By Arya Kia
Iran’s electricity crisis presents an unusual paradox. The country possesses some of the world’s largest natural-gas reserves and has spent decades expanding its generating fleet. Yet electricity shortages have become a recurring feature of daily and economic life. Households face outages, factories are ordered to cut production, government offices are closed during periods of extreme demand, and each summer brings renewed warnings that available supply will fall several gigawatts short of what consumers require.
The scale of the problem became particularly visible in 2024. According to reporting on an assessment by Iran’s Parliamentary Research Center, peak demand approached 80 GW while the grid could simultaneously supply only around 62 GW after accounting for technical and operational constraints. The resulting shortfall was estimated at approximately 18 GW. A recent peer-reviewed Energy Policy study of Iran’s electricity imbalance similarly describes recent deficits approaching this scale.
That gap cannot be understood simply by counting how many power plants Iran has built. Installed capacity and dependable capacity are not the same thing. A generating unit can remain on the national inventory while being unavailable or producing below its nominal capacity because of maintenance, fuel shortages, aging equipment, extreme temperatures, insufficient water, transmission constraints or other operational limitations. The US Energy Information Administration reported that in 2023 Iran’s available generating capacity was less than 75% of installed capacity, while peak summer demand exceeded supply by approximately 12 GW.
The distinction goes to the heart of Iran’s electricity problem. The country does not merely suffer from a shortage of power plants. It suffers from a widening mismatch between the electricity consumers want, the electricity the system can reliably deliver, and the financial and physical capacity to close that gap.
The crisis is therefore often misdiagnosed when it is attributed to a single culprit. Excessive consumption matters. So do natural-gas shortages, drought, sanctions, energy subsidies, aging power plants, cryptocurrency mining, electricity exports and insufficient investment. But none provides a complete explanation on its own. Iran’s electricity shortage is better understood as a system in which these pressures interact and, in several cases, reinforce one another.
Capacity on Paper
For decades, Iran expanded its electricity system around an abundant domestic supply of hydrocarbons. Gas turbines, steam plants and combined-cycle facilities account for most generation, supported by hydropower, the Bushehr nuclear plant and a relatively small but rapidly growing renewable sector.
Nameplate capacity continued to increase even as reliability deteriorated. The problem is that installed capacity measures what generating assets are theoretically capable of producing under specified conditions. Electricity security depends instead on what they can actually produce when demand peaks.
This distinction is particularly important in Iran. Older thermal units can lose output because of maintenance requirements, aging equipment and declining efficiency. High summer temperatures can derate some thermal generators. Gas shortages can leave otherwise functional generating capacity without sufficient fuel. Hydropower capacity can remain installed even when reservoir conditions prevent it from operating at the required level. Transmission congestion and distribution losses can further reduce how much electricity reaches consumers. This means Iran can add thousands of megawatts of nominal capacity without gaining the same amount of dependable electricity.
The deterioration is visible in the changing supply-demand margin. EIA data indicate that Iran’s summer peak deficit had already reached around 12 GW in 2023. The Parliamentary Research Center subsequently estimated a substantially wider deficit during 2024. The recent Energy Policy system-dynamics analysis likewise identifies the growing gap between electricity demand and reliably available supply as a structural rather than temporary problem. As shown in Table 1, Iran’s installed generation capacity, maximum power supplied at peak, and peak electricity demand followed increasingly divergent trends between 2017 and 2024.
The divergence is visible in the data. Between 1396 and 1402, Iran’s installed generating capacity increased from 78.8 GW to 92.8 GW, an increase of nearly 18%. Yet maximum power supplied during peak conditions rose by less than 12%, from 54.6 GW to 61.0 GW. Over the same period, peak electricity demand increased from roughly 55.4 GW to 73.5 GW—about 32%. As a result, the gap between demand and power actually available at peak widened from less than 1 GW to more than 12 GW. In 1402, only about 66% of Iran’s nominal generating capacity was effectively supplying the system at peak.
Such a comparison makes visible what aggregate capacity statistics obscure: Iran has continued to build generating assets while its effective reserve margin has progressively disappeared. Capacity is an asset, while reliability is a system outcome. The difference helps explain why announcing another power plant does not necessarily mean the electricity crisis is closer to being solved.
It also changes how new capacity should be evaluated. One additional megawatt of generation is most valuable when it is available during the hours the system is most stressed. A nominal megawatt that lacks fuel, water, transmission access or operational availability contributes much less to electricity security than the capacity figure alone suggests.
Demand Without Margin
The supply problem has developed alongside rapidly growing electricity demand. Iran’s population, urbanization, appliance ownership and industrial development have all contributed to higher consumption. Subsidized electricity has also reduced incentives to conserve power or invest in efficiency. More recently, extreme summer temperatures have placed additional pressure on the system as demand for air conditioning rises.
The importance of cooling goes beyond annual electricity consumption. Power systems must be capable of serving the maximum simultaneous load, not simply producing enough electricity when averaged across an entire year. That makes a few extremely hot summer hours particularly important. Iranian grid operator Tavanir reported that peak electricity demand reached a record 78.1 GW in July 2024, compared with 73.5 GW at the previous year’s peak. Later assessments put the maximum requirement close to 80 GW.
Climate stress can also work against the system from both directions. A peer-reviewed study in Energy examining electricity supply and demand dynamics in Iran under climate-related stresses found that rising temperature increases electricity requirements while water scarcity creates additional constraints for power generation. Hot and dry summers can therefore create a particularly difficult combination: cooling pushes demand upward while water limitations and thermal derating weaken part of the available supply.
Iran has increasingly managed these peaks administratively. Factories are instructed to reduce electricity consumption. Government working hours are altered. Offices may close during extreme heat. Residential consumers receive conservation appeals and scheduled outages. These measures can protect the grid from instability. But they can also make the underlying imbalance less visible. If a steel mill is ordered to stop production, the electricity it would have consumed disappears from measured grid demand. If a household loses power for two hours, the electricity it would otherwise have used during those hours does not appear in consumption statistics.
This creates an important measurement problem: recorded electricity consumption reflects what the system actually supplied, not necessarily what consumers would have demanded if electricity had been fully available. Supply and realized demand can therefore appear to move back toward balance precisely because part of demand has been forcibly suppressed.
The underlying need has not disappeared. It has been converted into unmet household demand, closed offices or lost industrial production. This distinction became visible again in 2025, when Tavanir reported lower peak demand following consumption-management measures, although temperatures were also lower than during the comparable period in 2024. Lower realized demand after enforced conservation is therefore not necessarily evidence that the structural deficit has disappeared. A shortage can be temporarily managed by cutting consumption. It cannot be eliminated that way.
The Visible Culprits
Persistent electricity shortages naturally encourage simpler explanations, and cryptocurrency mining is one of the most visible. Iran’s inexpensive electricity created powerful incentives for energy-intensive mining operations. A peer-reviewed study published in IET Generation, Transmission & Distribution estimated cryptocurrency-mining demand in Iran at approximately 750 MW during the period examined and showed how low electricity prices made even relatively inefficient mining equipment economically viable.
Seven hundred and fifty megawatts is not trivial, particularly in a system already operating with a narrow reserve margin. But scale matters. Even if that entire estimated mining load had been removed from the grid, it would have represented only a fraction of the national peak deficit that subsequently reached roughly 12–18 GW. Cryptocurrency mining can therefore aggravate an electricity shortage, but it cannot by itself explain the scale or persistence of Iran’s imbalance.
Electricity exports generate a similar debate. Iran exports power to neighboring countries while periodically rationing domestic consumers, which can understandably appear contradictory. Yet exports need to be assessed in relation to their scale, timing, contractual obligations, domestic network losses, and the much larger structural gap between dependable supply and peak demand.
A 2024 study published in Utilities Policy, using a system-dynamics analysis of Iran’s electricity production, consumption and exports, found that losses within the domestic electricity system were substantially larger than electricity exports and projected a worsening imbalance if prevailing trends continued.
This does not mean cryptocurrency mining or electricity exports are irrelevant. Both can place additional pressure on the system, particularly during periods of peak demand. But they are better understood as visible contributors rather than structural drivers of the shortage.
A power system with an adequate reserve margin can accommodate cross-border electricity trade and emerging sources of demand without routinely resorting to rationing. When that margin has already been eroded by rapid demand growth, insufficient investment, fuel constraints, aging infrastructure and other structural pressures, however, loads that might otherwise be manageable become much more consequential. In this sense, mining and exports expose the vulnerability of Iran’s electricity system more than they explain its underlying cause.
Arya Kia is an energy systems researcher focusing on renewable energy, energy and water systems, energy policy, and system dynamics. He is a doctoral candidate in Energy Systems Engineering at Sharif University of Technology and is based in Vancouver, Canada.