Hydro-Quebec still prefers to snub the bitcoin industry

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THE KEYS OF CRYPTO. When jurisdictions establish specific frameworks for cryptocurrency mining, this stabilizes the demand for energy. Hydro-Québec is pleased to have demonstrated this in concrete terms. A demonstration for the absurd, I would still be tempted to conclude in the cryptocurrency industry.

A pioneer in renewable energy, the Crown Corporation not only exports its surplus electricity beyond Canadian borders, but also its know-how. This is how Kim Robitaille, Hydro-Quebec’s director of electricity supply, recently explained to Belgian federal deputies the strategy in place to channel the energy-consuming cryptocurrency mining industry.

To sum up these last three years of sectoral controversy, Hydro-Quebec has preferred to become undesirable to the bitcoin ecosystem. With a variety of commercial terms intended as a weapon of mass deterrence.

“The bitcoin crisis”

“Since 2018, Hydro-Quebec, together with successive Quebec governments and the Régie de l’énergie, has established specific rules for cryptographic use applied to blockchains,” recalled the Director of Supply. “This means that Quebec now has a demanding regulatory framework that reduces the interest of cryptocurrency miners settling there.”

The narrative has not officially changed for the Quebec energy supplier and distributor. His management of the cryptographic file specified “the need to act” in the face of “the crisis.” In the spring of 2018, an inordinately high number of connection requests flooded Hydro-Québec. The theoretical volume to cover these new needs is estimated at 18,000 MW. This would represent half of the province’s total consumption. Therefore, solutions had to be found to curb demand, since the energy company admitted not being able to satisfy it given the existing electricity supply means and the limited capacity of its distribution and transmission network.

Make this madness profitable?

Hydro-Québec, a storied company with a shareholder naturally interested in financial spin-offs, was not going to shy away from its pleasure. The idea will be to establish a minimum threshold for the supply of energy, at a high price.

“To take full advantage of this enthusiasm, it is proposed to make available a block of fixed MW whose allocation would be through a call for proposals, favoring projects with the most economic and environmental benefits,” explained Kim Robitaille.

The Quebec government supports the headquarters by allowing it to suspend supply for these requests, otherwise the customer must pay a deterrent fee of 15 cents per kWh, compared to 8 cents on average for the general rate.

Regulatory risks

With the support of the regulator, the Régie de l’énergie, Hydro-Québec, is creating a new category of “blockchain” users with a set of specific conditions. But the deterrent fee remains.

The province’s small crypto entrepreneurs at the time felt involved in a gladiatorial slaughter with the all-powerful energy arm of the government. Even a larger Quebec competitor, Cogeco, had in turn entered the regulatory arena. The major telecom group was concerned about Hydro-Quebec’s blockchain fee.

The crown corporation wants to launch a call for proposals. It has already entered into agreements with crypto clients for 158 MW. For their part, the ten small municipal networks also took advantage of the enthusiasm and concluded agreements for a total of 210 MW. With the new fixed block, this amounts to a total of 658 MW. That is, almost 30 times less than the initial estimates.

Hydro-Québec will not launch the call until October 2019 and by the time it closes, given the regulatory deadlines, the price of bitcoin will have fallen considerably. And given the more restrictive conditions to participate in the call, the bidders must pay the connection costs and evaluate the benefits, the opportunity to invest in the bitcoin industry slips. Only 32 MW found a receiver.

“Total electricity consumption in Quebec for cryptographic use applied to blockchains is currently stable at around 150 MW,” said the supply manager. “These conditions meant that few projects materialized. We hardly get any more requests. The business context to operate is more restrictive than before. Additional sales seem unlikely. “

Enabling context again

The case has been waiting more than three years for it to be finalized, several important players in the sector and already operating in Quebec are trying to challenge the applicable rules. Who would want to mine crypto at this price?

But Hydro-Quebec confirmed the political hypothesis: regulation stabilizes demand. But, on the other hand, the demand is moving rapidly towards other jurisdictions that do not have a specific framework for this market.

“The imposition of such a restriction would send the wrong signal to the industry and thus limit its development in Quebec,” the Québec giant Bitfams recently argued before the Régie.

Since 2018, the cryptocurrency mining market has evolved dramatically. The value of digital assets and profitability of mining activity no longer have a common measure.

“We have recently seen a sharp increase in the value of the securities of companies active in this field and numerous expressions of interest. The fact that China has significantly restricted cryptocurrency mining in its territory brings a new perspective to the current case before the Régie, ”the Canadian Federation of Independent Business (CFIB) also alleged before the energy regulator.

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