April 17th, 2024

City couldn’t power cryptocurrency demand

By COLLIN GALLANT on March 31, 2022.

A worker climbs atop a data processing unit at the Hut 8 crypto-mining facility located off Box Springs Road in this June 2018 file photo. The city says it couldn't meet power demands for the number of companies looking to join Hut 8 here without guarantees.--NEWS FILE PHOTO


Federal and provincial politicians are seeking to draw in cryptocurrency operations, but the City of Medicine Hat’s power company may not be willing to accommodate new major power contracts without substantial guarantees, officials have told the News.

That comes as the rapidly evolving sector gains prominence in global economic news and governments try to attract data-processing companies to Canada.

Medicine Hat is home to one of the first and largest bitcoin mining operations in Canada in Hut 8 Cryptocurrency. That firm signed a long-term power contract in 2018, heralding local low-cost power supply that avoids provincial transmission fees as the major draw.

Since then, say officials, they have been dealt with dozens of proposals to set up facilities that would cumulatively require “thousands” of megawatts of power from the city’s power plant complex that has a total capacity of 255 megawatts to the entire city.

“We haven’t had to advertise,” said Rochelle Pancoast of the city’s strategic management office. “If we opened up general crypto-mining today, our capacity would be (sold out) tomorrow.”

She stated the city’s view is that cryptocurrency is a global sector whose players will seek out lowest cost over loyalty to any particular location.

Without a long-term, take-or-pay supply contract or the potential for related or knock-on industrial development, the city is hesitant to allow new major entries that might block off power supply from other economic development efforts.

Hut 8 came to Medicine Hat in early 2018, and at the time, administrators said the company’s status as a TSX listed company, along with 20-year contracts for power and city-land, gave them assurance about its commitment to operations here.

Another huge power contract however, could require the city to consider a third power plant expansion in just five years, she said.

This spring the city will add another 45-megawatts of power production to manage existing demand through a budgeted $65-million expansion.

“We use a high degree of discretion when managing the potential of overbuild,” said Pancoast, referring to “overbuilding” power plant capacity with excess supply to meet increasing demand over time.

Cryptocurrency is becoming a hot topic in politics.

On Wednesday, Alberta Finance Minister Travis Toews tabled a proposed bill to help attract financial technology (fintech) companies to the province (See Page A4).

“The world of finance is rapidly evolving, and our government understands we need to partner with businesses if Alberta is going to stay ahead of the curve,” said Toews of the bill that would allow greater use of cryptocurrency and blockchain systems behind it to be used in financial transactions.

As well, a now postponed update to Alberta’s grid transmission legislation proposes greater use of stranded natural gas and renewable power plants to accommodate “behind the fence” power production, potentially fuelling bitcoin miners.

Those companies earn a fee in bitcoin for processing transactions of the digital currency that requires huge amounts of power.

Federal Conservative Party leadership candidate Pierre Poilievre has said he supports further use of the virtual currency and making Canada a world leader in the developing sector.

The Hut 8 contract, for delivery of up to 42 megawatts of city-produced power and another 20 off the provincial grid, is the largest in the city by a factor of 10.

It has underwritten profits at the city’s generation business unit, but also sent administrators into planning mode to increase capacity required to fill demand through its franchise area.

While Hut 8 and a similarly sized contract to Aurora Cannabis accounted for new production from the Unit 16 power plant, completed in early 2018, the city is now completing a Unit 17 power addition, due for commissioning in May.

The new 45-megawatt gas-turbine was allowed by the Alberta Utilities Commission to back-stop local power needs in case a main city generator shuts down – a key requirement of the city’s power charter.

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2 years ago

This seems to be an enviable position for the ‘City’ to be in. I sure hope they are not giving the production away, just to attract this type of customer. If they continue to build additional generation, and the bottom falls out of the data mining sector, we can still sell excess power to the grid. What with the proliferation of electric cars, that I am sure will be in our future, once they solve the battery problem(with electric automobiles). This seems, on the surface, to be a profitable use of our excess natural gas.