Kentucky regulator denies electricity discounts for crypto mining proposal

Chinese-owned Ebon International has said it likely would not locate in Kentucky without discounts

by Liam Niemeyer, Kentucky Lantern

Kentucky’s utility regulator has denied millions of dollars in electricity discounts offered by utility Kentucky Power to support a massive cryptocurrency mining operation in Eastern Kentucky. 

The Kentucky Public Service Commission in a Monday order stated Chinese-owned Ebon International, the proposed Lawrence County cryptocurrency-mining facility, would “unquestionably” create jobs along with tax revenue for local and state governments: Kentucky Power stated the company planned to invest more than $250 million in the facility and create more than 100 local jobs. The facility would be located at the site of Kentucky Power’s Big Sandy natural gas plant, which was converted from burning coal in 2015. 

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But the potential risks to ratepayers, particularly in light of Kentucky Power’s lack of in-house power generation, outweighed the economic benefits, the PSC concluded. 

According to the order, Kentucky Power lacks enough power plants or agreements to purchase power to meet its ratepayers’ power supply needs starting in 2026. The utility said it planned to buy extra power from the multi-state grid operator PJM Interconnection to serve Ebon International — which would use 250 megawatts at full capacity and would be the largest cryptocurrency mining operation in the state — and other customers.

But the commission said the costs of buying power elsewhere, or the costs of building in-house power plants to meet Ebon International’s needs, come at a risk to Kentucky Power’s more than 150,000 customers in Eastern Kentucky.

“Kentucky Power’s lack of capacity that can produce energy creates the risk that energy prices rise in the footprint, and as a net purchaser of energy, the power bills of all customers will go up,” the order stated. 

Cryptocurrency mining typically uses massive amounts of electricity to run high-powered computers. Those machines solve complicated equations that help secure online transactions of the currencies. In the case of the popular cryptocurrency Bitcoin, mining companies are rewarded for solving the equations with Bitcoin itself. Each Bitcoin is valued at more than $25,000 as of late August. 

The commission last year launched three separate investigations into the “reasonableness” of electricity discounts offered by Kentucky utilities to cryptocurrency mining companies, largely citing concerns raised by environmental and renewable energy groups including the Kentucky Resources Council and the Mountain Association. 

Byron Gary, the program attorney for Kentucky Resources Council, in a statement said the groups were “grateful” the commission was taking a closer look at subsidies given to “wasteful facilities.” 

“We hope the Commission will continue to place consideration on the impacts of its decisions on the average ratepayers already struggling with high electric utility bills,” Gary said. 

Kentucky Attorney General Daniel Cameron and the industry group Kentucky Industrial Utility Customers had also asked for an investigation into the discounts given specifically to Ebon International. Cameron and KIUC had opposed the discounts, in part, because of the concerns that Kentucky Power had underestimated the costs of transmitting electricity for the project. 

The commission earlier this month approved electricity discounts given by Louisville Gas and Electric and Kentucky Utilities to a Bitcoin mining operation run by Kentucky’s largest coal mining company Alliance Resource Partners in Union County. The regulator is still considering whether to approve such discounts from Kentucky Power for a third cryptocurrency mining company Cyber Innovation Group in Pike County, which the coalition of environmental groups is also opposing. 

Kentucky Power spokesperson Sarah Nusbaum in a statement said the company is still reviewing the commission’s order denying the discounts and that the utility has “sufficient” power supply to meet its ratepayers’ needs, including using the PJM energy market as “backup power.” 

In an Aug. 8 filing before the PSC, Kentucky Power stated Ebon International would not locate in Kentucky without the electricity discounts. 

“We have other locations under development in the US and it would simply not be prudent for us to spend our capital in a situation with higher costs of power,” said Jason Wang, Ebon’s managing director in a March 2023 letter. “The cost of electric power is the single most important cost beyond the capital cost of equipment to build a data center.” 

Nusbaum said the utility would continue to “work diligently in this area” because of the need for economic development in Eastern Kentucky.

Photo: Adobe Stock