Industrial production in Iran is in crisis. Manufacturers report frequent power outages that have often brought operations to a standstill. This is particularly notable since Iran has one of the largest oil and gas reserves in the world.
The country suffers from severe power outages every summer and gas shortages every winter. Every year, politicians decide to reduce industrial power supply so that households can continue to have electricity. In summer, the deficit can be as high as 14,000 MW, or 20 percent.
Iran International reported last month that Iran was facing a huge energy deficit due to high summer temperatures, but the situation had not improved since early July.
Industrialists argue that it is really confusing for energy politicians to take the easiest path and cut off electricity supply to factories and steel mills rather than develop infrastructure or buy electricity to meet the country’s shortage. They question how policymakers will compensate for lost production, cover the insurance and costs that arise from power outages, and deal with obligations to customers and financial losses due to production delays.
Reacting to the frequent power outages, Hamidreza Ghaznavi, secretary general of the Entrepreneurs Association, told Khabar Online on Thursday: “The Ministry of Industries, Mines and Trade (IMT Ministry) must resolve the power outages in the industries. However, there is no vocal support for the industrial sector.”
Different impacts on different sectors
Asked how much current capacity is affected by power outages, Ghaznavi said, “Some industries have been shut down for two months. Others operate only at night, and still others alternate between two weeks of operation and two weeks of shutdown.” He explained that different industries face different challenges, but the steel and textile sectors have been hit particularly hard. He stressed that while all manufacturers are struggling, these industries are in an even worse situation.
Political failures and economic consequences
Ghaznavi criticized the Ministry of Industry and Transport for not adequately protecting production. He noted that reducing electricity consumption in the public sector could improve supply to the industrial sector, but this approach has not been implemented effectively. He pointed out that there are many ways to reduce electricity consumption, such as by imposing penalties, but these measures are not enforced to prevent the deteriorating conditions in factories.
In order to prioritize the energy needs of private households, the government has imposed restrictions on energy supplies to industry, causing annual losses estimated at $6 to $8 billion.
Official statistics show that 13 percent of the electricity generated in Iran is lost during transmission and distribution due to the outdated network. Experts even estimate that the loss is as high as 30 percent. This loss corresponds to the entire electricity consumption of the steel industry, which generates export revenue. In addition, many Iranian power plants are inefficient gas or steam power plants. Instead of modernizing the network or switching to more efficient gas and steam power plants, the government has opted for measures such as adjusting office hours or restricting the electricity supply to industry.
Bleak prospects for the Iranian economy
Ghaznavi highlighted the dire situation and called on the Ministry of Energy and Telecommunications to do more to address power outages and support investments. He pointed out that a resolution was passed to encourage factories to use solar and clean energy, but it has not yet been implemented. There is little support for factories to switch to solar power and no immediate action has been taken to facilitate this transition.
Despite the recurring power outages affecting the industry, the CEO of Iran Power Generation, Transmission, and Distribution Company recently announced that the country’s electricity consumption has reached an astonishing 79,872 megawatts, a record number in the history of Iran’s electricity industry. According to Mostafa Rajabi Mashhadi, the country is only 128 megawatts short of breaking the 80,000 megawatt mark – the numbers are astonishing. This demand is equivalent to the electricity consumption of Egypt and Spain combined.
Instead of addressing the fundamental energy imbalance, authorities have cut off electricity and gas to industries – a short-term solution that does not address the country’s energy deficit. Ghaznavi stressed that people need jobs to make a living and that factories must work to meet market demand. If prices rise due to shortages, those who previously had reliable electricity may no longer be able to afford basic necessities, he added.
