Power sectors in Iraq, Pakistan and Afghanistan, the biggest customers of Iran's electricity, are monopolized by their governments and they are interested in concluding deals with the state-run Iran Power Generation, Transmission and Distribution Management Company (Tavanir) but not with private firms.
Mohammad Hassan Motevallizadeh, the head of Tavanir, also noted that under the present circumstances wherein Tavanir faces financial problems, permitting private companies to sell electricity will be detrimental to the Energy Ministry as it will deprive the [bankrupt] ministry of crucial forex revenue, Barq News reported.
“Although electricity export tariffs are based on a variety of factors, including fuel prices in the Persian Gulf region, power can be sold for at least 11 cents per kilowatt hour in international markets, while the same in the domestic market earns a meager 1.5 cents,” he said.
“Selling power to neighbors is the only source of foreign currency revenue for Tavanir. The involvement of private electricity producers in the market at this juncture is uneconomical.”
Motevallizadeh noted that if and when necessary, private sector will be granted the license to start power export.
Due to low power tariffs, Tavanir has long been under economic pressure and admitting private companies to sell electricity to foreign customers will aggravate the ongoing financial crisis, he added.
The official noted that several subsidiaries benefit from Tavanir’s forex revenues and the entry of private sector in such a key sector will cause the income to be divided among a few private power producers that would be detrimental to the ministry.
Revenue from electricity export to neighbors reached $60 million in 2018.
Tavanir is in charge of purchasing electricity from power plants and private companies are forced to sell only to the state giant.
Unless power prices increase, Tavanir’s problems will persist and possibly get worse, the official warned.
Due to the huge gap between real energy costs and what consumers pay, the government must annually pay $1 billion in subsidies to plug the huge gap in real energy costs and the bills sent to consumers.
Power generation in Iran costs at least 5 cents per kilowatt-hour, but consumers are charged less than 1 cent per kWh.
Motevallizadeh said the experience of countries like Turkey shows that the only way to convince subscribers to use power wisely is by revising pricing structures and obliging heavy consumers to pay real prices that include the cost of power generation, dispatch and transmission.
Free Enterprise
Unlike what the official says about the advantages of Tavanir’s monopoly on selling power, supporters of free enterprise like Alireza Kafshkanan, an energy expert, argue that as long as electricity is sold only by the Energy Ministry, the power sector will not flourish as it deserves, due to the unwillingness of private firms to get involved in mega projects.
“Unless the private sector breaks the monopoly over electricity export and the ministry allows space for private companies, infrastructures will not develop,” Kafshkanan said.
Recalling Iran's ability to become a regional electricity export hub with its impressive infrastructure and skilled workforce, he says, "Iran's 10-year track record in electricity deals [export and swap contracts] with neighbors, such as Pakistan, Afghanistan and Iraq, is praiseworthy. It is strange that no plans have been made to transform the country into a regional hub.”
One major reason behind the monopolies is the steep increase in foreign exchange rates. Currency rates have surged in Iran as a permanent faultline of the sanction-plagued economy. The dollar fetched 250,000 rials on Wednesday. Last year, it was near 150,000 rials. In the summer of 2013, the greenback was not worth more than 36,000 rials.
Stabilizing Power Supply
According to Davoud Farrokhzad, the head of Iran Grid Management Company, an Energy Ministry subsidiary, power exports to Iraq, Pakistan and Afghanistan have almost stopped to help stabilize power supply during peak hours.
“The sale of electricity to neighboring states has experienced a downward trend over the past 60 days, decreasing from 3,000 megawatts per day to nearly zero,” he said.
“Nonetheless, power import from Turkmenistan, Azerbaijan and Armenia has risen to 700 MW per day and cannot increase further because the much-needed infrastructure to transfer electricity from neighboring countries to Iran is not well developed.”
Farokhzad noted that less than 300 MW of power were imported to Iran per day last summer when the network load reached 58 gigawatts, but things have changed and the widening gap between production (58,000 MW) and demand (67,000 MW) has put transmission substations and distribution networks under huge pressure, due to which explosions have been reported in some substations.
Giving a breakdown on power consumption, he noted that industries, households, agro sector and commercial units comprise 38%, 32%, 18% and 7% of the total electricity use in Iran respectively.
Public places like parks, walkways and bus stations account for the rest.
Iran’s southern cities are experiencing 50-degree Celsius heat and the capital Tehran’s temperature has reached 38 degrees Celsius.
