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Iran’s Pezeshkian-led Reformists face monumental challenge in tackling electricity shortfall

Iran is expected to have mass power cuts this summer.
Iran is expected to have mass power cuts this summer.

As the embers slowly go out on the former Raisi administration, Iran continues to grapple with widespread power shortages exacerbated by the scorching summer heat and worsening climate change like sudden floods knocking out the grid for days at a time.

The former administration, which was abruptly shortened by the president and foreign minister dying on the side of a mountain not far from the border with Azerbaijan and Armenia, jolted the Islamic Republic System into a new election cycle a year earlier than planned. Some academic journals have even placed Raisi and Amir-Abdollahian’s deaths at the hands of the changing climate due to sudden rainfall and fog for that time of year.

So far, mitigation strategies, including tweaking office work schedules and enforcing power usage restrictions on industries, have prevented widespread blackouts­—but only some of the time. Even the most generous analysis of the situation would suggest that the electricity grid in the country is facing increasing demand irrespective of whether people are at work due to the incremental increase in temperature in cities including Tehran, Shiraz, and Ahvaz, putting extra strain on traditional so-called “swamp coolers” or modern air conditioning units which use more power.

With worsening weather patterns, the implications for the industrial sector and disruptions to administrative routines remain enormous. They are costing the economy already battered by US sanctions and poor levels of infrastructure investment over the past 40 years.

Iran's growing energy deficit

For several years, Iran has been hit by an electricity deficit across the country. Demand management programmes across the industrial and administrative sectors and incentives for homes have kept the lights on and staved off total blackouts during the outgoing government's three-year term. Nevertheless, these measures have taken a toll on both industry and the daily life of administrative staff.

When Raisi assumed power in August 2021, Iran faced a power deficit of 15,000 megawatts (MW) per day. Over his tenure, the government managed to crank up the country's daily power generation capacity to 94,000 MW, with nearly 76,000 MW coming from thermal power plants (TPPs) – roughly 81% of the total. The TPP sector is a mix of private and state-owned power plants, with the private sector churning out 68% and the state sector pitching in the remaining 32% of electricity.

The rest of the power production capacity stems from various sources, including hydroelectric plants (13,000 MW), nuclear power plants (1,020 MW), scattered generation (2,500 MW), renewables (1,200 MW), and diesel power plants (400 MW).

The outgoing government juiced up Iran’s power production capacity by nearly 9,000 MW, thanks to the addition of 44 new power plants (6,561 MW), a boost of 2,000 MW in the operational capacity of gas power plants, and contributions from small-scale units (380 MW).

Everyone agreed that upping power generation capacity was key to tackling the worsening power shortages and making up for past misses in expanding electricity production. So, it shot right to the top of the government's to-do list led by Raisi’s team.

Running out of water

However, the incoming government, slated to take office in mid-August, inherits a massive power deficit, which is expected to worsen significantly in 2024 and has seen record temperatures across Iran. Even if this year's policies manage to avert power cuts, the new government, with Masoud Pezeshkian at the helm, has a monster challenge on its hands to untangle the power sector's mess and pivot the country away from deteriorating power plants and a lack of water to turn turbines.

On July 9, a prominent Iranian reformist accused authorities of deliberately depleting dam reservoirs to create electricity shortages for the incoming government in a statement that highlights ongoing political tensions in the country. Javad Imam, spokesman for the Reformist Front, claimed on July 8 that water is being released from dams at an alarming rate, resulting in daily electricity production of 123,977 MWh whilst rapidly lowering reservoir levels despite record rains earlier this year.

"In about 20 days, the Shahid Abbaspour and Masjed Soleyman dams will be out of commission, and production at Gotvand will be nearly zero," Imam wrote in a widely shared social media post. He warned that these actions could leave the new government facing a deficit of 8,000MW in hydroelectric power when it takes office.

Renewables come back

However, the biggest miss of the former administration was the renewables. His administration fell short despite a few small solar power plants opening nationwide during his tenure. With more than 300 sunny days a year, Iran has huge potential to expand solar farms and attract investments.

Five government departments signed a memorandum of understanding in 2022 to build 550,000 small-scale solar generators in rural and across Iran within five years. According to the plan, each solar station will have a power production capacity of 5 kilowatts and the government guarantees to buy the electricity generated by solar farms at a fixed price of 22,000 rials ($0.07) per kilowatt hour.

Solar radiation in Iran is estimated to be about 1,800 to 2,200 kilowatt-hours per cubic meter annually, which is higher than the global average. Meanwhile, studies show that renewable investments in Iran are profitable. 

Just over 7,000 solar power stations are operating across the Islamic Republic. Renewables, including solar and wind sources, account for around 1% of the country's total electricity generation capacity of more than 90 GW. Which, as anyone who knows Iran’s mountainous sunny environment would attest is the most significant home goal. According to Iran’s own Energy Ministry data, solar and wind account for 48% and 36% of domestic renewable power production, respectively.

Subsidies and deals with close ally China have failed to move the industry partly due to the low cost of $2.0c/kWh in 2023. With prices this low, the incentive for investment in developing any new power plant in the country has to be heavily subsidized—and no one wants to lose their money.  Still, if the Pezeshkian administration is anything like its Rouhani-era counterpart, there could be a slew of rationalisations on the horizon—which could be quickly politicised like in the 2019 so-called petrol protests when the former government tried a degree of rationalisation in raising the prices to something a little more in line with reality.

During the Rouhani administration in 2019, the Iranian government, before new US sanctions, signed a deal with British renewable energy investor Quercus, who at the time said it would invest $600mn in solar power in the country. That deal, which collapsed due to sanctions, was a small window of what was possible in the country during that era. Construction was expected to take three years, with each 100 MW standalone lot becoming operational and connecting to the grid every six months to mitigate the risk for investors.