Iran struggles with power cuts despite energy riches

By Fredrik Dahl and Hashem Kalantari

TEHRAN, July 23 (Reuters) - Daily electricity outages lasting several hours are fraying nerves at the height of Iran's sweltering summer, plunging neighbourhoods into darkness and bringing whirring air conditioners to a sudden halt.

"Life in Tehran is difficult the way it is. With the power cuts it has become intolerable," said Reza Sekhavat, owner of a grocery store in a middle-class district in the capital, where temperatures have soared above 40 degrees Centigrade.

Iran is the world's fourth-largest oil producer and sits on its second-largest natural gas reserves, but analysts say heavily subsidised domestic energy prices encourage wasteful consumption that puts pressure on the power grid.

"It has got to be tackled from the point of view of price. People have to pay real prices," London-based energy consultant Mehdi Varzi said.

But price rises may be politically difficult ahead of an election due in mid-2009, when President Mahmoud Ahmadinejad is widely expected to run again. When gasoline rationing was launched last year, several fuel stations were torched.

Coming six months after gas shortages left some northern areas without heating during Iran's coldest winter in decades, the summer blackouts highlight problems keeping up with soaring domestic energy demand despite the country's hydrocarbon riches.

This makes the Islamic Republic vulnerable to disruptions such as the present one, blamed on a severe drought that has hit hydro-generated power, accounting for roughly 10 percent of total electricity supplies.

"Iranian governments have raised electricity capacity quite substantially in the last decade but it is clearly not enough," Varzi said. Rapid migration to cities since the 1970s had contributed to demand increasing by double digits each year.