Venezuela: Zulia Governor Blames Illegal Crypto Mining for Continuing Regional Power Shortages

Sabotage, lack of maintenance, and climate change have also been offered to explain the crippling blackouts.

By Paul Dobson
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2018-02-23t215040z_826718566_rc1762e26480_rtrmadp_3_crypto-currencies-venezuela.jpg

Antminer D3 cryptocurrency mining computers in the Ministry of Youth and Sport in Caracas (Marco Bello / Reuters).
Antminer D3 cryptocurrency mining computers in the Ministry of Youth and Sport in Caracas (Marco Bello / Reuters).

Merida, May 3, 2018 (venezuelanalysis.com) – Regional authorities have blamed “illegal” cryptocurrency mining for the electrical crisis which has gripped the western Venezuelan state of Zulia, without offering more details about such activities.

Zulia has suffered from severe electricity shortages since an important underwater cable was damaged in December, leaving large parts of the region in the dark. Electrical rationing was introduced on March 23.

The shortages come months after the national government unveiled a new regulatory framework for cryptocurrency activities late last year, which sought to rein in illegal mining as well as set down norms for the country’s new cryptocurrency, the Petro. Despite efforts to crack down on unregulated private mining, which has flourished in Venezuela in recent years due to subsidized electricity rates, the activity has continued, exacerbating the country’s already acute power shortages.

On Friday, the governor for the populous western border state, Omar Prieto, claimed that authorities were “working to correct” the problem of illegal mining due to the “excessive demand [it places] on the electrical system” in Zulia.

Authorities have also attributed the continuing electricity shortages to sabotage of the power grid as well as droughts hampering regional hydroelectric facilities, whilst trade unionists have, for their part blamed the problem on lack of maintenance.

Prieto’s comments came just five days after the launch of CriptoLago, Zulia’s legal digital-currency mining corporation which mines the Petro, as well as Bitcoin in three mining farms throughout the state.

Cryptocurrency mining is an activity in which users employ networks of computers to solve complex mathematical equations in order to generate original "coins" which can be subsequently exchanged for other cryptocurrencies as well as real currency equivalents. Most cryptocurrencies, including the Petro and Bitcoin, have a built-in ceiling for the maximum number of coins that can be generated, leading the crypto-value to increase over time.

According to Criptotendencia.com journalist, Jennifer Cumana, the CriptoLago initiative, which Prieto described as “a futuristic project”, can produce roughly USD $27 million a month.

Prieto made no comment about the role of CriptoLago in the electrical crisis.

Zulia State contains massive oil fields below its Maracaibo Lake and is amongst the highest energy consumers in Venezuela, in part due to its soaring temperatures and culture of ubiquitous air conditioning.

It was the first state to be granted rights to set up digital currency mining farms, however experts have warned that the high-energy farms may top Venezuela’s delicate national electrical grid over the edge.

Upon unveiling the CriptoLago project in April, Prieto explained that they were constructing three electrical plants of 1,500 kW each to make the mining farms self-sufficient.

However, power cuts which predate the CriptoLago project have not improved, with residents in Venezuela’s second largest city, Maracaibo, reporting unscheduled daily power cuts of up to 8 hours, and up to 2 days in rural regions.

Prieto stated this past April 30 that authorities will need two months and USD $2 million to resolve the electrical problems in the region.

Last month, Maracaibo’s Chamber of Commerce declared an “electrical emergency”, explaining that the power cuts were severely damaging the regional economy.

“We the businessmen want to produce, but the failing in the reliability of the electrical services is yet another obstacle which stops us from maintaining production levels,” stated Chamber President Fergus Walshe.

Similarly, a new regional decree came into effect last April 30 forcing shopping centres and restaurants to purchase small power generators and run them from 1-4pm to help reduce electrical demand at the peak time of 2pm.

In response to ongoing electrical problems, Electrical Energy Minister Luis Motta Dominguez has repeatedly blamed alleged acts of “sabotage”, among which he included December’s underwater cable failing with took 800 MW out of the regional system.

“Destabilising factors burnt four substations in Zulia and sabotaged the cable system of the Maracaibo Lake,” he also declared this past April 13.

More recently, arrest warrants have been issued for members of regional energy firm Electrical Energy of Venezuela (Enelven) – a private electrical supplier absorbed into the public CORPOELEC national electrical company in 2007 – including for its ex-president, Ciro Portillo.

“We have identified some elites who were in charge at Enelven and, as part of the plan against the mafias, I have ordered that those who lead the electrical war be sought and arrested. They led and hired people to go and cut strategically important cables,” stated President Maduro on a well-attended campaign visit to Zulia this weekend.

“As the elections of May 20 approach, [anti-government forces] want a confused, annoyed people,” he claimed upon unveiling two new carbon and diesel thermoelectric power plants in Zulia, one in the Guajira municipality and the other in Las Riveras close to the lake.

However, alternative explanations for the electrical “chaos” have been offered by Angel Navas, president of the National Trade Union of Electrical Workers, who claims that a lack of maintenance is the main culprit.

“The installations in the Maracaibo Lake are rusty… all of the local electrical installations require urgent maintenance including the changing and repositioning of equipment,” he stated.

He also claimed that electricity from the main Guri hydroelectric plant in the southeastern state of Bolivar “has problems arriving due to the terrible conditions of the corroded transmission lines.”