Ethiopia has cut the electricity supplied to Bitcoin mining companies to about 23% of contracted levels, as falling water inflows into the country's hydroelectric reservoirs strain a power system that depends overwhelmingly on hydropower, forcing the state utility to ration electricity and prioritize households and manufacturers.

Bitcoin mining is an energy-intensive computing process in which specialized hardware runs continuously to secure the Bitcoin network, which is why mining firms seek out large volumes of low-cost electricity when deciding where to operate.

Supplies Reduced in Successive Steps

Ethiopian Electric Power (EEP) initially reduced deliveries to miners to 75% of contracted volumes, then to 50%, before cutting them further to about 23%, EEP Chief Executive Ashebir Balcha said at the utility's annual performance briefing. The staged reductions represent a sharp departure from the utility's earlier position: under the power-purchase agreements, EEP had committed to supplying miners with 98% of their contracted electricity. In practical terms, miners now receive less than a quarter of the electricity they had been promised under those agreements.

The cuts followed a roughly 20% decline in water inflows into Ethiopia's hydroelectric reservoirs, with dry conditions associated with the El Niño climate phenomenon adding further pressure to the system. Hydropower accounts for about 95% of EEP's generation mix, leaving the country's electricity production particularly exposed to changes in rainfall and reservoir levels.

Miners Are EEP's Largest Revenue-Generating Customers

The move highlights the tension at the center of Ethiopia's Bitcoin-mining strategy. Data-mining companies generated about 50.37 billion birr for EEP in the last financial year, making them the utility's largest revenue-generating customer category, according to StockMarket.et. Separate reporting cited by Bloomberg put mining companies' contribution at about 35% of EEP revenue, while noting that miners consumed almost one-third of Ethiopia's electricity output. Yet EEP has chosen to give up some of that revenue as electricity becomes scarcer.

"The people come first," Balcha said in explaining the utility's decision, according to StockMarket.et. The utility has prioritized public and domestic industrial supply over data mining and electricity exports as the shortage persists.

A Mining Hub Under Its First Major Test

The timing is significant. Over the past year, Ethiopia has emerged as an important destination for global Bitcoin miners, drawn to the country by abundant renewable power and relatively low electricity costs. EEP has signed power-purchase agreements with 39 Bitcoin-mining companies, of which 31 are operational, according to figures reported by Bloomberg.

The current squeeze exposes the vulnerability of that model, in which cheap renewable electricity is only an advantage as long as the underlying resource — in Ethiopia's case, water — is available. StockMarket.et described the broader situation as Ethiopia entering a "rationing season," with the power utility cutting supply to its largest revenue-generating customer before the full effects of the shortage arrive.

EEP's installed generation capacity rose 23% to 9,730 megawatts, but capacity utilization fell to about 60%, below the utility's 67% target, as limited water availability constrained how much of that capacity could actually generate.

Financial Turnaround Continues Amid the Shortage

The utility has also been undergoing a financial turnaround. It reported about $739.7 million in revenue for the 2025/26 financial year, up 57.8% year-on-year, and gross profit of roughly $245.5 million, marking a return to profitability after years of losses. A restructuring also moved about $1.64 billion of EEP-related debt off its books, while electricity tariffs have been rising under reforms introduced in 2024.

Reassessment Planned for October 2026

EEP plans to reassess the electricity situation in October 2026. If reservoir conditions remain weak, supplies to Bitcoin miners could be reduced further, while electricity exports to neighboring countries could also face restrictions as the utility manages the shortfall. Until then, reservoir inflows — the same variable that triggered the staged reductions — will be the key factor in how far the rationing ultimately extends.

For Ethiopia, the episode underscores a central trade-off in its mining strategy: Bitcoin miners can provide substantial foreign-currency and electricity revenue when power is abundant, but they are also among the easiest major loads to curtail when the grid comes under pressure. The country's Bitcoin-mining boom is therefore facing its first major test — not from Bitcoin prices or regulation, but from the most basic constraint on a hydro-powered mining economy: water.

Source: BitcoinKE