Unprecedented energy shortage rattles Iranian industries

Power cuts in Iran, now at unprecedented levels, are severely damaging some of the country's critical industries which are now struggling to pay workers and keep businesses afloat.

The head of the Isfahan Chamber of Commerce, Amir Kashani, told Bourse Press earlier this month that he estimates a total annual loss to the steel industry at around $4 billion.

In an interview with state television last week, an official of Abbas Abad Industrial Compound in the southeast of Tehran said the industries based in the compound are facing power cuts of up to 14 hours a day.

The industrial area is home to dozens of factories producing electronic and household appliances, car parts, plastic, and dairy products.

Mohsen Zabihi, the coordination deputy of TAVANIR, Iran's government-owned energy company, said on December 15 that low winter temperatures and the increase in domestic gas use have caused serious shortages in the supply of fuel to power plants, particularly in the northern areas of the country.

He announced that all industrial units have been informed that they must reduce their electricity consumption by 50 percent from 6am to 5pm, by 90 percent between 5pm to 12am, and by 70 percent until 6am the next day.

The continued disruption to production is putting many workers in danger of losing their jobs. In an unusually candid admission, Chief Justice Gholamhossein Mohseni-Ejei said on Monday that production companies are facing serious issues including cash flow problems and inability to pay the workforce due to power shortages.

Producers say power cuts are damaging their machinery and products, particularly food with poultry farmers reporting extensive deaths of young chickens, and dairy producers' products saying their products are spoiling during power cuts.

With the drastic deterioration of the economy in the past few years, workers’ strikes to protest low wages and long delays in the payment of their salaries have become more common.

If the situation worsens, the risk of protests looks increasingly high, with Mohseni-Ejei briefing security and intelligence officials to ready for such unrest, reminiscent of the nationwide protests of 2019.

Around 80 percent of Iran's electricity is produced from fuel. Officials say the private sector owns around 65 percent of fuel power plants.

However, many companies described as private are owned fully or partially by various state entities such as Bonyad-e Shahid, Bonyad-e Mostazafan, and government-owned banks such as Bank Sepah.

As in most other sectors, there is no transparency in data on electricity production, profits, and losses of fuel power plants but experts say they have been consistently accumulating huge losses since 2018 for various reasons including the government’s strict control of prices and failure to pay its debts to them.

Iran's minister of energy, Abbas Aliabadi, recently told reporters that "a considerable number" of organizations or individuals have been putting strain on the grid due to illegal Bitcoin mining. However, this includes state bodies such as the Revolutionary Guards (IRGC), the burden only adding to existing issues such as the dilapidation of power plants and the government's failure to store enough fuel for running them in the winter.