Plans for a hydroelectric station in Central Asia have raised eyebrows over beliefs that financial institutions are funding the project to establish cryptocurrency mining operations under the guise of clean energy, reports Eurasianet.
What's happening?
Eurasianet reported that the Rogun hydropower dam project in Tajikistan will receive a $350 million grant from the World Bank for the first phase of construction.
Other investments have come from the Asian Infrastructure Development Bank, which pledged a loan of $270 million, and the Kuwait Fund for Arab Economic Development, which paid out the first of six installments of $16.7 million for a total of $100 million.
The $6.4 billion dam, expected to be the tallest in the world at 335 meters, will provide power to over 8 million people while avoiding 150,000 tonnes of carbon dioxide emissions annually.
It will have six turbines that will generate 3,600 megawatts of electricity, doubling the nation's energy production.
Why is the financial backing of Rogun concerning?
While investors and officials have touted Rogun's ability to "contribute to the decarbonization of regional power grids in Central Asia," some analysts have a suspicion the project only drew support because of its ability to support cryptocurrency mining.
Alexander Kolotov, who heads the regional environmental watchdog Rivers Without Boundaries, told Eurasianet the electricity produced by Rogun "should be simply fantastic" for mining. However, financial backers have likely distanced themselves from the dam's connection to the industry because of poor optics.
"Mining cryptocurrency is not a story about the development of a country or a region," he added. "A mining farm does not create jobs for local residents, does not develop the surrounding area. It produces a purely virtual and extremely volatile product."
Eurasianet cited a U.N. report about the environmental impact of bitcoin mining in 2020-21, noting that its carbon footprint was equivalent to burning 84 billion pounds of coal. It used as much water as would fill over 660,000 Olympic-sized swimming pools and relied heavily on coal and natural gas for energy.
Additionally, much of the hydropower station's profitability depends on exporting around 70% of the electricity it produces to countries including Azerbaijan, Kazakhstan, Kyrgyzstan, and Uzbekistan.
Rivers Without Boundaries and other civil society organizations think that prospective buyers will resort to other renewable energy solutions before Rogun becomes fully operational in over a decade, though.
"I am sure that we will hear about the [crypto] mining [link] at the Rogun HPP only when the budget of the project swells to some completely indecent size," director of the Kyrgyzstan-based watchdog group Nash Vek Chinara Aitbaeva said.
"That's when it's possible to present the option of creating crypto-mining at [Rogun] as an additional instrument for project profitability."
What's being done about the energy efficiency of cryptocurrency?
While the verdict is still out on the future of Rogun, several companies are seeking to improve mechanisms for cryptocurrency mining that drastically reduce energy costs.
Tajikistan could also follow the path set by the Canton of Bern in Switzerland, which plans to stabilize its grid by using energy that would otherwise go to waste to power bitcoin mining activities.
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