Kuwait cuts off crypto mining to save power

• Kuwait has power shortage problem
• Crypto mining is energy-intensive
• Struggling to diversify energy mix

Kuwait this week began a clampdown on illegal cryptocurrency mining activity, as the energy-intensive sector places further pressure on the Gulf state’s already severe power shortage problem.

The country’s industrial facilities were told earlier this month to suspend operations for six hours daily during the summer, as part of a power rationalisation plan.

The ministry of interior said that cryptocurrency mining, which is banned in Kuwait, was placing a significant drain on electricity resources, resulting in power outages in some residential areas.

Nearly 30 people were detained and 50 homes seized as part of the clampdown, according to local media.

This comes at a time when Kuwait’s domestic electricity production cannot meet summer demand due to limited generation capacity, over-reliance on fossil fuels and maintenance delays in existing plants.

The country is however part of the Gulf Cooperation Council Interconnection Authority, an interconnected grid between Gulf countries, and last year bought electricity from neighbouring countries. But this is turning out to be inadequate too.

Last year consumption in Kuwait exceeded 17,000 megawatts per capita for the first time, overwhelming local production and resulting in the need to buy 500MW of daily imports from the Gulf power grid, the Kuwait Times reported this month.

Despite strong oil production and large reserves, the country’s power outages have been exacerbated by underinvestment and inefficiencies in its power sector, according to energy experts.

“Power generation projects frequently face delays, renewable energy and energy storage deployment remain slow, and the country’s electricity grid infrastructure is fragile,” Jessica Obeid, founding partner at New Energy Consult in Dubai, tells AGBI.

“On the other hand, demand continues to escalate, exacerbated by intense heatwaves increasing the reliance on air cooling, and hefty subsidies.” 

These chronic issues lie within a deeper problem, she says.

“Kuwait’s unstable political environment hinders effective governance, long-term strategic planning and implementation, and nowhere is this more evident than within the electricity sector,” Obeid says.

Diversifying its energy mix

Kuwait relies heavily on imported gas and lags behind its neighbouring Gulf states in terms of diversifying its energy mix. According to the International Energy Agency, natural gas is the largest source of electricity generation in Kuwait, with 52 percent share, followed by oil, whose share is 47 percent.

“While Kuwait is a major energy exporter, it remains highly dependent on imported natural gas for half of its power generation, which creates a unique form of energy insecurity,” says Karim Elgendy, executive director at the Carboun Institute, an energy policy think tank.

“Unlike some of its Gulf neighbours, such as the UAE, Qatar and more recently Saudi Arabia, Kuwait has yet to significantly diversify its energy mix or invest in large-scale renewable energy projects.” 

Kuwait’s long-term energy security lies in accelerating its diversification efforts into renewables and reforming subsidies to curb excessive consumption, analysts believe.

“In the short term, Kuwait may need to lean more heavily on regional cooperation, such as the GCC power grid, to manage peak demand,” Elgendy says.

• Kuwait enforces power cuts as demand outstrips capacity
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• Kuwait playing catch-up with ambitious green energy plans

The Kuwaiti government provides significant subsidies for electricity tariffs to consumers, resulting in lower electricity costs for the public. However, these subsidies also create a lack of incentive for consumers to save electricity, experts say.

Since 1966, Kuwait has distributed electricity to citizens for 0.7 US cents per kilowatt-hour, which is the world’s sixth lowest, according to a report by the Houston-based think tank, The Baker Institute for Public Policy in January.

“Reforming energy subsidies to encourage greater efficiency could play a vital role in reducing demand growth and improving the overall resilience of the power sector,” Elgendy adds.