The escalation of the super energy crisis, particularly in the electricity and natural gas sectors, has led to an increase in power and gas outages in industrial units in recent years.
Frequent power outages have caused damage to important industries such as steel, petrochemicals, and other sectors in Iran. According to Mehrdad Lahooti, a member of the Parliamentary Budget and Planning Commission, these outages have led to annual losses of $5 billion for Iranian industries. Consequently, the damages caused by frequent power outages have become a major concern for industrial unit owners.
These power outages are occurring despite the statement made by the Deputy Finance Minister of Energy last November, highlighting that the country’s electricity production at the beginning of the 1987 revolution was only 7,000 megawatts. He also announced the Ministry of Energy’s efforts to achieve a “blackout-free summer next year.” The emptiness of this promise was proven before the start of summer.
In July of last year, following an unprecedented increase in temperatures and electricity consumption in Iran, activities in the country’s industrial sectors were urgently halted. The electricity shortage led to the announcement of closures in 15 provinces on July 11. Despite the temporary closures in some provinces and the continued power outages in industrial units, the Ministry of Energy failed to manage the electricity deficit crisis.
Current Status of Electricity Production in Iran
Iranian officials and even official reports from the Ministry of Energy claim a production capacity of over 92,000 megawatts, but in reality, Iran’s electricity production in recent weeks has been around 72,000 megawatts, with the country’s power grid currently facing a deficit of over 15,000 megawatts.
The Ministry of Energy’s archives indicate that 35% of Iran’s power plant capacity was established before 2001, and many older plants have effectively been decommissioned, yet they are still included in the “electricity production capacity” statistics. It should be noted that about 12,000 megawatts of Iran’s electricity production capacity comes from hydroelectric plants, which have seen a reduction of up to 8,000 megawatts in some instances due to decreased rainfall in recent years.
Unmet Goals
Over the past decade, the Ministry of Energy had aimed to convert its gas and steam power plants into combined cycle power plants, increasing plant efficiency from about 30-33% to 45%. However, this goal was not achieved, and most of the power plants established in recent years remain low-efficiency steam or gas plants.
Official statistics from the Ministry of Energy and the Parliamentary Research Center show that 13% of Iran’s electricity production is lost in transmission and distribution networks; this significant figure is equivalent to 40% of the country’s total household electricity consumption. The low efficiency of thermal power plants also exacerbates the electricity deficit crisis in Iran.
In 2023, the Ministry of Energy planned to commission over 6,000 megawatts of new power plants, but less than a third of this goal was achieved. The last time Iran managed to commission 5,000 megawatts of new power plants was in 2010, and since then, the targets for increasing electricity production have never been met. The result of this trend has been a reduction in net electricity exports from a positive eight terawatt-hours in 2014 to one terawatt-hour in 2022.
According to the advisor of the Comprehensive Steel Plan of Iran, the country needs about $84 billion in investment for balancing the electricity required by industries and about $80 billion for gas.
Is Electricity Consumption in Iran High?
Iranian regime officials claim that high electricity consumption by the public is one of the factors causing the imbalance in the electricity sector. It should be noted that in the household consumption sector, Iran, Turkey, and Germany have similar population sizes. According to the annual report of the International Energy Agency, household electricity consumption in Iran is 40% less than in Germany and 36% more than in Turkey.
Considering global statistics, it can be concluded that household electricity consumption in Iran is consistent with the global average, and Iranians are not among the highest electricity consumers in the world. Additionally, studies show that electricity consumption in Iran is similar to the global average and even lower than in about 80 other countries.
The Future of the Electricity Deficit Crisis
According to the Vice Chairman of the Board of Directors of the Electricity Producers’ Companies, under the current conditions, Iran’s electricity grid is facing a deficit of about 15,000 megawatts during peak consumption. If this trend continues, in 10 years, Iran will face a 37,000-megawatt production deficit, meaning one-third of the country’s electricity needs will not be met.
Hassan Ali Taghizadeh, head of the Power Producers Syndicate, also emphasized that solving the electricity imbalance requires an annual investment of $4 billion in the power industry and the construction of 7,000 megawatts of new power plants (a combination of gas, combined cycle, wind, and solar plants).
Meanwhile, the total oil revenue of the Iranian regime last year is estimated to be around $30 billion. Even if the entire 15,000-19,000 megawatt deficit, as predicted by the government’s Seventh Development Plan, is not to be resolved, resources are still needed to overcome the current crisis.
Despite the promises of Iranian regime officials, there is currently no short-term solution to the electricity deficit crisis. The continued gas cuts to industrial units will mean a reduction in economic growth and associated problems. Without securing the necessary financial resources and advanced technology, the electricity and gas deficit crisis will not be fundamentally resolved.
Last year, according to a report by the Etemad newspaper, power outages led to a 5% reduction in the production and sales index across all industrial sectors. This year, it is predicted that with rising temperatures and increased power outages, the production and sales index of all industrial activities will decline further. The energy imbalance and the deficit in natural gas and electricity have gradually led Iran to lose its regional market for natural gas and electricity.
The Iranian regime is facing its biggest security challenge in the past four decades. In the near future, we should expect further declines in economic growth, factory bankruptcies, increased unemployment, and uprisings due to gas and electricity cuts during different seasons of the year.
