Electricity export from Iran to neighboring countries generated $600 million in 2021, a deputy energy minister said.
"The state-run Iran Power Generation, Distribution and Transmission Company [Tavanir] cannot raise power exports unless infrastructures are developed," Homayoun Haeri was also quoted as saying by Barq News.
Tavanir sells close to 1,500 megawatts of electricity to Iraq, Pakistan and Afghanistan on a daily basis, he added.
Haeri noted that although neighboring states are willing to import more power from Iran, Tavanir cannot boost exports as its output capacity is limited due to lack of investment.
Iran’s current electricity production capacity is 85,000 megawatts.
Downplaying the impact of US-imposed sanctions to generate electricity, the official noted that Tavanir’s biggest challenge is that the private sector is not willing to fund power projects anymore.
“Return on investment in electricity projects was four years in the past, which has now increased to 15 years and explains why private contractors have totally lost their interest in this loss-making sector,” he said.
Tavanir’s Monopoly
Asked about Tavanir’s monopoly to sell power, the deputy minister noted that the power sector in Iraq, Pakistan and Afghanistan are the monopoly of governments and “they are keener to sign contracts with Tavanir rather than private firms”.
Although the Renewable Energy and Energy Efficiency Organization — a state-owned entity known as Satba — had promised to prepare the ground for private sector investment in and export of renewables, nothing has happened yet.
“In the present situation, allowing private companies to export electricity will deprive the Energy Ministry of crucial forex revenue,” Haeri said.
Reza Ardakanian, a former energy minister, said, “Selling power to neighbors is the only source of foreign currency revenue for Tavanir. The entry of private power producers in this domain at this juncture does not make economic sense.”
He stressed that due to inexpensive power tariffs, Tavanir has long been grappling with economic problems and letting private companies to sell electricity to foreign customers will aggravate its financial problems.
“Tavanir’s forex revenues are divided among several subsidiaries. Dominance of the private sector in such a key sector will cause the income to be distributed among a few private power producers that would be to the detriment of the ministry,” he said.
Although electricity export tariffs vary and 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. The same in the domestic market barely makes 1 cent.
Power generation in Iran costs at least 3 cents per kilowatt-hour but consumers are charged less than 1 cent per kWh.
Tavanir is in charge of purchasing electricity from power plants and private companies are obliged to sell only to the state giant.
Free Enterprise
However, advocates of free enterprise like Alireza Kafshkanan argue that as long as electricity is sold only by the Energy Ministry, the power sector will not flourish due to the reluctance of private firms to get involved in mega projects.
“Unless the private sector breaks the absolute monopoly over electricity export and the ministry allows space for private companies, the industry will not improve,” he said.
Recalling Iran's ability to emerge as a regional electricity export hub with its impressive infrastructure and skilled workforce, Kafshkanan says, "Iran's 10-year track record in electricity deals [export and swap contracts] with neighbors, namely Pakistan, Afghanistan and Iraq, is commendable. 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.
