Ethiopia has cut electricity supplies to its fast-growing Bitcoin-mining industry by more than three-quarters as reduced water inflows into the country’s hydroelectric reservoirs strain power generation during an unusually dry season.

The power cuts underscore the growing tension between Ethiopia’s efforts to attract energy-intensive cryptocurrency miners and the demands of households and manufacturers as drought conditions constrain the country’s electricity supply.

Bitcoin-mining companies accounted for 35 percent of revenue generated by Ethiopian Electric Power Corp. in the past financial year and consume almost a third of the country’s total electricity production of 9,730 megawatts.

Hydropower supply under pressure

The El Niño weather phenomenon has worsened Ethiopia’s dry season, reducing water inflows into hydroelectric reservoirs by 20 percent, according to Ashebir Balcha, chief executive officer of Ethiopian Electric Power.

The utility began reducing electricity deliveries to Bitcoin-mining facilities as the dry season approached, initially cutting supply to 75 percent of contracted levels. When conditions failed to improve, the reduction was increased to 50 percent and has now reached 23 percent of contracted supply, Balcha said during an earnings presentation.

“When we noticed the dry season was approaching, we reduced the supply to 75 percent,” Balcha said. “When there was no improvement we reduced to 50 percent and now we reached 23 percent.” The reductions are intended to preserve electricity for manufacturing companies and households while the country manages lower hydroelectric generation.

Bitcoin miners face deeper cuts

Ethiopia has signed power-purchase agreements with 39 Bitcoin-mining companies, of which 31 are already operational. Under those agreements, Ethiopian Electric Power had committed to providing at least 98 v of the contracted electricity.

The sharp reduction therefore represents a significant departure from the power commitments that helped attract miners to the country. Although cryptocurrency trading remains illegal in Ethiopia, the country has welcomed Chinese Bitcoin-mining companies attracted by its low electricity costs and access to large-scale hydropower.

The mining industry has consequently become a significant customer for the state-owned electricity provider, contributing 35 percent of its revenue in the past financial year while using almost one-third of the country’s electricity output.

Export revenue cut

Ethiopian Electric Power will reassess electricity availability by October, according to Balcha. Depending on the outcome, the utility could reduce supplies to Bitcoin miners further and restrict electricity exports to neighboring countries.

The pressure on electricity availability has already forced the utility to lower its forecast for export revenue. Ethiopian Electric Power has cut its forecast for electricity-export revenue by 40 percent to $279 million for the current financial year, citing the impact of drought.

The decision highlights the trade-off facing Ethiopia as it balances the economic benefits of electricity-intensive Bitcoin mining and power exports against the needs of domestic consumers during a period of weaker hydroelectric production.