With temperature falling from 40 degrees Celsius in June and July to around 30 in September, power exports have witnessed an uptrend over the last 10 days as household electricity demand declines, the head of Iran Power Generation, Distribution and Transmission Company (Tavanir) said.
“Power exports have reached 1,000 megawatts per day and it will exceed 1,500 MW soon, while imports are as low as 350 MW on a daily basis,” Arash Kordi was also quoted as saying by ILNA on Monday.
Selling electricity to neighboring nations, including Iraq, Pakistan and Afghanistan is a top priority for the state-run Tavanir, a subsidiary of the Energy Ministry, as it is the only source of foreign currency revenues, he added.
The Tavanir chief said the company has signed international agreements and must not breach its contracts even if demand peaks in Iran.
To help meet rising power demand between June and August, electricity imports from neighbors like Turkmenistan, Azerbaijan and Armenia approached 700 MW per day.
Kordi noted that exports were never halted as otherwise it would have legal consequences for Iran.
Iran trades electricity with four neighbors on its northwestern and western borders, namely Azerbaijan Republic (including Nakhchivan Autonomous Region), Turkey, Armenia and Iraq.
Under swap deals, Iran exports electricity to Armenia and Azerbaijan in winter and imports the same when domestic demand soars in summer.
Iran's installed electricity capacity is currently around 85,000 MW.
Reverse Pattern
According to Kordi, unlike in the previous year when household consumption increased by 5% in summer, figures indicate a reverse pattern this year.
“Power use in household sector has plummeted by 5% over the last two months compared with the corresponding period of a year ago,” he added.
Consumption also declined by 18% and 3% in industrial and farming sectors respectively in the same period.
Drawing a parallel between power deficit in 2021 and the current fiscal year, the official noted that electricity imbalance was 15,000 MW last year and it has decreased by 31% to reach 10 gigawatts because new thermal power stations have added at least 5 GW to Tavanir’s output capacity.
The company’s chief added that a total of 58,000 villages in Iran have access to electricity, which means 99.7% of rural regions are connected to the national power grid and the rest lacking electricity are nomads while the average index of electrified villages in the world is 15%.
“The number of rural areas linked to the national power grid has increased by 15-fold over the past four decades,” he said.
Over 25,000 kilometers of distribution networks have been established to connect more than 21 million rural subscribers to the power grid.
Referring to blackouts that posed risks to various infrastructures last year, Kordi said they are no longer an issue, while electricity consumption reached a record 69,480 MW on Aug. 16.
The Energy Ministry owes $2 billion to private sector power producers due to the huge gap in the real energy costs and the bills sent to consumers.
The government must annually pay about $1 billion in subsidies because of the gap.
“We have often reminded the government that the current energy subsidy is four times the national budget,” he said, rejecting subsidy policies as unwanted and unhelpful, stressing that future governments will find them prohibitive and impossible to sustain.
Controversial Policy
According to Ehsan Sadr, the head of the Power Generation Companies Syndicate, the controversial policy of paying subsidies to the loss-making power sector that has kept electricity prices low for consumers is unsustainable and threatens private power producers with bankruptcy.
“As long as the government insists on paying $1 billion in subsidies to the power sector annually, the industry cannot thrive and the gap between power generation capacity and demand will continue to rise,” he said.
“Raising electricity tariffs and charging real prices are the only realistic solution to help the Energy Ministry tackle its financial crisis. Having said that, vulnerable social classes need to be supported by special aid packages.”
According to the official, cutting subsidies will increase inflation, but combating the growing menace needs courage as the problem should be tackled.
“The fact of the matter is that the government has only been able to pay the huge subsidy by not settling its massive debts to the private sector,” he said.
“The Energy Ministry’s unpaid debts is worth $2 billion and instead of clearing the debt, they give subsidies, which is totally unsustainable and must end sooner rather than later.”
Data released by the ministry show that from among all countries, Iran has the cheapest electricity, charging on average 3,000 rials (about 1 cent) per kilowatt-hour after Burma, Egypt and Kuwait.
“The government keeps on reiterating that it wants to privatize the power sector. The key question is how private companies can invest in this sector with such unrealistic [low] prices,” Sadr said.
“Unless prices become real, the problem will persist and possibly get worse.”
