Facts and Stats on Energy Crisis in Iran

Amir2018TaghatiAugust 21, 2023
Facts and Stats on Energy Crisis in Iran
Iran is currently grappling with a severe energy crisis, a situation exacerbated by a combination of mismanagement by consecutive governments

iran electrical power grid
Written by
Amir Taghati

Iran is currently grappling with a severe energy crisis, a situation exacerbated by a combination of mismanagement by consecutive governments and the dominance of industries under the Islamic Revolutionary Guard Corps (IRGC). The regime’s mishandling of the energy sector has led to inefficiencies and a lack of strategic foresight, leaving the country vulnerable to energy shortages.

The IRGC’s influence on key industries, including power generation, distribution, and even export to foreign countries has further exacerbated the crisis. Prioritizing political and economic interests over efficient management and infrastructural development has hindered the implementation of necessary reforms and upgrades in the energy sector, resulting in inefficiencies, unreliable supply, and environmental concerns.

The crisis has manifested in frequent power outages, impacting daily life, industries, and essential services. Furthermore, reliance on unsustainable practices, such as burning fossil fuels like mazut, not only exacerbates the crisis but also contributes to environmental degradation and air pollution.

This analysis delves into Iran’s resource statistics and potential in comparison to its energy consumption. The goal is to offer a comprehensive insight into the complex energy crisis Iran is currently grappling with and emphasize the pressing necessity for groundbreaking change.

 

Energy consumption
Electricity consumption in Iran is distributed as follows: 33% in the residential sector, 34% in the industrial sector, 14% in agriculture, and 19% in public areas, lighting, and other miscellaneous uses.

Daily natural gas consumption in Iran is equivalent to 5 million barrels of oil, coupled with the consumption of 1.8 million barrels of oil daily, totaling approximately 6.8 million barrels. Considering the current oil prices, this translates to nearly half a billion dollars per day, a staggering figure.

The frequent power outages have disrupted people’s lives, particularly during hot weather, causing significant hardships for families. However, beyond these challenges, those with small industries are also suffering as their production grinds to a halt.

Farmers, as one of the marginalized sectors, are experiencing devastating effects from power outages, severely damaging their agricultural produce.

These power shortages result in heavy economic losses. The economic impact of the power outages during the summer of 2021 was estimated at around $7 billion. Yet, a closer analysis of the situation indicates that this figure might surpass $10 billion, as several major industries associated with the Supreme Leader’s office evade audits.

In the current year, the regime declared August 2nd and 3rd as holidays due to power shortages, citing heat as the reason. Furthermore, the third day, which happened to be a Friday [weekend in Iran], was practically a holiday as well. These continuous disruptions inflict substantial damage on the country’s economy, yet the regime appears to lack a comprehensive solution.

State officials, however, consistently point the finger at the people and demand they reduce their electricity consumption. This narrative remains consistent across various issues, including water, gas, and inflation. Essentially, the regime views the people as the perpetrators, deflecting responsibility from its own policies.

 

Electricity Shortages in Iran
It’s quite common for the country to experience an electricity mismatch ranging between 15,000 to 20,000 megawatts, signifying a clear shortfall in power supply. According to energy expert Mehdi Arab-Sadeq, who spoke with the state-run Rokna on August 2, this deficit is a substantial figure.

To put things in perspective, even if the regime were to hypothetically receive half of the total electricity production from Turkmenistan, Azerbaijan, and Armenia, the shortage wouldn’t be fully covered. This disparity is equally evident in the gas sector; the regime confronts a daily scarcity of 270 million cubic meters of gas. To give context, this is roughly the annual gas consumption average for Turkey.

Regime authorities acknowledge that simply relying on imports won’t suffice to address this considerable electricity deficit. What’s needed is the establishment of robust power plant infrastructure.

Reasons Behind Electricity Shortages in Iran
There are numerous factors contributing to the electricity shortages in Iran, but the most significant ones include:

  1. Deterioration of Transmission and Distribution Grids: Approximately 13% of the generated electricity is lost in Iran’s outdated transmission and distribution networks before reaching any consumers. This wastage is highlighted in a report by the regime’s parliamentary research center.
  2.  Outdated and Weak Technology: The regime employs outdated and inefficient technology in its power plants, resulting in even new power plants achieving less than 30% efficiency. This is in stark contrast to modern power plants worldwide, such as combined-cycle plants, which achieve efficiencies of 55% to 60%.
  3. Aging Power Plants: By 2017, 25 of the country’s power plants were completely outdated and needed to be decommissioned. Their efficiency was merely 10% to 15%. This was reported by the state-run ILNA news agency on October 4, 2017.4.
  4. Current Power Plants approaching “end of life”: Some of the existing power plants are approaching a 66-year operational period, as reported by the regime’s ISNA news agency on December 11, 2022.5.
  5. Neglected Infrastructure Upgrades: Over the past decade, the regime should have annually invested $2 billion in the renovation of the electricity network. However, this has been neglected, resulting in an annual loss of $4 billion due to inefficiencies in the electricity network.

Hydroelectric power plants
The regime’s actions of exploiting and depleting surface waters have had a profound impact on the efficiency of hydroelectric power plants. As a result, these plants have suffered a significant decrease in their effectiveness, and some have even been forced out of operation. An illustrative example is the Karun Dam, which originally stood at a height of 37 meters. However, due to a staggering 20-meter reduction caused by the alarming depletion of water resources, its stature has been drastically reduced. This troubling situation is not unique and is seen across other dams in the country as well.

This trend signifies a departure from the sustainable operation of hydroelectric power plants nationwide. Some dams are now either being decommissioned or experiencing a sharp decline in performance. In fact, some have humorously described these hydroelectric power plants as having reached their lowest point.

However, it is worth noting that hydroelectric power plants contribute only 7% of the country’s total electricity production. Considering the multitude of dams they have constructed, which, apart from being involved in the exploitation and depletion of Iran’s surface waters, have yielded no additional benefits in terms of efficiency, all at the hands of the Islamic Revolutionary Guard Corps.

 

Failed plans
Despite including plans for increasing electricity production in their development strategies, the regime consistently falls short of achieving its targets. For instance, their goal for 2023 was to launch 6,100 megawatts of new power plants, but by this spring, only 320 megawatts have been successfully put into operation – a mere 5% of the intended target.

Ebrahim Raisi’s administration had set a goal of inaugurating 2,630 megawatts of combined-cycle power plants for this year. However, by summer, only one megawatt was actually activated.

Adding to the ongoing power shortages experienced by the public, the regime’s pursuit of expanding cryptocurrency mining farms, particularly for Bitcoin, plays a role. This move is driven by the regime’s desire to evade sanctions and generate cash. According to officials from the Ministry of Energy, a substantial amount of electricity – approximately 600 megawatts – is being consumed solely for the purpose of Bitcoin mining.

 

Exporting energy amid severe shortages
Despite the ongoing electricity crisis, the regime continues to engage in electricity exports. Based on the monthly statistics published on the regime’s official energy ministry website, Iran’s electricity exports have surged to nearly 1.9 terawatt-hours in the first four months of the year 1402 on the Persian calendar [March 2023- March 2024], marking a significant 92% increase compared to the same period in the previous year.

Notably, one-third of the total electricity exports for the initial four months of this year occurred in July, indicating a notable 48% increase in export volume compared to June.

Interestingly, despite the prevalent electricity shortage and the substantial surge in exports, Iran’s electricity imports have only slightly exceeded 1 terawatt-hour in the same period, reflecting a considerable 23.8% decrease compared to the corresponding period in the preceding year.

Amidst these circumstances, the Raisi government chose to double electricity exports this spring. Short in cash, the Raisi administration omitted the specifics of income generated from gas and electricity exports from its budget plan. However, interestingly, the government’s revenue from selling gas and electricity to countries abroad contributed more to its total revenue than domestic sales of electricity and gas.

 

Sources of Iran’s Electricity Supply
Currently, thermal power plants contribute to 80% of the country’s electricity, while hydroelectric power plants provide around 7% to 10% of the total power generation.

The share of solar and wind power plants in Iran’s electricity production is merely 0.5% of the total output, despite the fact that the country has a calculated potential of 90,000 megawatts from renewable sources. With 300 sunny days per year and ample sunlight, Iran possesses a natural advantage for solar energy production. However, the regime seems more interested in exploiting and deceiving than actually pursuing these endeavors.

For the current year, Raisi has set a target of launching 1,350 megawatts of solar and wind power plants. Yet, during the spring of 2023, only 21 megawatts were materialized, accounting for a mere 1.5% of the total goals for the year 1402 [2023-2024].

Examining the construction cost of the Bushehr nuclear power plant, which is estimated at a minimum of $22 billion— some even suggesting figures as high as $40 billion— it’s worth considering that this cost was spent on producing 1% of the country’s electricity, equivalent to 800 megawatts. Furthermore, it took 35 years to build.

This amount of power, 800 megawatts, could have been generated with an investment of $820 million to $1.4 billion in solar or wind power plants (depending on the type of facility). A case in point is the UAE, where a 1,200-megawatt solar power plant was established in just two years at a cost of nearly $2 billion.

This stark comparison illustrates that the $22 billion invested in the Bushehr nuclear plant could have produced nearly 15,000 megawatts, approximately 19 times the nominal capacity of the Bushehr plant, from clean solar energy without adverse environmental effects.

This provides further proof that the clerical regime’s assertion of peaceful nuclear usage is evidently deceptive and unsupported.

The State of Power Plants in Iran
The efficiency of power plants in Iran is remarkably low, ranging from 20% to 40%, and sometimes even less than 20%. This is despite the fact that power plants in Iran receive fuel at almost no cost.

According to Clause 14 of the regime’s budget law for 1401 [2022-2023], the price of gas delivered to power plants was equivalent to 100 rials. In contrast, according to the budget law, for every cubic meter of gas delivered to power plants, a fee of 70 tomans is paid to the National Gas Company.

Currently, thermal power plants supply 90% of Iran’s electricity by burning natural gas, diesel, and mazut. These power plants consume over 30% of the gas produced in Iran but have low efficiency, with the best-case scenario being a 40% efficiency rate, meaning they waste 60% of the gas delivered. With a simple calculation, they waste nearly 20% of Iran’s total gas and contribute to its destruction.

Hence, because power plants in Iran acquire fuel with minimal cost, they lack the motivation to enhance efficiency. This is due to the fact that any quantity of electricity they produce and sell directly translates into profits for them.

Now, if the efficiency of power plants were improved by just half a percent, a saving of 846 million cubic meters of fuel could be achieved annually. If this efficiency improvement reached 1%, a saving of nearly 1,700 million cubic meters of fuel could be achieved annually. Such measures have high effectiveness in reducing air pollution. Nonetheless, one of the activities carried out by power plant owners in Iran involves the illicit trafficking of diesel.

 

Who owns the power plants in Iran?
The ownership of power plants in Iran has shifted due to Supreme Leader Ali Khamenei’s policy called privatization, which involved reinterpreting Article 44 of the regime’s constitution. As a result, the IRGC as well as the economic institutions linked to Khamenei have taken control of these power plants.

For instance, the Abadan power plant, with a capacity of 814 megawatts, was taken over by Setad also called EIKO, the Execution of Imam Khomeini’s Order, at a cost of 1.715 trillion tomans. Interestingly, the price of the land for this project was three times the mentioned amount.

Similarly, the Zagros power plant, producing 656 megawatts, came under the ownership of the “Martyr Foundation” for less than 800 billion tomans. The Damavand power plant also fell prey to corruption and seizure by the same foundation.

Additionally, the Khatam al-Anbiya base acquired the Sabalan power plant with an electricity capacity of 960 megawatts, paying only 456 billion tomans.

Other examples include the Gulf Development Energy Horizon Company, associated with the regime’s Law Enforcement Force Foundation, taking control of the Mashhad and Sabzevar power plants.

Meanwhile, the Khoy power plant came under the control of the Pasargad Energy Development Company, linked to the IRGC’s Cooperative Foundation.

The Fars power plant was acquired by the Bank-e-Tejarat in exchange for government debts, and the Ministry of Defense gained authority over the Kazeroon and Neyshabur power plants.

In another instance, the MAPNA company, a subsidiary of the Khatam al-Anbiya base, took over the Sanandaj and Parand power plants.

Notably, the Isfahan power plant was acquired by Persian Steel Company (Fatahiha) for a nominal amount, and the Ghadir Investment Company, affiliated with the regime’s Ministry of Defense, managed to secure ownership of the Gilan power plant for a mere 1,394 billion tomans.

The Qom and Tehran power plants, for instance, are owned by Saba Holding, associated with the Mostazafan Foundation. Other power plants in the country have affiliations with state entities, often operating under ambiguous labels. This usually involves transactions or debt settlements that lead to ownership transfers.

To illustrate, the Binalood, Chabahar, and Sultanieh power plants, collectively capable of producing 1092 megawatts and valued at 1223 billion tomans, were transferred to address government debts with financial institutions. Similarly, the Damavand, Fars, Montazer Qaem, Tabriz, Tus, Zagros, Jahrom, and Abadan power plants, with a total capacity of 9267 megawatts and a value of 8792 billion tomans, were also handed over to settle debts.

Additionally, the Sabalan, Sanandaj, and Parand power plants, with a combined capacity of 2874 megawatts and valued at 1460 billion tomans, were transferred to address debts related to water and industry.

It’s important to note that the MAPNA Group, under the umbrella of the Khattam al-Anbiya IRGC base, holds 50% control over the country’s electricity generation.

As a result, the Khamenei regime has established control over power plants through its economic entities, exploiting both the population and the environment by relying on fossil fuels like mazut. Hence, the sole path to escape exploitation and breathe unpolluted air in Iran lies in eliminating the root issue itself.

Amir2018TaghatiAugust 21, 2023
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