July 23, 2008 / 11:44 AM / 10 years ago

Iran struggles with power cuts despite energy riches

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.

“SILENT EARTHQUAKE”

Iranian media have also cited United Nations sanctions on Iran over its disputed nuclear programme and lack of investment as factors to blame for the summer’s power problems.

Deputy Energy Minister Mohammad Ahmadian this week said the government may increase electricity prices by nearly five times from September as part of a wider overhaul of subsidy payments.

But such a move could anger Iranians who are already seeing the purchasing power of their wages eroded by inflation, now running at more than 26 percent annually.

Ahmadinejad, a self-styled champion of the poor, has urged people to economise on power for the rest of the summer to ease pressure on power plants. The authorities publish a schedule for the electricity disruptions each week, but some of Tehran’s 12 million residents say they suffer bigger-than-announced cuts.

Mehdi Safaie, owner of a delicatessen, said the outages had paralysed his business. “The government is blaming us for consuming too much gas, too much water, too much bread and now too much electricity,” the 27-year-old said.

Last winter, Iranians were urged to use less fuel after demand surged because of a cold snap and following a cut in gas supplies from Turkmenistan. People in northern regions had to queue for alternative fuels to heat their homes and cook food.

Despite boasting natural gas reserves only surpassed by Russia, analysts say sanctions, politics and lack of investment have slowed development of the sector.

Varzi said there was a need for spare capacity in case of unexpected developments such as this year’s drought, which one lawmaker has likened to a “silent earthquake” causing $13.1 billion worth of damage to Iran’s farm sector.

“If you have an efficient power sector then there should be something to fall back on if things go wrong,” Varzi said. (Additional reporting by Edmund Blair, Zahra Hosseinian and Hossein Jaseb; Editing by Catherine Evans)

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