Power Contracts for Miners Set to Expire in 2027
Paraguay’s state-owned utility, Administración Nacional de Electricidad (ANDE), has confirmed that electricity contracts currently serving bitcoin mining operations will not be renewed beyond December 31, 2027. These contracts provide power at approximately $44 per megawatt-hour, a rate that has attracted mining operations representing an estimated 4% of the global bitcoin network’s computational power, known as hashrate.
The miners collectively pay roughly $350 million annually for this electricity, according to industry estimates. ANDE has characterized the 2027 expiration date as final, signaling a definitive end to the preferential power arrangements that made Paraguay a notable bitcoin mining destination.
AI Campus Secures Long-Term Power Commitment
In a move that underscores the shifting priorities for Paraguay’s energy resources, ANDE has signed a 15-year power purchase agreement to supply a planned artificial intelligence campus. The project is backed by Founders Fund, the venture capital firm co-founded by Peter Thiel. The campus is expected to require substantial, consistent electricity for training and running large AI models, a compute-intensive process that shares infrastructure similarities with bitcoin mining but serves a different economic purpose.
The utility’s decision to commit to a 15-year deal with the AI campus, while declining to extend miner contracts beyond 2027, indicates a strategic preference for AI infrastructure over cryptocurrency mining in the allocation of the country’s hydroelectric capacity.
Why Paraguay Attracted Bitcoin Miners
Paraguay generates nearly all of its electricity from hydroelectric dams, most notably the Itaipu Dam, one of the world’s largest, which it shares with Brazil. The country historically produces more electricity than it consumes domestically, creating a surplus that has been exported to Brazil or sold to energy-intensive industries at competitive rates.
Bitcoin mining, the process by which specialized computers validate transactions and secure the bitcoin network in exchange for newly issued bitcoin, requires vast amounts of reliable, low-cost electricity. Paraguay’s combination of cheap hydro power, a relatively cool climate, and a welcoming regulatory environment drew miners seeking to reduce operational costs.
Energy Allocation Reflects Broader Policy Shift
The transition from bitcoin mining to AI infrastructure mirrors trends observed in other energy-rich jurisdictions. Governments and utilities are increasingly evaluating the long-term economic and strategic value of different compute workloads. AI data centers are often viewed as creating more skilled jobs, fostering local technology ecosystems, and aligning with national digitalization strategies, whereas bitcoin mining is frequently characterized as employing fewer people per megawatt and exporting most of its economic value.
ANDE’s decision suggests Paraguay is prioritizing the development of a domestic AI sector over the revenue from hosting foreign mining operations. The 15-year commitment to the AI campus provides the utility with predictable, long-term demand from a single large counterparty, contrasting with the more fragmented and potentially mobile base of bitcoin miners.
Implications for the Global Bitcoin Mining Landscape
If the contracts expire as stated, approximately 4% of global bitcoin hashrate will need to relocate or shut down by January 2028. This represents a significant but manageable portion of the network’s total computational power. The bitcoin network’s difficulty adjustment mechanism, which automatically recalibrates the mining difficulty every 2,016 blocks (approximately two weeks) to maintain a consistent block production rate, would absorb the loss of hashrate without disrupting network operations.
Miners operating in Paraguay will face decisions about relocating equipment to other jurisdictions with competitive power costs, selling hardware, or ceasing operations. Potential destinations include other regions with stranded or surplus energy, such as parts of the United States, Canada, Scandinavia, or Central Asia, though each presents its own regulatory, climatic, and infrastructure challenges.
What to Watch Next
Several developments will clarify the timeline and impact of this transition:
- Formal contract notifications: ANDE’s official communication to individual mining operators regarding non-renewal terms and any transition arrangements.
- AI campus construction milestones: Progress on the Founders Fund-backed facility will indicate the pace of new demand coming online.
- Miner relocation announcements: Public statements or on-chain data showing mining equipment moving to new locations.
- Paraguay’s broader energy policy: Any legislation or regulatory changes that formalize the prioritization of AI and high-tech industries over cryptocurrency mining.
The situation remains fluid until ANDE issues formal notices to contract holders. However, the utility’s public stance and the signed 15-year AI deal suggest the policy direction is firm. For the bitcoin network, the loss of Paraguayan hashrate would be a notable geographic redistribution but not a systemic threat. For Paraguay, the bet on AI infrastructure represents a wager on long-term technological development over near-term industrial revenue from mining.
This article is for informational purposes only and does not constitute financial, investment, legal, or tax advice. Cryptocurrency investments involve risk. Conduct your own research and consult a qualified professional before making financial decisions.
