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Economy

Why The Power Keeps Getting Cut In Oil-Rich Iran

The Islamic Republic of Iran has no shortage of oil and gas. And yet, its people and industries are having to contend right now with regular power cuts. The question, then, is why, and what — if anything — the Iranian government can hope to do about it.

Why The Power Keeps Getting Cut In Oil-Rich Iran

The Iranian Government cut off electricity due to energy savings, Teheran, July 2021

Roshanak Astaraki

Analysis-

LONDON — Repeated power cuts in Iran have made lives a misery in recent months and are pushing industry, production and services to critical limits. In early July, when President Ibrahim Raisi officially began work as head of the 13th government of the Islamic Republic, he asked the outgoing energy minister Reza Ardakanian why this was happening.

Sources within the energy sector have given some clues and warn that shortages will continue into the winter. Mostafa Rajabi-Mashhadi, a spokesman for the electricity industry, has said there is a "20% shortage in fuel" needed for power production, while Nosratollah Kazemi, a member of the sector's main trade union, recently blamed a "lack of correct planning in energy," warning that even if policies were rectified now, outages could continue for two or three more years.


Power cuts began in mid to late 2020, for some evident reasons such as the use of outdated gas power plants, reduced rainfall that has severely cut hydroelectric output, and lagging plans to boost solar power production.

Their effects have included interruption of basic services, including in hospitals, and in production, which has led to layoffs. These are fueling dissatisfaction among a population already exasperated with state mismanagement in various areas.

Some observers believe anger at power outages and infrastructural obstacles to renewed power generation may prove fateful for the Raisi government.

The country has turned into a fuel beggar.

Some parliamentarians have proposed legislation to end fuel and energy subsidies, which would raise prices. Others, like Hadi Beiginejad, a member of parliament's Energy Committee, are more concerned about the Islamic Republic's ability to send fuel to the regime's regional allies.

Slow to transition to renewables

Energy demand is rising in all countries, and while Iran has considerable oil and gas reserves, four decades of economic mismanagement have brought the country to its present state. The regime, wedded to its revolutionary ideology, has spent revenues from oil and gas exports in reckless, unstable ways, and failed to curb wasteful fuel consumption at home.

For 50 years now, countries have focused on the need to replace fossil fuels with alternative energy sources. The UN held a conference on new energy sources as early as 1961. Energy has since become a vital matter, both for its environmental impact and its role in the autonomy of nations.

An Iranian shopkeeper and his customer stand at a supermarket while the electricity of his shop has been cut off due to energy savings by the Iranian Government in Tehran,July, 2021 — Photo: Morteza Nikoubazl/NurPhoto/ZUMA

A lonely nuclear power plant

Iran engaged in those debates at the time, but its diversification plans were forgotten after the 1979 revolution. This neglect has turned a country once tipped to play a decisive role in energy markets into a fuel beggar. The regime's sixth development plan (2016-2021) envisaged a 5% share for renewables in Iran's energy production mix, but as of now, it's barely 1%.

Starting in the 1990s, the regime began an ill-advised push to build dams, harming Iran's natural water reserves and farming. And yet, Raisi's energy minister, Aliakbar Mehrabian, insists that Iran is a "model" in energy production. Because of insufficient rainfall, many of the dams generate no power today.

The regime is lagging in all stages of energy production and consumption.

In Bushehr, the country's single nuclear power plant is also failing to produce as much power as publicized, even halting operations early this year, purportedly for technical reasons. In early 2021, a member of the Atomic Energy Organization warned it might even stop altogether if Iran is unable to buy parts needed from Russia.

Buried assets

Iran has the world's second largest natural gas reserves and is fourth with regards to oil reserves. Nevertheless, it cannot meet domestic fuel needs. In the winter of 2020-21, many gas-powered plants had to use mazout as fuel, which reduced their output and caused severe pollution in cities. Shortages are expected this winter too, as demand is set to rise. The government is at an advanced stage in talks with Turkmenistan to import gas.

The regime is lagging in all stages of energy production and consumption. The country has a 10% oil recovery rate at the extraction stage, considerably below rates abroad. The average rate elsewhere is around 34%, while Saudi Arabia has a 50% rate.

Regional instability is another factor that will impede any recovery as an energy actor. China will work to make Afghanistan a key energy transfer route, undermining a similar role for Iran. And while India wanted to use Iran's Chabahar port to import Central Asian energy through Afghanistan, this multilateral plan has stalled as India will not be doing business with the Taliban for now.

Regional relations are changing and not necessarily in Iran's favor, leaving us with the question of when and how the Islamic Republic can start reviving its ailing, but vital, energy sector.

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