Blackouts; A Power Struggle Between the Guards and Government

Widespread blackouts across Iran in recent days coincide with government claims that cryptocurrency miners are disrupting the country’s power supply. Media outlets and some parliamentary representatives close to the Islamic Revolutionary Guard Corps (IRGC) attribute the blackouts to the deterioration of the power grid.

Mohammad Hasan Metavolizadeh, CEO of Tavanir Company, says that during efforts by company officials to shut down cryptocurrency mining centers, they came under “gunfire.”

Simultaneously, at a government cabinet session, the Ministry of Intelligence and the Economic Security Police were called upon to combat cryptocurrency mining.

Last week, blockchain analysis firm Elliptic released a report estimating that 600 megawatts of electricity annually in Iran is used for extracting one billion dollars worth of Bitcoin.

Such an enormous revenue stream, equivalent to four months of Armenia’s government budget or two months of Afghanistan’s government budget, cannot be the work of ordinary individuals. It was previously reported that the IRGC, in collusion with Chinese miners in Rafsanjan and other parts of the country, has established large-scale cryptocurrency mining farms and uses cheap electricity in the country.

Metavolizadeh’s remarks about “gunfire at Tavanir company officials” and the Ministry of Power seeking assistance from the Ministry of Intelligence also indicate that their opponent is the Islamic Revolutionary Guard Corps.

However, what is striking in his statements is a figure cited for electricity consumption at cryptocurrency mining farms.

He says that 2,000 megawatts are consumed for Bitcoin extraction in the country. This figure is more than three times the Elliptic Institute’s assessment.

If the Iranian government exported this amount of electricity, it would earn more than $2.2 billion, and if such a figure is accurate, the annual revenue of Iranian miners from Bitcoin extraction would actually exceed $3 billion.

Metavolizadeh says licensed miners consume approximately 300 megawatts of electricity, and the remaining electricity consumed for cryptocurrency extraction is unlicensed.

Such an amount of electricity consumption is equivalent to 3.5 percent of the country’s total electricity consumption and more than 10 percent of the domestic electricity consumption of 30 million residential subscribers.

Based on the International Energy Agency’s assessment, Iran had approximately $52 billion in hidden electricity subsidies in 2019.

That is, if Iran exported all its generated electricity to foreign markets instead of domestic consumption, it would have $52 billion in additional revenue. Cheap electricity has made the cost of Bitcoin extraction in the country extremely low, and even foreign miners such as Chinese companies have come to Iran for cryptocurrency extraction.

What the Government Won’t Say

Government officials and the Ministry of Power have consistently spoken over the years of “85,000 megawatt electricity generation capacity” in the country and have insisted on this point. However, details from the Ministry of Power’s statistics show that the actual electricity generation capacity of the country is 64,000 megawatts.

In fact, many old power plants that were decommissioned years ago are included in the “generation capacity” statistics, but the actual operational capacity for electricity generation in the country is 21,000 megawatts less than this figure.

On the other hand, when we talk about operational capacity, we consider the country’s electricity generation potential at its best, and this figure does not mean the actual electricity production of the country. Last year, the highest electricity generation in the country occurred on August 21 and was less than 58,000 megawatts.

The difference between operational capacity and actual electricity production stems from the fact that power plants in the country with a capacity of 12,000 megawatts produced only 9,000 megawatts of electricity last year due to lack of rainfall, and Iranian officials say that this year the figure has been cut in half. The suspension of thermal power plants for maintenance is another factor in the difference between operational capacity and actual electricity production.

Therefore, while the country’s peak electricity consumption has now reached 55,000 megawatts (3,000 megawatts less than peak consumption in 2020), the country has faced widespread blackouts.

However, what the government does not mention regarding blackouts is that nuclear electricity, which Iran claims to be striving to develop and which has cost Iranian citizens hundreds of billions of dollars over the past decade due to sanctions, accounts for only 1 percent of the country’s total electricity generation.

On the other hand, according to the Ministry of Power’s own statistics, electricity losses in the country’s old and deteriorated transmission and distribution system exceed 10 percent, equivalent to the electricity generation of 10 nuclear power plants the size of the Bushehr plant.

Last year, approximately 40 terawatt-hours of the country’s electricity was lost in the distribution network, equivalent to one-third of the country’s residential electricity consumption.

Moreover, the Iranian government had set a target of launching 4,800 megawatts of new power generation capacity last year, but only 38 percent of this plan was realized. In 2019, less than half of the country’s electricity growth plan was achieved, and therefore last year the country faced an electricity shortage, and the government doubled electricity imports, bringing it to 2.7 terawatt-hours.

The natural growth of the country’s electricity consumption is five percent annually, and the government should launch new power plants accordingly, but has not done so in recent years.

Also, thermal power plants that run on gas, fuel oil, and diesel account for 85 percent of the country’s total electricity generation, but their average efficiency is very low and less than 39 percent.

Iran could have, with the help of foreign companies, converted old power plants with outdated technology into combined cycle power plants and increased their efficiency to above 44 percent, but sanctions and poor government planning have prevented this.

On the other hand, 36 percent of the country’s electricity is used in the industrial sector, the efficiency of which is also very low, and effectively wastes a large portion of the country’s electricity.

With 300 sunny days, Iran is one of the world’s rare countries for solar energy production, but the share of clean energy in the country’s electricity generation mix does not even reach one percent. The operation of thermal power plants with highly polluting fuels such as fuel oil not only wastes the country’s resources but also endangers the health and lives of citizens.

According to the Paris Climate Agreement signed by the international community in 2016, Iran was supposed to reduce its greenhouse gas emissions by 4 percent, but statistics from the “Global Carbon Project” show that Iran’s greenhouse gas emissions from 2016 to 2019 increased by as much as 20 percent and reached 780 million tons. Iran is the sixth largest emitter of greenhouse gases in the world.

Iranian officials make no mention of this issue and do not explain why, when there is adequate infrastructure for producing clean and renewable energy such as solar electricity, they insist so much on nuclear electricity generation, the cost of which is also approximately equal to solar electricity generation, and finally, after 20 years and $8 billion in costs to build the Bushehr nuclear power plant whose fuel will be purchased from Russia for the next 15 years, they insist so much on the nuclear program and uranium enrichment, and ultimately the share of nuclear energy in the country’s total electricity generation is only 1 percent.

Source: DW