January 17, 2023
In hot summer days, nothing is worse than experiencing power outage and having to resort to rather traditional ways of cooling yourself. Hand fan anyone?
Although, authorities mainly attributed the reason for such outages to slowdown of investment in the energy sector and the wear and tear of the distribution and production network, some experts were fast in jumping to conclusion that the high electricity consumption of crypto currency mining farms was the main reason for blackouts across the country.
Crypto currency mining was first regulated in 2019 but the recent By-Law re Extraction of the Crypto Currencies notified on 14 November 2022 (“By-law”) has substituted the former regulations while detailing the conditions for authorized mining of cryptocurrencies. In this article, we will have a look into some of the important provisions in this regard.
Article 2 of the By-law stipulates that any activity related to the extraction of cryptocurrency, including import, production, sale and repair of equipment, is allowed only by obtaining a license from the Ministry of Industry, Mine and Trade through legal commercial and customs procedures. It is further foreseen that in free trade-industrial and special economic zones, the Ministry can delegate the authority to issue the above-mentioned license to the organizations of the relevant zones as the case may be.
It is worth mentioning that the establishment of cryptocurrency mining centers with electricity consumption is not subject to the limitation for industrial zones to be distanced (120) kilometers from Tehran city, (50) kilometers from Isfahan city and (30) kilometers of centers in other provinces. However, for optimum use of energy, the geographical zoning is performed by the Ministry of Energy in cooperation with the Ministry of Oil to prioritize the location of cryptocurrency mining centers and take advantage of the energy price. Meanwhile, it is prohibited to use the electrical branch circuit or gas branch established for other purposes in order to extract crypto assets.
It is further stipulated that for the purpose of optimal management of extraction centers and with the aim of helping to reduce illegal extraction, the Ministry is obligated to issue the instructions related to the establishment and operation of large-scale extraction centers with the cooperation of the ministries of energy and petroleum within three months from the date of notification of the By-law
For the purpose of securing the electricity the cryptocurrency mining centers need, they are allowed to use a combination of the following methods:
1- The construction of renewable power plants or the purchase of electricity from newly built renewable power plants that will be put into operation according to the regulations approved by the Ministry of Energy.
2- Investing in energy consumption optimization projects or using a customized energy saving certificate within the framework of the energy and environment optimization market guidelines approved by the Ministry of Energy.
3- Investing in the construction and operation of a thermal power plant for electricity generation with fuel supply from the accompanying gas (flare) site.
4- To purchase electricity from the national grid by receiving electricity branching, except during the time of electricity and fuel network restrictions, the price of each kilowatt-hour of electricity consumed is equal to the average price of exported electricity based on the Nima price, minus the following discounts:
A- Reducing the voltage of the connection to the electricity network in order to expand the large-scale extraction centers based on the instructions of the Ministry of Energy and at the maximum amount of twenty percent (20%) of the average price of the export of electricity.
B – The discount related to the fulfillment of foreign exchange obligations based on this regulation is a maximum of ten percent (10%).
Note 1 – The above discounts are applied to the electricity bills issued after the announcement of the approval of the return of currency by the central bank to the Ministry of Energy.
Note 2 – The average price of exported electricity in Rials is announced by the Ministry of Energy on a quarterly basis in accordance with the Nima pricing system.
5- Construction of a thermal power plant outside the national network, whose fuel tariff is determined as follows:
Energy tariff = (gas tariff / fuel tariff)
We hope that with proper implementation of the said regulations and ensuring sanctions for the offenders, we would witness fewer power outages in the summers to come.
Coordinated by Dr. Mahnaz Mehrinfar and Sahar Sotoodehnia