Quebec was fishing for tech giants but caught bitcoin miners.

At least that's how David Vincent, business development director at electric utility Hydro Quebec, describes the results of a campaign launched in 2016 to lure the likes of Facebook, Amazon and Microsoft to build their data centers in the Canadian province.

The sales pitch was simple: the province offers plentiful, cheap and renewable electricity, along with cold weather and a politically stable environment.

And while Hydro Quebec has gotten plenty of bites from traditional data center operators, the company also quickly discovered those same traits are equally attractive for cryptocurrency mining operations.

Nonexistent just six months ago, interest in Quebec from commercial-scale bitcoin miners has skyrocketed, Vincent said, amid the surge in cryptocurrency prices and political uncertainty in other jurisdictions.

For Hydro Quebec, 35 cryptocurrency mining organizations are asking the company for information regarding connecting to the power grid there. Those companies now account 70 percent of the total wattage capacity in Hydro Quebec's development pipeline.

In an interview with CoinDesk, Vincent said:

"I have so much demand right now there's no need for marketing. Pretty much every day I have a new one."

And sentiments from others suggest what Hydro Quebec is seeing now is just the tip of the iceberg.

"Based on what I've seen in equipment purchase, real estate and power deals, things are exploding in Quebec," said Austin Hill, the former CEO of Blockstream, who is now investing in and backing some of the mining projects looking to Quebec.

Cheap and abundant

Cryptocurrency mining – the energy-intensive process by which new transactions are added to a blockchain – generally requires specialized hardware (either ASICs or GPUs) to solve complex mathematical puzzles. Because of the vast amount of computing power that's used, mining rigs generate a significant amount of heat, which is why mining operations look for colder environments to set up shop.

But it's not only the cold weather that's a draw for Quebec. The government's aggressive effort, during the post World War II era, to build dams in its northern regions has proven enticing enough to pull mining operators away from existing bases that already have weather on their side.

Because of that work, Quebec has become one of the largest hydroelectric power producers in the world. Hydro Electric, with 37,000 megawatts of installed electricity capacity, routinely produces at surplus levels and is thus able to offer some of the lowest rates in North America to its commercial customers.

For data centers, Hydro Quebec charges as low 2.48 cents (in USD) per kilowatt hour, and 3.94 cents per kilowatt-hour for bitcoin miners (the slight increase for the latter due to mining operations' smaller job creation and economic development footprint), Vincent said. These rates are anywhere from 50 percent to three times lower than in comparable parts of North America, according to data compiled by Hydro Quebec.

Historical consistency in pricing over time, and the assurance that the rates are not simply teasers that will jump overnight, are a key part of the value proposition for cryptocurrency mining operations, Vincent said. He added:

"We always succeed at staying below inflation. It's been like that since 1963 and it's not going to change."

And while some have argued that cryptocurrency mining is environmentally degrading, there's a growing trend by these mining operations toward finding competitive advantage via greater energy efficiency and resource optimization.

"In some hotter environments, the current ASIC equipment ends up having a very short shelf life of around six to nine months because it gets so hot, and the cost of cooling it isn't worth the cost of the equipment," Hill, who heads the Montreal-based Brudder Ventures, said, adding:

"It's just easier to run it super hot, throw it away and buy a new one. It's hugely wasteful."

And moving to cooler climates, like Quebec, could help.

Political stability

Another driver behind Quebec's accidental emergence as a cryptocurrency mining hub is that miners are increasingly looking for stable political environments where they can deploy their capital investments and plan their business efforts four to five years in advance with a higher degree of confidence.

While several of Hydro Quebec's interested parties are based in North America, a significant number of mining organizations hail from countries, notably China, where the landscape for cryptocurrency mining, and cryptocurrencies in general, has become cloudier.

In China, for instance, rumors have been surfacing that the government plans on withdrawing preferential benefits such as cheap electricity and tax deductions to bitcoin mining operations. Plus, the People's Bank of China has been one of the more aggressive regulators in the world when it comes to cryptocurrency, most recently issuing a ban on initial coin offerings and moving to shut down bitcoin exchanges.

Notably, Vincent said mining interest in Quebec began to tick upward significantly last fall after these moves by China.

He told CoinDesk:

"They don't say it like that, but the fact that the rush of the demand came at pretty much the same time they were having problems in their previous jurisdiction, we could think there was a correlation."

These concerns, along with a steady flow of reports about mining equipment seizures, kidnappings and game-playing by corrupt public officials in places like Venezuela, could make setting up shop in places where these risks are minimal more important than ever for mining operators.

A good problem

While Hydro Quebec is still, admittedly, trying to fully grasp this new class of customers, it's been more than willing to roll out the welcome mat for them because of the enormity of the requests, not to mention the 24/7 nature of their operations.

To show mining operation's scale, Vincent compared them to Hydro Quebec's other customers.

Its smallest commercial customers, such as the Montreal Canadiens' hockey arena, require five megawatts of electricity and a typical data center requires 30 to 60 megawatts. By contrast, "the top-three to top-five miners in world, most of them are talking to us, and the demand that they have right now is around 200 to 300 megawatts," he said. "It's huge."

But with an industry as volatile as cryptocurrency, nothing is fully set in stone, and as a risk-averse, publicly owned utility, Hydro Quebec is minimizing its exposure by requiring miners to foot the upfront cost of the power connection and arrange a line of credit from a third party large enough to offset any losses in the event of something dire.

"The question for us is: is this a trend that will continue to stay at least as strong as it is right now?" Vincent said.

But for now, the biggest problem facing Hydro Quebec is finding enough buildings and locations that are suitable to be used as mining farms, as well as hiring more people who can help meet all of the requests from these types of potential clients, as quickly as they are coming in.

"[The miners] have this impression that they're losing money every day, so they're asking for big buildings with big interconnections and they want it tomorrow," Vincent said, concluding:

"We have the capacity, but we're not used to having so much big demand like this. It's a good problem to have."

Quebec flag image via Shutterstock