"Power rationing" will soon arrive during the "flood season," and will Chinese miners face greater pressure under the "carbon neutrality" policy?

This article was published on Wu's Blockchain Real, original title: "The Flood Season is Approaching, but Chinese Miners Will Face Greater Regulatory and Power Shortage Pressures," author: Colin Wu

The annual flood season is approaching, but Chinese miners are facing potential pressure from regulations. Although the Chinese government's attitude towards the cryptocurrency mining industry has been fluctuating, the pressure this year may be relatively greater. Wu's Blockchain has learned that the southwestern region and Sichuan are facing greater pressure due to power shortages, while the northwest region is facing challenges due to carbon neutrality policies.

The Northwest Region Faces Carbon Neutrality and High Energy Consumption Issues

On April 7, Nature published research from Tsinghua University and the Chinese Academy of Sciences indicating that Bitcoin mining in China will peak at approximately 297 trillion watt-hours in 2024, generating about 130 million tons of carbon emissions. This figure exceeds the annual greenhouse gas emissions of all medium-sized countries in Europe (such as Italy or the Czech Republic), and the carbon emissions per GDP unit from the Bitcoin industry far exceed China's average industrial carbon intensity, making Bitcoin mining an obstacle for China to achieve its carbon neutrality goals.

Previously, Wu's Blockchain pointed out that considering the top academic backgrounds of Nature, Tsinghua University, and the Chinese Academy of Sciences, this paper may influence China's energy decision-makers and even higher authorities. Reference “Carbon Emissions and Environmental Protection: The Biggest Threat to Future Bitcoin Mining May Be Groundless Worries, How to Respond”

Earlier, on February 2, 2021, the National Development and Reform Commission released a document stating that Inner Mongolia was the only province that failed to meet the dual control measures for total energy consumption and intensity in 2019. On February 25, the Inner Mongolia Development and Reform Commission announced on its official website that, according to the energy consumption dual control work arrangement, it required a comprehensive cleanup and shutdown of virtual currency mining projects, with all operations to cease by the end of April 2021. “Inner Mongolia Plans to Withdraw Cryptocurrency Mining: What Impact Will Carbon Neutrality Commitments Have on the Mining Industry?”

On April 21, at the second Bitcoin Deer "Flood Season Festival," Bitcoin Deer Chairman Wu Jihan stated that carbon neutrality has long-term impacts on the industry, and reducing carbon emissions is a global trend; the mining industry should not harbor any illusions. Furthermore, as the Chinese mining and blockchain sectors face a more complex situation, as previously stated by Zhou Xiaochuan, blockchain finance must always answer one question: what is its use for the real economy?

The Southwest Region and Sichuan Face Power Shortage Issues

Although power shortages during the flood season are common, this year's shortages may be more severe. Due to economic recovery post-pandemic and high temperatures, electricity load in Sichuan has been rapidly increasing since May, but water inflow has been about 30% lower than in previous dry years, leading to a shortage of electricity coal supply and soaring coal prices. Big data users have already faced temporary power restrictions. On the other hand, the strict inspections in Inner Mongolia have led to a large number of miners relocating, exacerbating the power supply shortage for mining in Sichuan.

On May 16, due to insufficient power, power restrictions, inspections, and other reasons, Sichuan required data centers to implement temporary power restrictions, causing a sharp decline in overall network computing power. According to BTC.com data, as of 9 AM on the 17th, Antpool dropped by 17.8%, Binance Pool by 14.5%, and Huobi Pool by 23.7%, while other mainstream pools fell by 6%-8%.

On May 9, the Yunnan Provincial Energy Bureau and the Yunnan Energy Regulatory Office organized a symposium with key power generation enterprises. The meeting required all power generation companies to do everything possible to increase the number of available days of coal storage, resolutely avoid coal shortages leading to shutdowns, strengthen equipment operation and maintenance, and personnel reserves, strictly control unplanned outages, and ensure good communication and cooperation with local governments, coal supply, and transportation enterprises to form a collaborative effort to ensure stable power supply.

Local Governments Begin Research on Mining Power Consumption Issues

Due to the sharp rise in Bitcoin prices this year, societal attention to the industry has surged, especially with the recent boom in altcoins leading to a large influx of new users, prompting increased scrutiny from regulatory authorities. On May 15, Xinhua News Agency published an article criticizing the rampant chaos in the virtual currency market.

According to The Paper, on April 4, the Beijing Economic and Information Technology Bureau issued an "Emergency Notice on Investigating the Involvement of Bitcoin and Other Cryptocurrency Mining Activities in Data Centers in Our City," requiring a review of the relevant situations involving Bitcoin and other cryptocurrency mining in Beijing's data centers. Relevant units involved in such activities were asked to report their power consumption and total energy consumption ratio for mining activities over the past year by 12:00 noon on April 28. The Beijing Economic and Information Technology Bureau responded to The Paper on the afternoon of April 29, confirming that the notice was indeed issued by the bureau, primarily to review and investigate the types of business and energy consumption carried by data centers for the bureau's normal operational work.

Wu's Blockchain has learned that similar investigative actions are taking place across various provinces and cities nationwide. The data may be reported to relevant central departments to inform the next steps in decision-making. Logically, the most severe action could be a ban on all mining activities, but this is unlikely since Bitcoin is defined as a legal virtual commodity, and mining activities themselves are not illegal. A more reasonable possibility is to gradually shut down related industries from a high energy consumption perspective. The ideal situation would be for decision-makers to maintain an open and observant stance. However, overall, due to carbon neutrality policies and the political requirement to "resolutely eliminate high energy consumption and high emission projects that do not meet requirements," the uncertainty surrounding domestic mining is rapidly increasing.