Cryptocurrency miners are moving in to Norway and Sweden to take advantage of cheap hydro-electric energy and low temperatures to power and cool their servers.
Iceland has been Europe's most popular location for miners of digital currencies such as bitcoin and ethereum.
But at 6.5 euro cents and 7.1 cents per kilowatt hours, respectively, commercial power prices in Sweden and Norway are cheaper than Iceland's 8 cents and far below the European average of 11 cents.
The interest is good news for Sweden's Vattenfall and Norway's Statkraft, the dominant utilities in their countries. Supplying power to cryptocurrency miners is a tiny part of current business but the two state-owned firms have said they see it as an opportunity.
The process is energy intensive. Miners plug in thousands of servers at a time to get the computing power to produce cryptocurrencies, which is done by solving mathematical equations.
Miners of bitcoin will use about 130 terawatt hours of energy this year, matching Argentina's consumption or the projected usage of all the world's electric vehicles by the mid-2020s, according to Morgan Stanley.
"We're on a global hunt to secure as much power as we can," said Olivier Roussy Newton, director and co-founder of Canadian group HIVE Blockchain Technologies, which started mining ethereum in Sweden in January.
The company said it was expanding energy capacity for its crypto mining in Sweden to 17.4 megawatts, with funds available to ramp up a further 26.8 MW by September. Last month, it agreed to buy data center company Kolos Norway AS for $9.9 million with a view to expanding its mining operations.
In March, U.S. miner Bitfury opened a new $35 million mining data center in Norway. The miner will be buying 350 gigawatt hours of pure clean energy from local renewable energy provider Helgeland Kraft.
Many bitcoin miners are looking at the area including the Chinese because of abundant cheap hydro power, said Bill Tai, a member of Bitfury's board of directors.
China's Bitmain, the world's largest bitcoin miner which recently set up a unit in Switzerland, has also been investigating Sweden and Norway's potential, two industry sources with knowledge of the matter said.
China accounts for around 70 percent of the crytopcurrency mining industry but Beijing has discouraged it in part, due to concerns about pollution from coal-fired power. This has forced them to look elsewhere.
"A lot of miners are keen to get into Norway and that includes Bitmain and other Chinese names," said Mark Collins, chief executive of CBH Consulting AG, a Zurich-based clean energy consultant running for the blockchain industry.
A second source with knowledge of the matter also mentioned Bitmain's interest. "A number of nationalities are turning to the Nordics," that source said.
Bitmain spokesman Nishant Sharma said the company would announce expansions in Europe and other regions as they occur. He said he was not aware of any "special plans" for Sweden or Norway.
Mining a single bitcoin requires $1,400-$1,800 worth of electricity, up to a quarter of the total costs and about the annual power bill of a four-person household in Germany.
This means that cryptocurrency miners are under pressure from policymakers to prove their green credentials and Norway and Sweden's clean energy holds even greater appeal.
"This area is the Saudi Arabia of green energy," said Tai.
In Norway, hydropower accounts for over 99 percent of electricity production while in Sweden the number is about 40 percent with the same again from nuclear.
Some utilities in Europe such as Italy's Enel and Germany's E.ON are worried that the speculation behind cryptocurrencies could lead to a market crash. Enel said in February it was not interested in powering cryptocurrency miners.
But Norway and Sweden have welcomed the business.
"It is an opportunity for energy providers in the area. It's a consistent power draw for them without spikes and troughs and energy providers like that," said Collins.
Norway recently changed tax rules to exempt data centers from paying property taxes in a bid to attract foreign companies.
Node Pole, a Swedish investment advisor owned by Vattenfall and smaller peer Skelleftea Kraft, helped Chinese tech company Canaan Creative, a miner and one of the world's largest makers of bitcoin mining chips, to set up shop in Sweden last year.
"For the last 6-8 months there has been an increasing interest in opportunities in Sweden," Node Pole Chief Executive Patrik Oehlund said.
Vattenfall provides Canaan with the roughly 10 MW of power capacity it needs and the utility sees more bitcoin deals on the horizon.
"There are a number of companies in different phases of evaluating establishment on the Nordic Market," said Matts Wesslen, Vattenfall's manager of energy intensive industries.
Nevertheless, Alex de Vries, blockchain specialist at PwC, said the opportunities in cryptocurrency mining may be short-lived.
"If bitcoin energy consumption continues like it does today it will become unsustainable," he said.
"That might be an opportunity for utilities in the short-term but over the long-term miners will have to find ways to become more efficient to cut electricity use."
© 2023 Thomson/Reuters. All rights reserved.