Why it became expensive for the citizens when the Bitcoin mine had to close

A Norwegian Municipality Shut Down a Local Bitcoin Mine. But After the Cheers, Reality Hit: Residents‘ Electricity Bills Rose.

Of course, the community reacted with a sense of satisfaction. A mayor of a town in Norway was determined to shut down the local Bitcoin mine because it supposedly didn’t create any „real value,“ and now, ha! — the citizens are footing the bill with their electricity costs.

But why?

It’s about Hadsel, a municipality far north in the country, 300 kilometers above the Arctic Circle, part of a group of islands with rugged fjords and surprisingly mild weather. Mayor Kjell-Børge Freiberg had refused to extend the operating license of a local data center that mined Bitcoins. He denied the extension. When it closed, he said he was „very, very happy.“

Now that the Bitcoin mine no longer draws electricity, the price for others should drop, right? Simple economics, or so it would seem! Supply and demand!

But the opposite happened: Residents of Hadsel saw their electricity bills rise by 20 percent, roughly 230 euros a year.

The reason is simple: The energy market in northern Norway is not one of scarcity but of surplus. Norway has more than enough energy available through water and wind power. For the local provider, Noranett, the demand from the mining farm has vanished without a corresponding drop in costs. The farm consumed 80 gigawatt-hours a year and contributed about 20 percent of Noranett’s revenue. The provider must now offset this by charging the remaining consumers.

For the residents, it could still be a good deal. The mining farm cooled its machines with rotary fans that ran around the clock, causing constant noise. „It drove people to madness and despair,“ as one local remarked.

Mayor Freiberg was somewhat disappointed when electricity costs rose. One has to deal with it, he said. The municipality will now have to look for projects to fill the gap. This situation, he added, makes the region attractive as it has surplus electricity to offer (all from renewable sources like the rest of Norway) and seeks an industry that creates value. Now no one thinks that data centers are welcome anymore.

Which is a bit of a shame, as other, quieter fans might have been an even better deal in the end.