Electricity Crisis in Iran; Investors Regret Involvement in the Electricity Industry

According to two industry officials, the country's electricity sector is struggling with two main crises: energy supply issues for industries and a lack of private investment in power generation. While an official from the Iran Chamber of Commerce reported on the energy supply crisis for industries and the imposition of 'electricity transit fees' on small industrial units, the vice president of electricity producers claimed that 'without the direct presence' of investors and the elimination of the Ministry of Energy as an intermediary with consumers, the imbalance between production and consumption will continue. According to the government news agency ILNA, Abbas Jabalbarzi, vice president of the Industry Commission of the Iran Chamber of Commerce, announced that with the 'order to stop burning mazut' to reduce air pollution and simultaneously reduce gas pressure due to increased consumption in the winter season, electricity production in power plants has decreased. He emphasized that this situation has led to power outages in industrial units, and in some areas, factories are required to endure two days of power outages per week. Jabalbarzi also pointed to a new challenge in providing electricity to industries, adding, 'The government has approved a law that also obliges small and medium units to pay electricity transit fees; a cost that was previously exclusive to large consumers.' This industry official deemed these costs unreasonable, stating that 'these units do not buy electricity from the energy exchange, and no transit occurs for them.' Regarding the imposition of 'crippling' costs on small industries, he added that the Ministry of Energy has 'retrospectively calculated this cost,' and industries must pay it from the beginning of this year while they have not been able to increase their product prices. Meanwhile, Reza Riahi, vice president of the board of electricity producers, identified structural problems in the electricity economy as the main cause of the crisis, stating that investors have regretted continuing their activities in the electricity sector due to the imbalance between revenues and costs and debts arising from currency policies. Riahi emphasized that the policies of Article 44 of the Constitution regarding the privatization of the electricity industry have not been properly implemented, and the Ministry of Energy still has full control over fuel and electricity pricing. He added, 'To attract new investment, the Ministry of Energy must exit the electricity buying and selling chain and enable direct communication between power plants and consumers.' This industry official pointed out that many investors have regretted continuing their activities in this industry due to a tenfold increase in exchange rates and heavy debts. Meanwhile, the revenue from electricity sales in rials has not increased in proportion to costs, and the financial cycle of power plants is in crisis. Riahi warned that if the current trend continues, the country will face a shortage of 37,000 megawatts of electricity in the next ten years, leading to more widespread blackouts. He identified the solution to this crisis as creating a suitable investment environment, removing the government from pricing, and developing economic infrastructure in line with costs. Riahi also noted the country's winter electricity needs, which are about 35 to 40 thousand megawatts and heavily dependent on gas fuel, emphasizing that renewable electricity is only effective during peak daytime hours and cannot meet nighttime needs. The vice president of the board of electricity producers stressed that 'without serious changes in policies and reforms in the electricity economy, the imbalance between production and consumption will continue, and more crises are ahead.' The Associated Press also reported on Friday, December 23, that the ongoing power outages in Iran in recent months have 'disrupted the lives and businesses of people.' The news agency noted that while multiple factors such as mismanagement, decreasing energy reserves, ongoing drought, budget deficits, and sanctions related to the Islamic Republic's nuclear activities likely play a role in the power outages, some believe that cryptocurrency mining may also be a contributing factor.