Ethiopia’s fast-growing Bitcoin mining industry is facing a sharp reduction in electricity supply after weaker hydropower inflows forced the country to ration power. Ethiopian Electric Power, or EEP, has steadily tightened deliveries to miners as reservoir levels come under pressure from El Niño-related weather conditions.

Mining companies that were supposed to receive at least 98% of their contracted electricity are now getting only 23%, down from 75% and then 50% in earlier reductions. The cut underscores how dependent Ethiopia’s mining expansion had become on surplus hydropower that is no longer as readily available.

A major customer base loses priority

Ethiopia has agreements with 39 Bitcoin mining companies, 31 of which are already operating. Over time, the sector grew into a significant part of the country’s power system, consuming roughly one-third of national electricity supply.

That made miners important customers for EEP as well. The utility was collecting about 35% of its revenue from mining operations, which paid in foreign currency while benefiting from power priced at around 3.2 cents per kilowatt-hour.

The economics worked while surplus generation was available, but the balance changed once power became scarcer and households and industrial users moved ahead of miners in the queue for supply.

Hydropower dependence turns weather into a system risk

The squeeze reflects Ethiopia’s overwhelming reliance on hydropower, which provides about 95% of the country’s electricity. According to the source report, inflows into the country’s 21 dams fell by around 20% after El Niño affected rainfall and water availability.

The Grand Ethiopian Renaissance Dam, or GERD, is central to that system. It produced 18.3 terawatt-hours last year, equal to roughly 52% of Ethiopia’s electricity generation. EEP said lower reservoir levels have reduced output at some generating units by as much as 50 megawatts each.

Because so much of the power mix comes from dams, lower inflows quickly translate into difficult allocation decisions across the grid. That has left energy-intensive Bitcoin miners especially exposed to the current shortfall.

Political pressure around power use

The debate is particularly sensitive given the scale of electricity consumed by mining. The source article says producing one Bitcoin in Ethiopia uses roughly 6.4 million kilowatt-hours, an amount equivalent to the annual consumption of about 14,950 average Ethiopian households.

That comparison carries added political weight because around half of the country’s population still lacks access to electricity. In that context, continued large-scale power deliveries to miners become harder to justify when water shortages force rationing elsewhere.

The result is a straightforward reprioritization of supply, even though the mining industry had become a valuable source of foreign-currency income for the utility.

October review could bring more cuts

EEP plans to reassess the restrictions in October. If reservoir inflows do not recover, the source report says mining companies could face even deeper reductions, while electricity exports to neighboring countries may also be curtailed.

The financial impact is already visible. EEP has cut its electricity-export revenue forecast by 40% to $279 million, reflecting the broader strain lower hydropower availability is placing on the system.

For the wider Bitcoin network, the effect appears limited for now. Ethiopia accounts for only a low-single-digit share of global hashrate, with Hashrate Index data cited in the report putting the country at about 2.4% of global computing power, or around 23 exahash per second. The next confirmed milestone is EEP’s October review, which is expected to determine whether miners recover any supply or lose more of it.

Source: news.bitcoin.com