Energy Allocation Issues for Crypto Mining in Iceland

When Iceland became a hotspot for Bitcoin mining in the early 2010s, it seemed like a perfect match. Cold air for free cooling, 100% renewable electricity from volcanoes and waterfalls, and a stable government. Miners flocked in. But by 2025, the dream has hit a wall - energy allocation is no longer a perk, it’s a prison.

Why Iceland Was the Perfect Place for Miners

Iceland didn’t just have cheap electricity - it had abundant electricity. Geothermal plants tapped into the Earth’s heat, and hydroelectric dams used glacial rivers to generate power with almost zero emissions. For crypto miners, this was gold. Unlike in China or Kazakhstan, where power came from coal or unstable grids, Iceland offered clean, reliable energy. And because it’s so cold outside, you didn’t need expensive cooling systems. Miners could run ASICs like the Antminer S19 XP or Whatsminer M50S 24/7 without overheating.

By 2023, crypto mining was using about 8% of Iceland’s total electricity. That’s not a small number. It’s more than the entire country of Denmark uses for all its homes and businesses combined. And yet, Iceland’s population is only 370,000. That means per person, Icelanders were using more electricity for mining than almost any other country on Earth.

The Grid Is Full - And No One’s Building New Power Plants

Here’s the catch: Iceland’s power system is maxed out. The country’s hydro and geothermal plants are running at 95%+ capacity. There’s no spare juice. No new dams. No new geothermal wells being drilled at scale. The last major power plant was built over a decade ago. And the government isn’t rushing to build more.

The National Energy Authority confirmed that new mining operations can’t get connected to the grid. If you want to set up a mining farm today, you’re stuck waiting - sometimes years - for a slot that doesn’t exist. The 120 megawatts currently allocated to mining is the ceiling. Any new miner has to either buy power from an existing operator (at a premium) or give up before they even start.

This isn’t a temporary shortage. It’s structural. Iceland’s energy infrastructure was built for a different economy - aluminum smelting, fishing, and tourism. Mining came in fast, and now it’s competing for the same limited resource.

Government Shifts: From Welcome Mat to No Entry

In 2018, Iceland welcomed crypto miners with open arms. By 2024, Prime Minister Katrín Jakobsdóttir publicly said the country needed to slow down. Why? Because the opportunity cost became too high.

Think of it this way: every megawatt used by a Bitcoin farm is one less megawatt for a hospital, a school, or a hydrogen plant that could export clean fuel to Europe. The aluminum industry - which has been in Iceland since the 1970s - uses more energy per job created than mining does. Aluminum smelters employ hundreds of workers. Mining farms? A few engineers and a lot of machines.

The government’s new priority? Blockchain tech that doesn’t eat electricity. Think central bank digital currencies (CBDCs), smart contracts for public services, and secure identity systems. Not mining rigs.

Who’s Still Mining in Iceland? And How?

The miners still operating in Iceland aren’t newcomers. They’re the ones who got in early. Companies like Genesis Mining, Advania Data Centers, and Verne Global locked in long-term power contracts back in 2015-2017. Those deals are still valid. They’re locked in at wholesale rates - sometimes as low as $0.02 per kWh. That’s why they’re still profitable.

But even they can’t expand. If they want to add 100 more ASICs, they need more power. And there isn’t any to spare. So they’re stuck. Some have started exporting their computing power as cloud services - renting out idle hash power to other miners overseas. Others are moving parts of their operations to places like Texas or Canada, where power is cheaper and more available.

Miners Are Frustrated - But Not Surprised

On Reddit and Bitcoin Talk forums, Icelandic miners are vocal. One user wrote: “I set up my farm in 2016. I was told the future was bright. Now I’m told I can’t even add a single new machine. I paid for the power. I paid for the infrastructure. Now I’m being punished for being early.”

Others are more resigned. “Iceland was never meant to be a mining superpower,” said one operator. “It was a safe haven. And it still is. But safe doesn’t mean scalable.”

The truth? Iceland was never going to outgrow Texas or Kazakhstan in total hashrate. It was never about volume. It was about reliability and sustainability. And now, even that is under pressure.

The Bigger Picture: Energy as a National Asset

Iceland isn’t banning crypto mining. It’s redefining what its energy is for. The government is looking at hydrogen production - turning surplus renewable power into fuel for ships and trucks. That’s a long-term export opportunity. It’s also job creation. Mining? It’s mostly automated. It doesn’t build roads, schools, or hospitals.

Tourism is another priority. More hotels. More electric vehicle charging stations. More data centers for AI and cloud services - which use less power per dollar of economic output than mining.

Economists at Reykjavik University did a cost-benefit analysis in late 2024. They found that for every 100 megawatts used by mining, the country lost an estimated $22 million in potential revenue from alternative uses. That’s not just about electricity. It’s about what you do with the money that electricity earns you.

What’s Next for Crypto Mining in Iceland?

The future is flat. No growth. No new farms. Maybe a few upgrades to existing ones - if they can squeeze in a few more machines without exceeding their power cap.

Iceland will remain a niche player. A place where miners go for stability, not scale. A safe harbor in a volatile world. But it won’t be the next Bitcoin powerhouse. That title has moved to places with cheap coal, cheap solar, and no energy limits.

For miners still in Iceland, the message is clear: protect what you have. Don’t expect to grow. And don’t count on the government helping you expand. The era of easy power is over.

Could Iceland Ever Reopen for Mining?

Maybe - but not soon. Building new geothermal or hydro plants takes 5-10 years. And even then, the government would need to approve them. Right now, the political will isn’t there. The public doesn’t want more mining. They want cleaner air, better infrastructure, and jobs that last.

If a breakthrough happens - say, a new way to extract geothermal energy from deeper rock layers - then maybe. But that’s science fiction for now. The reality? Iceland’s crypto mining era is winding down, not heating up.