Economic Imbalance at the Core of Iran’s Water and Power Crisis

TEHRAN (Iran News) Aliabadi described the situation as a “mother problem” that has persisted for years, culminating in a record 20,000-megawatt supply-demand gap during the summer of 2024. This imbalance, he noted, both undermined investor confidence and spurred uncontrolled rises in power and water use, with electricity consumption alone growing by more than 8.5 percent last year.

The minister stressed that while financial strain first became apparent in 2018, it reached a crisis point in 2024. He urged parliament’s research center to cooperate closely with his ministry to verify data and clarify discrepancies in official reports.

Aliabadi pointed to the accelerating demand for electricity as Iran and the world enter what he called the fourth and fifth industrial revolutions, characterized by digitalization and artificial intelligence. “If we attempt to meet these needs with traditional methods, we will face enormous global and local challenges,” he warned. Instead, he highlighted efficiency improvements, combined-cycle plant upgrades, and investment in renewable energy as the most viable strategies, already pursued by advanced economies.

The minister acknowledged that fuel shortages last year disrupted power plant operations, delaying overhauls and damaging equipment. This, in turn, lowered efficiency, reduced generation capacity, and intensified pressure on the grid.

Environmental pressures compounded the problem. Prolonged droughts over the past five years slashed hydropower output by 40 percent in 2024, and some hydropower units were forced entirely offline. Aliabadi said these conditions directly threatened grid stability and triggered localized blackouts.

Adding to the strain, 2024 also saw unprecedented heat, with national average temperatures rising 1.5 degrees above long-term norms. This spike sharply drove up demand for cooling in Iran’s hottest regions. Meanwhile, more than 15,000 megawatts of Iran’s installed capacity comes from aging plants that have effectively outlived their productive lifespan.

Iran’s electricity transmission and distribution network—one of the largest in the region—is also suffering from wear and obsolescence. Aliabadi emphasized the urgent need for modernization to ensure reliable delivery.

On water, he outlined chronic challenges rooted in decades of underinvestment and incomplete projects. Currently, each province has an average of 10 unfinished water projects, totaling 67 nationwide. With current budget allocations, completing these projects would take two decades, he said.

Aliabadi also underscored Iran’s worsening water balance: renewable water resources per capita have dropped from 6,800 cubic meters in 1956 to about 1,300 cubic meters today, and are projected to fall below 1,000 cubic meters by 2041. “We face a structural mismatch between demand and renewable supply,” he cautioned.

Key weaknesses include limited use of unconventional water sources such as treated wastewater and desalinated seawater, as well as fragmented governance and insufficient adoption of new technologies. The ministry, he added, is pursuing reforms to strengthen integrated water management and expand pilot-based innovation.

Looking ahead, Aliabadi presented a strategic program to manage water up to 2041, coinciding with the close of Iran’s Seventh Development Plan. The initiative emphasizes equitable allocation of resources, institutional reforms, separating executive from regulatory duties, reducing conflicts of interest, and empowering local water governance through participatory management.

One of the plan’s highlights is a target to eliminate 15 billion cubic meters of water imbalance, outlined in Article 37 of the Seventh Development Plan. The government has already held eight technical committee meetings and two high-level sessions of the Supreme Water Council to finalize an operational roadmap, he said.

For the power sector, Aliabadi said a four-year plan has been launched under the same development framework. It includes 14 major projects and 36 management packages designed to improve consumption efficiency, expand generation, and strengthen sustainability.

Drawing on his three decades of experience in Iran’s water and power sectors, Aliabadi expressed confidence that with proper reforms, the country can overcome its current crisis. He urged lawmakers to support the ministry’s agenda, emphasizing that Iran’s ancient civilization should not be undermined by what he described as solvable technical and economic challenges.

“Rest assured,” he concluded, “I will use every capacity to prevent our shortcomings from becoming a source of satisfaction for our adversaries. The path forward requires persistence, innovation, and collective responsibility.”