Power outages and restrictions imposed on industries and households in summer may have short-term benefits, but it is illogical, unsustainable and ineffective in the long run, a member of the Majlis Economic Commission said.
“The government should attract private sector investment by offering economic incentives, otherwise the current gap of about 15 gigawatts between demand and supply will keep widening,” Mehdi Toghyani was also quoted as saying by ISNA.
Failure to raise electricity production is very likely to create major challenges in the future not only for the industrial sector but also for families, he added.
The official noted that forcing industrialist to reduce power demand so that the Energy Ministry can supply households with adequate electricity is a stopgap measure with undesirable consequences, adding that such solutions will not yield the desired result.
“As long as fundamental issues like attracting investment are not addressed, the power cuts will persist and even get worse,” he said.
“Take steelmakers, for instance. When their output decreases due to power shortage, they increase prices to compensate for the loss, as a result of which house prices soar and there will be more economic pressure on people.“
Losses inflicted by power outages on steel mills were estimated to be about $235 million per week last year.
Put simply, power outage policy is doomed, especially in urban areas where electricity access and consumption rates are high.
Outages can impact household comfort, food safety and access to social services, in addition to damaging appliances.
If sustainable social and economic development is to be achieved, electricity disruptions/outages should be eliminated, for which the production level must rise.
Massive Debt
Commenting on the government’s massive debt to private electricity producers that has exceeded $4 billion, he noted that private sector will not invest in loss-making power ventures unless they are sure of their high investment return.
According to Mostafa Rajabi-Mashhadi, an Energy Ministry spokesman, retail electricity in the bourse will boost price competitiveness and the quality of services.
Retail electricity is widespread in the US and Europe, and consumers can choose the type of contract that best suits their needs.
Ali Shams-Ardakani, the head of the Energy Commission of the Iran Chamber of Commerce, Industries, Mines and Agriculture, is among economists and experts who have long called on the government to ease its iron grip on both selling electricity to domestic consumers and export by delegating the job to private companies.
“The government and its diplomatic missions should only be facilitators in finding the best possible venue for interaction between private firms and potential foreign clients,” Shams-Ardakani said.
As enshrined in Article 44 of Iran’s Constitution to downsize the bloated bureaucracy, a large part of responsibilities of the Energy Ministry should be transferred to the private sector. But so far, this has not been the case, despite the efficient role of private power producers.
Referring to a rule that came into effect last year, based on which heavy industries using an estimated 5 million kilowatt hours of power a year can buy electricity directly from private producers via the energy bourse, Rajabi-Mashhadi said it has helped private power producers receive their money in a shorter period of time compared to the time when they traded with Tavanir.
One major drawback of selling power to Tavanir is that it normally is unable to meet its financial commitments on time, as a result of which private producers are left to their own devices.
Forex Revenue
Contrary to what economists like Shams-Ardakani say about the need for ending Tavanir’s monopoly on selling power, Reza Ardakanian, the former energy minister, argues that allowing private companies to get involved in electricity trade is to the detriment of the government because it will deprive the treasury of crucial forex revenue.
“Selling power to neighbors is the only source of foreign currency revenue for Tavanir. Letting private power producers in this export business does not make economic sense.”
Due to the low power tariffs, Tavanir has been wrestling with colossal financial difficulties, and private companies wanting to join power trade would make a bad situation worse, he added.
Revenue from electricity export to Iraq, Pakistan and Afghanistan reached $60 million in 2018.
According to Mohammad Parsa, the head of the Federation of Iranian Energy Exports Industries, exporting electricity can be more profitable if private firms are involved.
“Installed power production has risen by 40% from 2009 and is near 85 gigawatts, but exports have declined due to the unwanted and unhelpful government role and interference,” he said.
“Our neighbors need at least 50 GW of electricity every day, of which less than 5 GW are exported by Tavanir. This volume could decline further unless the government steps aside.”
