Hamid Mollazadeh
Iran’s current energy crisis stems from a paradox: a country with some of the world’s largest reserves of natural gas and crude oil is struggling to ensure a stable electricity supply and is even experiencing regular power outages, particularly in summer.
This contradiction becomes even more alarming when it is officially announced that Iran spends close to $127 billion annually on energy subsidies, which not only distorts market signals but also eliminates any economic incentives for energy efficiency or a meaningful shift in consumption patterns.
In fact, Iran’s energy policy is stuck in a vicious cycle: low prices lead to excessive consumption, which in turn puts pressure on aging infrastructures, ultimately resulting in supply shortages and blackouts.
According to the latest data from international organizations namely the International Energy Agency (IEA) and the World Bank, Iran’s energy consumption and efficiency patterns, when compared with those of developed neighboring and developing countries, paint a worrying picture.
Per capita electricity consumption in Iran is estimated at around 3,500 kilowatt-hours. While this is lower than in affluent, industrialized nations like Germany (around 6,000 kWh) and Norway (over 23,000 kWh due to cheap electricity and energy-intensive industries), the real predicament emerges when this figure is examined alongside Iran’s primary energy intensity. Iran’s energy intensity—defined as the amount of energy consumed to produce one unit of GDP—is among the highest in the world.
Stark but Unpleasant Fact
To put it into perspective, Iran’s economy consumes nearly twice as much energy as India’s, three times as much as the US or China’s and four to five times as much as highly efficient economies like Germany, France or even Qatar, to produce the same economic value. This stark but unpleasant fact clearly shows that high energy consumption in Iran is not driven by economic prosperity or industrial output, but rather by extremely low efficiency and widespread waste throughout the entire energy production, transmission and consumption chain.
Per capita electricity consumption in the UAE and Qatar is often more than double that of Iran, yet these nations have high energy intensity, reflecting their reliance on energy-intensive industries and heavily subsidized domestic prices. However, a key strategic difference lies in their broader investments in energy diversification—such as nuclear energy in the UAE and large-scale solar projects.
Saudi Arabia, too, is rapidly reducing its oil dependency in electricity generation under its Vision 2030 plan, increasing the share of natural gas and renewables. In contrast, Iran’s share of renewable energy in its electricity mix remains well below 1 percent despite its extraordinary potential—specifically in solar energy. For comparison, Germany, a country with far less sunshine, generates nearly 50 percent of its electricity from green energy.
Heavy Power losses
Transmission and distribution losses in Iran’s electricity grid are estimated at 15 percent, indicating aging infrastructures and a dire need for technical modernization. This figure is similar to that of Russia, but in European countries like Germany and France, such losses are typically below 6 percent, and even lower in Norway.
Therefore, the issue is far more than a mere economic miscalculation—it reflects deeper structural mismanagement, wrong order of priorities and a failure to follow global standards.
A comparative analysis of Iran’s energy path with that of Brazil over the past four decades highlights striking differences.
Despite having over 300 sunny days a year, Iran barely generates 1 percent of its electricity from renewables, while the same figure in Brazil has already reached 45 percent, indicating that the problem is not a lack of resources, but rather poor prioritization and strategic mismanagement.
There is no denying the fact that international sanctions have played a destructive role in exacerbating the crisis in Iran. They have severely limited access to the technology, capital and much-needed parts to modernize Iran’s aging energy infrastructures. Cyberattacks have further complicated the situation, but if we attribute the crisis solely to sanctions, we have definitely fallen into the trap of oversimplification.
The root problem lies in the extreme vulnerability created by domestic mismanagement and overreliance on a single energy source.
Over 86 percent of Iran’s electricity is generated from natural gas-fired power plants, making the system highly susceptible to any disruption in gas supply.
Compounding this, Iran’s energy intensity remains among the highest globally, indicating wastage across the entire production and consumption chain. Even within the country, deep disparities exist—Tehran province, for example, consumes an unusually high share of the country’s electricity, reflecting a broader pattern of uneven development.
Squandering Natural Resources
Iran’s energy crisis echoes a failure in the management of national wealth, where high consumption and low efficiency have led to nothing but environmental degradation and squandering natural resources.
The thorny issue is not rooted in resource deficiency, but in misaligned priorities, an ineffective energy governance model and a political economy focused on very short-term goals.
A lasting solution requires a paradigm shift and a bold, coordinated policy package. First, a gradual and transparent reform of energy pricing must be introduced, supported by a strong social safety net to protect the most vulnerable. Without sending the right price signals, there will be no incentive for efficiency.
Second, the immediate modernization of aging electricity production and transmission infrastructures must be prioritized, alongside mobilizing capital for the rapid and large-scale development of renewable energy, especially solar, unlocking the country’s untapped potential.
Third, energy efficiency regulations in industries and construction initiatives must be enforced rigorously and consumption patterns must be transformed through cultural change and public awareness.
To put it in a nutshell, Iran’s energy future hinges on a fateful choice: to continue with the inefficient practices of the past or to embrace a structural overhaul toward a model based on efficiency, transparency and smart engagement with the global economy.
