The Energy Ministry and the Ministry of Industries, Mining and Trade signed a contract on Tuesday, based on which the latter will build power stations with a capacity of 10,000 megawatts over the next three years to help stabilize power supply to industries.
Deputy Energy Minister Homayoun Haeri made the statement at the signing ceremony in Tehran and noted that industries account for 37% of Iran’s total power consumption, ISNA reported.
The deal worth $7 billion was signed in the presence of Industries Minister Reza Fatemi-Amin, Energy Minister Ali Akbar Mehrabian, Industries Ministry’s deputy for economic development and planning, Mehdi Niazi, and Haeri.
“The state-run Power Generation, Distribution and Transmission Company’s [Tavanir] annual power generation capacity is around 300 billion kilowatt hours, of which 37% or 100 billion kWh are consumed by industries, especially steel mills,” Haeri said.
“The agreement is aimed at ceding the ownership of state power stations to major power users, including automakers, steel complexes and cement factories.”
According to the official, lack of investment in the key sector has taken a heavy toll on industries in the summer.
Put it simply, the industrial growth rate is not proportional to the development of power sector, as the former is experiencing a 10% annual growth, whereas the latter is lagging behind.
“Industrial demand peaked at 20 gigawatts in the summer and it has continued to rise. Tavanir is unable to meet the growing need,” he said, adding that industrialists should do their fair share of boosting electricity output by embarking on power plant development projects, in which case they will no longer be at the mercy of Tavanir.
Converting Single-Cycle Plants
Industries can help the power sector in three ways, one of which is converting single-cycle plants to combined cycle ones that require huge investments that are beyond the means of the Energy Ministry, he added.
Referring to other means, the deputy energy minister noted that steel factory owners can build new power plants, or upgrade dilapidated power stations.
“If industries complete unfinished projects, the Energy Ministry guarantees that adequate power will be supplied to factories even during peak demand hours, regardless of households’ consumption level,” he said.
To encourage investors, negotiations are underway with the Central Bank of Iran to provide steel factory owners with forex loans to help engage in power plant initiatives.
According to Haeri, the maximum output of thermal power plants is close to 51,000 megawatts, while peak power demand has exceeded 67,000 MW.
Estimates show that Iran’s electricity consumption will be around 78,000 megawatts in the next five years, and in case the current level of electricity generation does not increase, the country will have a deficit of 18,000 MW, he added.
Bridging the Gap
In order to bridge the gap between the current output and the level of consumption in five years, about 4,000 megawatts should be added to the nominal capacity of the country's power plants annually, which is definitely beyond the Energy Ministry’s financial ability.
“If and when heavy industrial customers have their own power stations, they will not need to shift consumption from peak [11 p.m. to 7 a.m.] to off-peak hours. Nor will they have to stop their business in summer when demand exceeds supply.”
Mining and manufacturing industries have borne the brunt of the recent power supply crisis, as they were forced to halt operations repeatedly in June and July because the state-run utility company could not produce sufficient electricity.
Frequent power outages in Tehran and other large cities adversely affected industrial units, taking a toll on electrical equipment and reducing efficiency.
Industrialists say outages have led to a decline in production, in addition to damaging expensive machinery.
Renewable Energy
According to Mehrabian, installed capacity of renewable energy in Iran had a 4.5-fold increase in the past five years.
“In 2016, the capacity of new energy sources was 200 MW that has now reached 900 MW,” he added.
However, renewables account for barely 1% of the total installed energy generation capacity that has reached 85 gigawatts.
In the next eight years, Iran wants to add 9,000 MW to renewable capacity to meet growing domestic demand and expand its presence in the regional electricity market. Iran buys and sells power in the region.
The number of small-scale solar power plants across the country, which are used by households or small industries, has increased in the past few years.
A total of 115 large solar farms are now operational. In addition, 3,650 small-scale solar power plants have been built in different regions and 2,500 rooftop photovoltaic power units are being constructed.
Private companies have invested $1 billion in the gradually expanding renewable sector, mainly solar and wind energy.
