Despite possessing the world’s second-largest natural gas reserves and one of the largest fossil fuel resources, Iran theoretically should not be facing an electricity crisis. However, the reality for millions of Iranian citizens is quite different: widespread power outages, industrial shutdowns, reduced production, and growing public dissatisfaction. This raises the question of how a country with such vast energy resources has become unable to supply its own electricity needs.
The answer lies in a combination of structural corruption, rent-seeking, chronic mismanagement, and the political priorities of the Iranian regime.
According to the U.S. Energy Information Administration (EIA), Iran has faced a widening gap between electricity generation and consumption in recent years. In the summer of 2023, the country’s electricity shortfall reached approximately 12,000 megawatts, and some domestic estimates for 2025 and 2026 suggest that the gap could exceed 20,000 megawatts. This is despite Iran’s officially reported installed power generation capacity of about 95,000 megawatts. Due to aging equipment, underinvestment, and technical problems, however, the actual operational capacity has fallen to around 70,000 to 75,000 megawatts.
One of the primary causes of this crisis is the lack of effective investment in electricity infrastructure over the past two decades. While the country’s electricity demand has grown by 4% to 6% annually, many power plant projects have either never been completed or have entered operation only after years of delay. The Sirik Power Plant in Hormozgan Province is a notable example. The project was intended to become one of the country’s largest combined-cycle power plants but remained stalled for years due to financial, managerial, and implementation problems.
The Aging Structure of Iran’s Electricity Industry
Meanwhile, billions of dollars in oil revenue that could have been used to modernize the country’s electricity infrastructure were instead directed toward military and security institutions and opaque projects rather than investment in the energy sector. As a result, a significant share of Iran’s electricity is still generated by power plants that, in some cases, are more than 30 to 40 years old. According to official statistics, the average efficiency of Iran’s thermal power plants is approximately 39%, a figure that significantly lags behind modern power plants elsewhere in the world.
In addition to aging infrastructure, Iran’s electricity transmission and distribution network faces serious challenges. Some reports estimate that power losses across the grid are around 13%, meaning that a substantial portion of generated electricity is lost before reaching consumers. In many developed countries, this figure is below 6%.
Cryptocurrency mining has also become one of the most controversial issues affecting the electricity sector. Iran’s Ministry of Energy has repeatedly stated that part of the electricity shortage is caused by cryptocurrency mining operations. However, the key question remains: how did thousands of mining machines enter the country and begin operating on such a large scale despite international sanctions? Numerous media reports over recent years have indicated that large cryptocurrency mining facilities affiliated with military institutions have benefited from subsidized electricity and special permits. These operations have generated substantial profits for powerful organizations, while ordinary citizens have borne the cost through power outages and rising prices.
Meanwhile, renewable energy continues to play only a minor role in Iran’s electricity sector. Despite the country’s vast solar and wind potential, renewable and nuclear energy combined account for less than 7% of the country’s electricity generation. This comes as many neighboring countries have made substantial investments in clean energy in recent years.
Therefore, Iran’s electricity crisis is neither a natural occurrence nor the result of increased public consumption. Rather, it is the product of years of corruption, rent-seeking, mismanagement, and the allocation of resources to priorities other than the development of national infrastructure. Today’s power outages are, in reality, the price of the decisions and corruption that have accumulated within the country’s energy management system over past decades.
