Iran has experienced persistent electricity shortages due to rapid demand growth, aging generation infrastructure, electricity price subsidies, and institutional challenges that have constrained investment and system modernization. This study evaluates the underlying causes of these shortages and assesses the potential of demand-side management (DSM), renewable energy deployment, and policy reforms to improve electricity system reliability. A mixed-methods approach was employed, combining quantitative analysis of electricity demand, generation capacity, and supply–demand imbalance with qualitative assessment of governance structures, regulatory frameworks, and DSM implementation. The results indicate that existing DSM programs have achieved only modest peak-demand reductions because of limited smart-meter deployment, weak consumer participation, and insufficient financial incentives. The analysis further suggests that utility-scale solar and wind projects can complement DSM in reducing medium-term supply deficits when supported by appropriate regulatory reforms and grid flexibility measures. Moreover, institutional fragmentation and non-cost-reflective electricity tariffs remain major barriers to effective electricity sector reform. The study concludes that improving electricity security in Iran requires an integrated policy framework combining phased tariff reform, expanded DSM programs, accelerated renewable energy deployment, strengthened institutional coordination, and greater private-sector participation. The proposed framework provides practical policy recommendations for enhancing electricity system resilience while supporting the country's long-term energy transition.