Source: Adobe / Andrey Popov
Bitcoin (BTC) and crypto miners have flocked to the Nordic countries in recent years as it is a region blessed with an abundance of cheap and clean energy, a cold climate and a stable regulatory framework. However, with electricity prices rising sharply this fall and political pressure mounting, miners may face a challenging time here.
The ongoing energy crisis in Europe has already attracted widespread attention in the past month, as both natural gas and electricity prices have risen to new highs in a number of European countries.
And although less affected than countries further south on the continent, rising prices are also being felt in the Nordic countries, where several major crypto mining companies have established their power-eating mining operations, with Norway, northern Sweden and Iceland being the most popular locations.
Today’s energy situation is a sharp contrast to typical market conditions in the region, with energy analyst Olav Johan Botnen of DW’s energy market researcher Volue Insight saying earlier this year that under normal weather conditions the Nordic region “has an expected oversupply of electricity of nearly 30 terawatt hours per year.”
According to Statistics Norway, electricity prices for Norwegian households in the second quarter of this year were already three times higher than a year earlier. And although commercial users – as the crypto miners are generally defined – pay less than households, they are also not spared from the impact.
Electricity prices in large cities and regions of Norway since September 2020 in EUR/MWh. Source: Nordpool
Similarly, Swedish electricity prices also rose in the second half of the year. In mid-September, the Swedish news agency TT reported that electricity prices in the country have never been higher, with the more densely populated southern Sweden being the worst affected region.
Electricity prices in large cities and regions of Sweden since September 2020 in EUR/MWh. Source: Nordpool
Speaking the CEO of the Norwegian mining company KryptoVault, Kjetil Hove Pettersen, reminded that the cost of electricity “is always the biggest cost for any mining company.”
An increase in electricity prices “naturally has a big impact on our financial results,” explained Pettersen, who heads one of the country’s largest crypto mining companies.
However, the CEO is still not overly concerned about what the cost of electricity will mean for the future of the company, saying that the price of BTC and the difficulty of network mining are more important.
“We’re also pretty optimistic about where the crypto market is going in the future, so no, I’m not worried about the coming years at all,” Pettersen added.
Politics at work: Data center or not?
However, rising energy prices are not the only issue that miners in the region need to keep an eye on. There is also politics.
During the recent parliamentary elections in Norway, crypto mining came up for discussion, with some politicians of the extreme left even calling for a complete ban on mining in the country. Others, meanwhile, felt that miners should pay more for the electricity they consume.
In Norway, crypto miners enjoy both a property tax exemption and a significantly lower electricity tax than other commercial users to attract more data centers.
The reduced tax rate for data centers is an important factor in making the country competitive in the eyes of miners.
Unfortunately for miners However, representatives of the parties of the victorious center-left coalition said before the election that crypto miners should not be treated as “data centers”.” In fact, this means that miners would have to pay the full electricity tax, as most other commercial users do.
“Using our clean Norwegian power for a speculative asset like cryptocurrency is not something we want to prioritize,” Labor Party MP Espen Barth Eide was quoted as saying by economic news agency E24 in early September.
Bitcoin currently consumes about as much energy as Poland. Source: Digiconomist
And with the Labour Party now expected to form a new government after eight years of a centre-right coalition in power, crypto miners in Norway should expect sharply rising costs associated with their mining.
Nevertheless, the CEO of KryptoVault said that he is not worried about the future, arguing that distinguishing between data centers that mine crypto and data centers that do other things will prove difficult from a legal point of view.
Similarly, Arcane Crypto, which is listed in Stockholm, seems to have enough confidence in the future of mining in the region to make the leap from a pure research and investment firm into the mining sector.
According to a September 8 announcement by the company, Arcane has entered into an agreement to purchase 352 Antminer s19 Pro mining equipment, which is expected to become operational in the third quarter of this year.
“We expect our mining operation to bring significant revenue to the Arcane Crypto Group. Under current market conditions, the miners we appointed would generate monthly revenues of around SEK 3.5M [USD 400,000] and be highly profitable,” said Torbjørn Bull Jenssen, CEO of Arcane Crypto, while also hinting that the company intends to expand its mining operations:
“From the first quarter of next year, we will have the hosting capacity to double this mining activity,” said Jenssen.
And with the industry still determined to move on, the question remains how hard policymakers in the region are willing to curb crypto miners, especially given the current energy crisis in Europe and record high electricity costs.