Two weeks after forbidding new cryptocurrency miners from entering the province, Quebec has outlined rules that could place a huge damper on new projects.
Hydro-Quebec has released the parameters for the selection process of new cryptocurrency mining projects looking to set up shop in Quebec. These were submitted to the Régie de l’énergie for approval and have been met with concern as they appear to be very restrictive in terms of bringing the growing industry to the province.
New blockchain companies will be required to bid for power and propose exactly how many jobs and the total investment per megawatt they will generate. The starting bid is one cent per kilowatt hour higher than the rate the industry had previously mined at, which translates roughly to a 20 per cent cost increase.
In total, the proposal is looking to allocate 550 megawatts worth of power to cryptocurrency miners and blockchain projects. That is in addition to the roughly 120 megawatts already allocated to current or approved projects.
These new restrictions are in response to Hydro-Quebec looking for new ways to use surplus energy from northern sources. They received more requests than anticipated and realized they had to halt projects and insert regulations before things got out of hand.
“The goal of this process is to both maximize economic spinoffs for Québec and revenue for Hydro-Québec—in turn, pushing electricity rates down for customers,” Hydro-Quebec wrote in a statement.
Other aspects of the new proposal include a $2,000 application fee provided upfront, a minimum five-year contract, and an upfront deposit of one cent per kilowatt-hour of energy requested just in case the company breaks their contract. Companies must also provide a letter of credit for $10 per kilowatt hour requested and pay for all infrastructure costs such as transport lines and energy supplies.
Hydro-Quebec will weigh applications based on two separate categories: the first, which accounts for 70 per cent of the weighting, is based on how much the blockchain/mining company will bid and go above the current price of electricity; the second, accounting for 30 per cent of the application’s weight, is based on the number of jobs created, payroll for those jobs, and investments into the province.
A few cryptocurrency experts have criticized the above weighting as it favours companies who are willing to just throw money at Hydro-Quebec for a quick cash grab versus companies who make real investments into the province through high-paying jobs.
“[Hydro-Quebec] and [the Liberal Party of Quebec] killed goose that laid golden eggs. A political storm in a teacup that snuffed the life out of nascent booming profitable industry. They’ll never know the magnitude of the opportunity we had just within reach. The Quebec Bitcoin eldorado is dead,” tweeted Francois Pouliot, the co-founder of Catallaxy and a major voice in Canadian cryptocurrency.
Prior to this announcement, many cryptocurrency mining projects were set to begin in Quebec’s Manicouagan area.
As Quebec shuts the door on many new projects, cryptocurrency mining is taking off in provinces like Alberta where companies such as Hut 8 have been making major investments in blockchain infrastructure.
The Toronto-based company unveiled 16 new BlockBox data centers—self-contained digital currency mining hubs—representing 19.2 megawatts of power capacity in Medicine Hat. This more than doubles Hut 8’s total operating power, which now sits at 37.9 megawatts. Right now, the company has 17 BlockBoxes in Drumheller and 16 in Medicine Hat and is planning to bring in 24 more by September.
Hut 8 worked with the city of Medicine Hat to lease space and purchase power at a fixed rate and has since mined more than $10 million worth of bitcoin this year alone, growing to become a world-leading cryptocurrency mining organization.
It’s unclear if cryptocurrency miners will move out of Quebec and search for better rates in provinces like Alberta, but right now it looks like a many companies will be looking for alternatives and may be able to find them in Western Canada.