For years, the country has heavily subsidized its electricity production leading to extremely low prices. It claims that this has now become unsustainable.
According to local news outlet Arz Digital, the day prior, Rajabi Mashhadi, a spokesperson for Iran's Ministry of Energy, said that the entity would be cutting the power supply to all of the country's licensed crypto mining firms by the beginning of July.
Citing an anticipated electricity deficit from the peak-summer season, Mashhadi stated, "There are currently 118 authorized [digital currency] extraction centers in the country, which must cut off their electricity supply from the national grid from the beginning of July."
"Last week, the country's electricity consumption recorded an all-time high of 62,500 megawatts (MW) during peak consumption, which is a significant figure. According to forecasts, this week's consumption requirement will exceed 63,000 MW, which means we must limit electricity supply."
The move comes after the country's Ministry of Energy reported a disappointing gain of 1.2 gigawatts (GW) to its power generation capacity in 2021. This was well below the projected gain of 3.5 GW, leading to a power use deficit.
Due to international sanctions, Iran lacks the investment needed in power generation capacity and natural gas production to keep up with consumption. On the other side, demand is soaring partly because due to the country's extremely low electricity prices. Average household electricity in Iran costs as little as $0.005 per kilowatt-hour (kWh), a fraction of the $0.024 per kWh in its neighbor Iraq and $0.159 per kWh in the United States. For political reasons, the Iranian government spends over $60 billion annually in indirect subsidies to depreciate electricity prices.
According to Cambridge University, Iran accounted for 0.12% of the Bitcoin (BTC) network's hash rate and was previously among the top 10 countries in the world by BTC mining productivity. However, its share of the Bitcoin mining market fell from a peak of 4% in the years prior, partly due to a severe power shortage in the summer of 2021.