Chinese City Known for Bitcoin Mining Seeks Blockchain Firms to Burn Excess Hydropower

A Chinese city in the world's bitcoin mining hub is publicly encouraging the blockchain industry to help consume excessive hydroelectricity ahead of the summer rainy season.

Ya'an, one of the many cities in China's mountainous Sichuan province, a region that's estimated to account for over 50 percent of the Bitcoin network's computing power, has recently issued a public guidance – likely in its first – to seize the "strategic opportunity of the blockchain sector" so that they can help consume the area's excessive hydropower electricity.

Although not specifically mentioned in the guidance, bitcoin mining is an activity in the blockchain industry that is notable for its reliance on the intensive usage of electricity.

According to a local daily's report on April 20, the government seeks to make the city a high-quality example for consuming excessive hydropower electricity and build itself into "an impactful blockchain industry hub" in the country.

The Ya'an city's guidance also emphasized that electricity to be used by blockchain firms should come from generated power that's being connected to the state grid.

"On principle, blockchain companies should construct factories near power plants that have excessive power and are integrated with the State Grid," the guidance says. "For blockchain companies that use electricity privately generated from power plants [without integration to the State Grid] should be rectified in due time."

The notice also follows the change of attitude from China's central government regarding bitcoin mining activities last year.

China's National Development and Reformation Commission, one of the 26 ministries that make up the State Council, initially labeled bitcoin mining activities as an industry that should be eliminated in a draft guideline in April last year. However, the agency scrapped that plan in the guideline's final form in November.

In general, China's Sichuan region has the issue of excessive hydropower electricity being wasted every year during the rainy summer season.

For example, the Garze prefecture government, another mountainous area in Sichuan, has said hydropower plants in the area generated 41.5 billion kWh of electricity just in 2017, with a total excess of 16.3 billion kWh that went to waste.

As such, the spring and summer season are usually a welcome time of year for bitcoin mining businesses in China because there will be abundant and cheap electricity resulted from the hydropower excess.

But this year, bitcoin's stagnating price movements ahead of the network's halving event due in two weeks have cooled down bitcoin miners' expansion investment.