worth the cost of the equipment," explains Hill. Brudder Ventures, based in Montreal, said:
"It’s just easier to run it super hot, throw it away and buy a new one. It’s hugely wasteful."
And moving to colder climates, like Quebec, could help.
Political stability
Another factor in Quebec's accidental emergence as a crypto currency mining center is that miners are increasingly seeking stable political environments where they can deploy their capital and plan their trade efforts four to five years earlier.
While many of Hydro-Quebec's stakeholders are based in North America, a significant number of mining organizations come from countries, particularly China, where prospects for crypto currency and crypto currencies in general have become more foggy.
In China, for example, rumors have emerged that the government plans to take advantage of preferential benefits such as cheap electricity and tax deductions from Bitcoin mining operations. In addition, the People's Bank of China has been one of the most aggressive regulators in the world in terms of crypto currency, the latest ban on initial currency offers and the closing of bitcoin exchanges.
Vincent pointed out that the interest of the mining industry in Quebec began to increase considerably last fall after these movements in China.
He told:
"They don’t say it like that, but the fact that the rush of the demand came at pretty much the same time they were having problems in their previous jurisdiction, we could think there was a correlation."
These concerns, with a steady stream of reports of seizures of mining equipment, kidnappings and games of corrupt officials in places like Venezuela, could make the facility in places where these risks are minimal more important than ever for mining operators.
A good problem
Although it is true that Hydro-Quebec is still trying to fully capture this new clientele, it has been more than willing to offer them the welcome mat because of the huge number of requests, not to mention the 24/ 7 nature of their operations. .
To show the extent of mining, Vincent compared them with other Hydro Quebec customers.
Its small commercial customers, like the Montreal Canadians hockey stadium, need five megawatts of electricity and a typical data center requires 30 to 60 megawatts. In contrast, "the top three among the top five miners in the world, most of them talk to us, and the demand they have right now is about 200 to 300 megawatts," he said. said. "He is huge."
But with an industry as volatile as crypto currency, nothing is completely unshakable and, as a risk-averse public company, Hydro Quebec minimizes its exposure by requiring minors to pay the initial cost of the connection. electric and organize a credit line of a third large enough to make up for any loss in case of something serious.
"The question for us is: is this a trend that will remain at least as strong as it is now?" Vincent said.
But for the moment, the biggest problem for Hydro Quebec is finding enough buildings and sites that can be used as mining farms, as well as hiring more people who can answer all the requests of these potential customers, as fast as they enter
"The miners feel like they are losing money every day, so they are asking for big buildings with big interconnections and they want it tomorrow," said Vincent, and concluded: