Ethiopia reduces power supply to Bitcoin miners due to drought

Ethiopia has reportedly reduced the electricity supplied to Bitcoin miners to 23% of their contracted levels. This significant cut is due to a hydropower shortage, primarily caused by reduced water inflows into the country's reservoirs.

The El Niño weather pattern has exacerbated dry conditions in Ethiopia, leading to a 20% decrease in water inflows. This has forced Ethiopian Electric Power (EEP) to prioritize electricity for households and manufacturing sectors over Bitcoin mining operations.

Ashebir Balcha, CEO of Ethiopian Electric Power (EEP), confirmed that power cuts to Bitcoin miners were implemented to ensure essential services. EEP initially reduced deliveries to 75% of contracted levels, then eased to 50%, and now to the current 23%.

Bitcoin miners were a significant revenue source for EEP, accounting for 35% of its revenue in the last fiscal year. They also consume nearly one-third of Ethiopia's total electricity output. The country's affordable hydropower has attracted international mining operations, such as Phoenix Group, which aimed to expand its Ethiopian mining capacity to 132 megawatts by April 2025.

EEP plans to re-evaluate the situation in October, with potential for further reductions or even restrictions on electricity exports to neighboring countries. This ongoing situation highlights the vulnerability of energy-intensive industries to environmental factors and resource allocation policies.

Economist Saifedean Ammous suggested that global Bitcoin mining electricity consumption and capital expenditure might have peaked between 2024 and 2025. He explained that Bitcoin's price would need to increase by over 18.92% annually to maintain the dollar value of newly minted coins, even before accounting for dollar depreciation.

Ammous noted that the Bitcoin halving mechanism reduces mining rewards by half approximately every four years, and the price of Bitcoin has declined by more than 35% over the past 12 months. This decline in mining rewards could lead to a slowdown or contraction in Bitcoin mining activity, a trend that might persist without a significant turnaround.

He also cited competition from artificial intelligence data centers, which offer an alternative revenue stream for miners' electricity connections and infrastructure. VanEck data, cited by Miner Weekly in June, estimated that public miners might require around $50 billion to develop planned AI infrastructure, as weaker mining economics encourage companies to reallocate capacity. Ammous presented his conclusion as a testable hypothesis, acknowledging that substantially higher transaction fees or a sustained recovery above previous electricity consumption peaks could invalidate it.