Electricity consumption growth jumps between 5 to 7% per year, and to meet the rising demand power infrastructure (generation and transmission) should expand without interruption, head of state-run Iran Power Generation, Distribution and Transmission Company (Tavanir) said.
“Expanding thermal plants, hydroelectric dams, nuclear power plants, wind turbines, solar panels as well as transmission and distribution lines and substations need at least $4 billion a year,” Mohammad Hassan Motavalizadeh was quoted as saying by Barq News website on Wednesday.
It is obvious that attracting funds of this type is far beyond Tavanir’s ability, he concurred.
Not trying to conceal challenges the huge utility company is facing, he said tapping into government financial sources is out of question as the administration itself is struggling with successive budget deficits due to low oil prices and the inability to collect its own money from crude oil exports due to the new US sanctions.
Despite the fact that private firms have added at least 13,000 megawatts to national production in the past 40 years, taking advantage of private sector potential to fund power projects is also unlikely, he noted.
According to the Tavanir boss, the pattern of instability in the currency market plus the Energy Ministry's refusal to pay acceptable rates for electricity produced by private companies are the primary reasons private enterprise simply has no interest in this industry.
“Under the circumstances, the best and practical solution to meet growing demand is to inspire the people and convince them” to use less power and adhere to the demand of wisdom.
Tariff Policy
Referring to the company’s new tariff policy, he said consumers (households, industrial and the agro sector) who cut consumption by 10% between June and September, will be eligible for 20% discounts in billing.
In a bid to encourage people to cut consumption, the government raised power tariffs in 2019 that was barely effective.
“Tariffs were raised by 7% for judicious consumers and 23% for those exceeding a certain consumption cap (300 kilowatt hours per month).”
Judicious consumption in 2018 and 2019 was effective in reducing the need for new power plants that come at great cost to the treasury only to meet high demand in the summer months, Motavalizadeh said.
“Programs to encourage diverse sectors to cut consumption should become a permanent feature of the utility.”
Based on a contract between the Energy Ministry and the agriculture sector in past two years, farmers who turned off their water pumps between 12 pm to 4 pm got discounts in their bills.
Consumption in the key agro sector fell 2% in 2018, whereas it shot up by a staggering 8.3% between 2007 and 2017.
Industrial consumers who shifted load from peak to off-peak times were also eligible for discounts.
“Absent such (incentive) policies, Tavanir last year would have needed $500 million for stable power supply and avoid outages. This policy will be pursued this year.”
Consumption Model
Of the total consumers in the household sector (30 million meters), close to 85% are within the average 300-kilowatt hour per month bracket, which is set as a basic consumption model. Around 15% of the subscribers are heavy consumers and when billing was on paper were warned in red print.
Power consumption in Iran is among the highest in the world, but the momentum of growth has slowed down in the past two years not only because of the economic recession but also thanks to Tavanir’s effective approach.
The highest registered consumption last year reached 57,700 MW. It was reported that if the various sectors did not cooperate, consumption would climb to 61 gigawatts.
One kilowatt of electricity, including generation, dispatch and transmission costs, is 6 cents per kilowatt-hour. Consumers pay 4 cents per kWh.
Electricity, gas, gasoline and water are subsidized in Iran and one government after the next have said that the costly subsidies cannot be sustained due to chronic economic problems and declining government revenues.
The entire concept of subsidies has come under a big question mark for years with proponents and opponents pushing ideas that are poles apart.
