Oil, gas and Iran economic analyst
Several organizations in Iran's power industry warn of a 26,000 MW electricity deficit next summer, exceeding 30% of peak demand, compounded by natural gas shortages affecting both industries and households.
Ali Nikbakht, Chairman of the Board of Directors of the Iran Power Plants Association, reported this summer's electricity shortage at 19 to 20 GW. He warned that if immediate action isn't taken, the deficit could reach 26 GW next year. Similar concerns were echoed by Hamidreza Salehi, Chairman of the Federation of Energy Exports and Associated Industries, and Hassan Ali Taghizadeh, Chairman of the Electricity Syndicate.
All three officials agreed that not only is it unrealistic to resolve the electricity deficit in the short term, but there is little hope of even sustaining the current level of imbalance.
Aging power plants
Nikbakht also emphasized the aging and deterioration of a significant portion of the country's power plant capacity. He pointed out that one major power plant has already halted operations for repairs, stating, “The spare parts for this plant should have been ordered two years ago, but that didn’t happen, exacerbating the electricity shortage.”
He further explained that while the total nominal capacity of Iran's power plants is over 92 GW, much of it is outdated. “Of the 15 GW nominal capacity of steam power plants, about 12 GW are over 30 years old. In the case of gas power plants, 2.7 GW have also exceeded 30 years of age,” he said.
As a result, 80% of steam power plants and 11% of gas power plants are effectively outdated. These low-efficiency thermal plants account for 43% of the country's nominal power plant capacity.
This aging infrastructure, combined with a steep drop in hydropower generation due to drought, has significantly reduced Iran's actual power production. Despite having around 93.3 GW of installed nominal capacity, the country's real power generation is only about 61 GW, meaning that 30% of Iran's power generation capacity is currently offline.
Growing electricity deficit
Iran should have increased its power production by at least 7% annually for over a decade to meet the growing demand. However, the last time this goal was achieved was in 2010. Since then, the country's electricity consumption has grown at twice the rate of its production. As a result, Iran, which had a net export of 8 terawatt-hours of electricity annually until the mid-2010s, is now facing a massive power shortage.
The issue is that Iran now faces electricity deficits year-round, not just during the summer. Since last spring, the Ministry of Energy has stopped releasing its monthly statistics. However, a report obtained by Iran International earlier this summer revealed that even in the final month of spring, the country faced a 5 GW deficit during peak nighttime hours and a 10 GW shortfall during peak daytime hours.
This deficit surged to 20 GW during this summer's peak demand and is projected to reach 26 GW by next summer. To put this into perspective, this deficit is 1.5 times the total electricity generation of Iran’s northern neighbors—Azerbaijan, Armenia, and Turkmenistan—all of whom export electricity to Iran.
With such a vast imbalance between supply and demand, coupled with ongoing annual growth in consumption, it’s unlikely that Iran will resolve this shortage within the next decade, even if it triples its investment in the power sector. The country needs $20 billion in investment just to cover the current electricity deficit, plus at least $4 billion annually to support the 7% growth in power production needed to meet rising demand.
The primary driver behind Iran’s increasing electricity consumption is the addition of about one million new subscribers to the grid each year, with three-quarters being residential consumers and the remainder from industry, agriculture, and commercial sectors.
Moreover, hundreds of millions of dollars are required annually for the maintenance and repair of aging power plants. Nikbakht noted that the annual maintenance cost for each power plant is approximately $3 million.
A critical concern is the government’s growing debt to private power plant owners, which has quadrupled over the past three years. By the beginning of this year, it surpassed 900 trillion rials ($1.5 billion based on the open market exchange rate or $2.1 billion at the official rate). This mounting debt makes it unlikely that the private sector will continue to invest in the power industry.
Government Deflection
Hassan Ali Taghizadeh, Chairman of the Board of Directors of the Electricity Syndicate, recently warned, "With the current approach, we will face a 25 GW electricity imbalance next year." He also criticized Iranian authorities for blaming the public for excessive electricity consumption, pointing out that the average household consumption in Iran is not only below the global average but nearly half of that in Europe. "Why accuse people of being wasteful? Don’t blame the public for the electricity imbalance."
Statistics reveal that the average household electricity consumption per capita in Iran is under 1,200 kilowatt-hours, compared to about 1,800 kilowatt-hours in the European Union. In countries like the United States and the Arab Gulf states, consumption is several times higher than in Iran.
Blaming the public becomes even more misplaced when considering that 13% of Iran’s electricity is lost in its outdated transmission and distribution network, which the government has neglected to modernize for two decades. This loss is equivalent to 40% of the country’s household electricity consumption, translating into a staggering $4 to $5 billion annual loss at current regional electricity prices.
Additionally, over the past decade, Iran has failed to convert its low-efficiency steam and gas power plants into combined-cycle plants, which boast a 45% efficiency rate. Currently, combined-cycle plants account for just 39% of Iran’s nominal power generation capacity, while low-efficiency steam and gas plants together still make up 43%.
Meanwhile, the share of nuclear and renewable energy in Iran’s power generation capacity remains just 1% each, with the remainder made up by hydropower plants.
