The installation of large cryptocurrency mines in Canada have fewer jobs and generate less economic activity than the establishment of traditional data centers, says a new study commissioned by Hydro-Québec.
In recent months, Hydro-Québec has received nearly 200 connection requests totaling more than 10,000 MW from mining facilities. The growing interest in cryptocurrencies and the low cost of Quebec energy explain this craze for Quebec.
A new study by KPMG, however, raises many questions about accepting these applications. Although the jobs generated by this industry are “generally quality jobs”, with an average annual salary of $ 61,000, the benefits may be limited, warns the document.
Depending on the size of the facility, KPMG estimates that a mining center can create 0.4 to 2.3 direct jobs per megawatt. In comparison, Hydro-Québec estimates that 8.8 jobs are created per megawatt in the steel sector, 20.7 in the oil sector and up to 27 in the traditional mining sector.
In addition, the largest mining facilities are the ones that consume the most energy, but also provide, proportionately, the smallest benefits.
For example, the opening of a small mining center could create an average of 2.3 direct jobs per megawatt of power. A middle center would create 2, while a large center and a very large center would create 0.7 and 0.4, respectively. The trend is the same when we look at indirect jobs.
These differences can be explained by the fact that all centers, regardless of their size, must be able to count on management, equipment maintenance and building safety personnel. Larger centers consume more energy, without necessarily needing much more employees.
“The relationship between the size of a facility and its economic impact is negative. The larger the mining facility, the lower its impact in terms of economic value creation per unit of energy, “says the study’s authors.
Less profitable than data centers
The paper also compares the impacts of mining centers to those of data centers, which had themselves been the subject of a previous study.
KPMG estimates that a data center dedicated to a single company generates around five jobs per megawatt, a figure that can reach 12 jobs per megawatt for data centers that serve multiple external customers.
In terms of wealth creation, it is estimated that a very large mining center would generate a total value added of about $ 80,000 per megawatt compared to nearly $ 250,000 per megawatt for a small center.
This activity is labor-intensive and mainly uses equipment manufactured outside Quebec.
Excerpt from the study conducted by KPMG
In this context, “mining facilities may find it difficult to justify obtaining the special economic [electricity] tariff. The creation of economic value, which is in addition to that obtained by purchased electricity, scarcely covers the 20% credit that would be granted on the normal electricity rate “.
The authors of the document specify, however, that their estimates do not take into account the profits that could be generated by the mining plants or their possible reinvestment in the Quebec economy. Their analysis also focuses on the mining of bitcoins, since this is the bulk of the supply requests received by Hydro-Québec.
Link supply to obligations
In order to increase wealth creation, the report mentions the idea of making the sale of energy to large mining plants conditional on the respect of certain conditions.
The decision to supply electricity to this type of megasite could be the subject of a specific analysis and most likely be accompanied by requirements in terms of other types of activities generating economic wealth for Quebec.
Excerpt from the study conducted by KPMG
Examples include the possibility of requiring the “manufacture, assembly or repair of mining equipment” in Québec, software development, or the carrying out of research and development activities. within the facilities. “This approach was used for example in the 2000s in Quebec in the case of aluminum smelters,” it is argued.
Finally, the study warns against the fact that “cryptocurrency can be subject to a crisis of confidence, a scandal, political or regulatory obstacles”. Thus, “we can not eliminate the risk that companies that would establish in Quebec to mine bitcoins, or some of them, reduce or close their operations if the context changes.”
Hydro-Québec in reflection
Hydro-Québec is preparing a framework with the government to determine what follow-up will be given to the numerous projects submitted to it in recent months.
In particular, the Crown Corporation wants to ensure that it can continue to supply its current customers during peak winter periods, without having to buy more energy in international markets at a high price, which could have an impact on rates. electricity.
In this context, Hydro-Québec is considering, with the mining centers, the signing of contracts providing that the power supply would be interrupted if necessary.