Pursuing the current wrong policies in the energy sector is definitely bound to cause absolute chaos, the head of Iran’s Renewable Energy Union said.
“As long as energy prices and supply are not based on market demand, adopting any other approaches cannot rectify the chaotic situation in the energy market,” ILNA quoted Seyyed Hashem Oraee as saying.
Referring to the growing imbalance between gasoline and electricity output and consumption, the energy expert noted that the thorny issue cannot be resolved by building more refineries or power stations because the root cause of the present predicament is supplying consumers with inexpensive fuel and power.
“The government’s insistence on building more oil and gas processing facilities to meet growing demand would only mean that more subsidies will be granted to the energy sector in the coming years,” he said.
According to the official, based on data from International Energy Agency, Iran accounts for 46% of total subsidies paid to the energy sector worldwide.
“Not letting the private sector to play a role in the energy sector is a recipe for disaster and the present vicious cycle of production and consumption will not end, unless the administration allows the market to decide about prices,” he said.
Drawing a parallel between current gasoline prices and other commodities like milk and water over the last 40 years, Oraee noted that the price of a liter of gasoline should be at least 50 cents to make economic sense, whereas it is sold at 3 cents per liter.
“As long as the government remains the sole energy producer and supplier and the private sector is marginalized, there is no hope of rectifying the deplorable situation,” he said.
Populist Policies
According to Oraee, who is also a lecturer at the Sharif University of Technology, longstanding and populist policies to grant massive energy subsidies practiced by the right-and-left wing politicians has been a costly catastrophe because they are only aimed at attracting votes to become either a president or a parliament member.
The professor, who chairs the Wind Energy Scientific Society, pointed out that shifting to renewables is fast becoming a norm in most countries (including oil-rich states) as they face massive ecological problems, namely global warming caused by fossil fuels.
However, Iranian authorities still insist on building more thermal power plants and raising their efficiency from 20-30% with little action on expanding green power.
Iran's installed power capacity is 85 gigawatts, of which less than 1 gigawatt comes from renewables such as solar and wind.
Iran’s northwestern neighbor Turkey is increasing electricity production from renewables that account for 13 GW of the country's total power output of 89 GW. India’s renewable capacity is said to be 79 GW and that of Japan 32 GW, while the UAE generates 15% or 8 GW of power from green resources.
“Iran’s annual gas consumption in the household sector has surpassed 200 billion cubic meters. Harnessing renewable energy can help reduce it to 40 bcm,” Oraee said and complained that those who devise energy policy in Tehran remain oblivious to simple arithmetic.
CO2 Footprint
Almost 98% of Iran’s power production come from oil derivatives and gas. This is while most countries are revisiting energy policies and embracing renewables to reduce their CO2 footprint, cut costs and healthcare bills and save resources for future generations.
“Failure to do likewise [divest from fossil fuel] means Iran’s energy crisis will exacerbate and later become irreversible,” he warned.
One highly disturbing issue is why natural gas consumption in 2020 rose by 12% compared to 2019 and GDP has been of the descending order.
“We wasted 12% more energy in 2020,” was Oraee’s alarming response.
He says part of the problem lies in not phasing out aging and outdated thermal power stations that gobble up massive amounts of gas to produce power at a prohibitive cost.
“Selling one kilowatt-hour of power at 0.4 cent while the real cost, including production and transmission, is 8 cents conveys the message to consumers that they can continue to waste energy with impunity. This is a vicious cycle that cannot be stopped unless subsidies are abolished. Period,” he said.
Elaborating the scale and scope of the energy crisis, Oraee said energy is the least valuable commodity in Iran because it is heavily subsidized and officials have hardly paid heed to crucial options to compel the people to rethink their high and rising consumption.
