Iran has one of the Middle East’s largest and most extensive energy systems. It operates a nationwide electricity grid, major oil and gas fields, a wide pipeline network, large refineries, export terminals and an established domestic gas-distribution system. These assets are supported by some of the world’s largest hydrocarbon resources.
Yet Iran regularly experiences electricity shortages, gas-supply pressure and restrictions on industrial energy use. The problem is not a simple absence of physical infrastructure. It is the widening difference between installed capacity and dependable supply. Demand has grown rapidly, while sanctions, low domestic energy prices, aging equipment, drought and limited investment have reduced the effective performance of the system.
Iran’s energy-infrastructure challenge is therefore one of modernization and efficiency. New capacity is still required, but the country also needs to improve existing power plants, pipelines, refineries and transmission assets that already form the backbone of its economy.
Installed Capacity Does Not Guarantee Available Electricity
Iran’s installed electricity-generating capacity reached almost 99 GW in early 2026, making its power system one of the largest in the region. Thermal power plants provide most of this capacity, with natural gas serving as the dominant fuel. Combined-cycle plants have expanded as Iran attempts to improve the efficiency of older gas-turbine facilities.
Installed capacity, however, is considerably higher than the amount of power that can always be supplied. Some generating units are old, operate below their rated output or require maintenance. Hydropower production changes with reservoir levels, while gas-fired plants may receive less fuel when household heating demand rises during winter.
Summer presents a different problem. High temperatures increase air-conditioning demand, pushing electricity consumption toward the system’s operational limit. Industrial customers, including steel, cement and petrochemical producers, may be ordered to reduce production so that residential supply can be maintained.
This creates a repeated seasonal cycle. Winter gas shortages reduce fuel availability for power plants, while summer electricity demand exceeds dependable output. Oil products can be burned as substitute power-station fuels, but this increases costs and air pollution and reduces the amount of fuel available for other uses or export.
Iran has continued adding generating units, particularly combined-cycle and solar capacity. However, new construction alone cannot resolve the problem when older plants, inefficient demand and fuel-supply constraints remain within the same system.
Natural Gas Infrastructure Holds the Power System Together
Iran’s electricity market cannot be separated from its natural gas network. Gas supplies households, industries, petrochemical plants and power stations, making it the central fuel in the national economy.
The South Pars field in the Persian Gulf is the main source of Iranian gas. Production facilities in Bushehr Province feed processing plants and pipelines that move gas toward population centres across the country. Iran produced approximately 276 billion cubic metres of gas in 2024, but almost all of it was consumed domestically.
This high domestic use limits Iran’s ability to become a major gas exporter despite its enormous reserves. The national system must support residential heating, electricity generation, industry and reinjection into oil fields. During periods of peak demand, the available supply may not be enough to serve all users at normal levels.
Iran’s extensive pipeline network is one of its most important infrastructure assets. It allows gas from the south to reach Tehran and northern provinces and supports exports to neighbouring markets. However, moving large volumes across long distances requires compressor stations, maintenance and reliable control systems. Leakage, equipment deterioration and inefficient end use reduce the value of each additional unit of production.
Gas storage is also strategically important. Greater storage capacity could allow Iran to inject gas during lower-demand periods and withdraw it during winter peaks. Without enough flexible storage, power plants and industries remain exposed to short-term changes in household demand.
Oil Infrastructure Remains Concentrated in the Southwest and Persian Gulf
Iran’s oil infrastructure developed around major fields in Khuzestan and neighbouring southwestern provinces. Crude is collected through pipelines and delivered to domestic refineries or export terminals on the Persian Gulf.
Kharg Island is the central point in Iran’s crude-export system, handling most of the country’s seaborne crude shipments. This concentration supports efficient export operations but also creates strategic exposure. Disruption at a major terminal, pipeline corridor or loading facility can affect a large share of national exports.
Iran produces roughly 3.3 million barrels per day of crude oil in addition to condensate and other liquids. Its domestic refineries have combined processing capacity of approximately 2.6 million barrels per day. Major facilities include Abadan, Isfahan, Bandar Abbas and the Persian Gulf Star refinery.
Refinery infrastructure performs two roles. It supplies Iran’s large domestic fuel market and supports exports of products such as fuel oil, liquefied petroleum gas and other refined fuels. Nevertheless, parts of the refining system are old and require modernization. Older configurations may produce too much heavy fuel oil and less gasoline, diesel or petrochemical feedstock than a modern market requires.
Projects such as the Persian Gulf Star refinery have helped improve gasoline supply, but rising transport demand continues to place pressure on the system. Fuel subsidies encourage consumption and reduce the financial return available for efficiency improvements and new infrastructure.
The Goreh-Jask crude pipeline was developed to create an export route outside the Strait of Hormuz. In principle, it provides greater flexibility by moving crude to the Gulf of Oman. In practice, the system has operated well below its nameplate capacity, showing that strategic infrastructure has limited value unless upstream supply, pumping stations, storage and terminal operations are all available.
A Large National Grid Still Faces Transmission and Distribution Pressure
Iran has a broad interconnected electricity network extending across its provinces and linking with several neighbouring countries. Transmission and sub-transmission lines exceeded 136,000 circuit kilometres by early 2026, supported by a large system of substations and regional distribution companies.
Cross-border connections allow Iran to exchange electricity with countries including Iraq, Turkey, Armenia, Azerbaijan, Turkmenistan, Afghanistan and Pakistan. These links can provide export revenue, support regional balancing and strengthen political relationships.
Domestic shortages, however, limit the amount of electricity Iran can export consistently. When demand rises sharply or generating capacity becomes unavailable, domestic supply takes priority. Neighbouring markets that rely on Iranian electricity or gas can therefore be affected by Iran’s internal energy balance.
Transmission expansion has continued, but reliability depends on more than network length. Substations, transformers, protection systems and control equipment must be maintained and upgraded. Distribution losses, illegal connections and inefficient equipment add to the burden on the system.
The growth of electricity demand also changes where infrastructure is needed. Tehran remains the largest load centre, while industrial provinces such as Isfahan, Khuzestan, Kerman and Hormozgan require large amounts of dependable power. New mines, steel plants, petrochemical facilities and urban developments can create demand faster than local networks are reinforced.
Drought Has Weakened the Role of Hydropower
Hydropower provides Iran with valuable flexible electricity, but output depends on water availability. Long periods of drought and declining reservoir levels have reduced generation from some dams at the same time that electricity demand has increased.
Water scarcity also affects thermal power plants, which require water for cooling and other operating processes. Competition among agriculture, cities, industry and power generation makes energy planning more difficult, particularly in central and southern Iran.
This connection between water and electricity means that hydropower cannot always provide the reserve capacity expected during summer peaks. Lower hydroelectric output places additional pressure on gas-fired plants, which may already be operating at high levels.
Climate conditions also affect transmission and distribution equipment. Extreme heat can reduce line capacity, increase transformer stress and accelerate equipment failure. Infrastructure planning must therefore account for changes in both electricity demand and the physical environment in which the system operates.
Sanctions Have Changed How Iran Builds and Maintains Energy Assets
International sanctions have limited Iran’s access to foreign finance, advanced equipment and international energy companies. This has affected upstream oil and gas development, refinery modernization, power-plant efficiency and the availability of replacement components.
Iran has developed significant domestic engineering and manufacturing capacity in response. Local companies construct pipelines, power plants, turbines, substations and refinery equipment. Partnerships with companies from countries including China and Russia have also supported selected projects.
Domestic capability has allowed infrastructure development to continue, but it does not remove every constraint. Complex compressors, control systems, advanced turbine components and specialized refinery technology can be difficult or expensive to obtain. Financing major projects is also challenging when international banks and investors face sanctions-related restrictions.
Security has become another infrastructure consideration. Iran’s generating plants, refineries, gas-processing facilities, export terminals and nuclear sites are strategic assets. Recent regional conflict has demonstrated that physical protection, redundancy and the ability to restore damaged systems are now part of normal energy planning.
The concentration of oil exports at Kharg Island and gas processing around South Pars creates particular exposure. A more resilient system would require alternative routes, distributed storage, spare equipment and enough reserve capacity to maintain essential domestic supply during disruption.
Solar Power and Nuclear Generation Offer Diversification but Not an Immediate Solution
Iran has strong solar resources and suitable areas for wind development, yet renewable generation remains a small part of the power mix. Solar capacity has expanded quickly from a low base, supported by efforts to reduce fuel pressure and supply industrial customers with dedicated clean electricity.
Large-scale solar projects can be built faster than conventional thermal plants and do not require natural gas or cooling water. Their value is particularly high during hot summer afternoons, when solar output can overlap with air-conditioning demand. However, large renewable additions will require grid reinforcement, improved dispatch systems and eventually battery storage.
Iran also operates the Bushehr nuclear power plant, which provides firm electricity without consuming natural gas. Additional units have been planned at Bushehr, while other nuclear projects remain at earlier stages. Nuclear expansion could diversify electricity supply, but it requires long construction periods, substantial financing, imported or specialized technology and secure connections to the national grid.
Iran already possesses the physical foundations of a major energy system. Its future reliability will depend less on headline installed capacity and more on how effectively those assets are maintained and coordinated. Power-plant efficiency, gas storage, transmission upgrades, refinery modernization, renewable deployment and demand reform must progress together. Without those changes, one of the region’s largest energy networks will continue to experience shortages despite being located above some of the world’s largest oil and gas resources.
