Private Firms to Export Electricity to 5 Countries

Private Firms to Export Electricity to 5 Countries
Private Firms to Export Electricity to 5 Countries

Iranian companies will commence power export to Turkey, Afghanistan, Pakistan, Iraq and the UAE in the near future, managing director of the National Iranian Gas Export Company said Sunday.

Following conclusion of the first power export agreement by an Iranian firm in January, negotiations between Iranian and foreign companies resumed and preliminary agreements were signed with four Iranian firms for export of electricity to the five neighbors, Alireza Kameli was quoted by IRNA as saying.

In the present conditions two issues are critical for Iranian firms, namely the location of power plants and the target markets for electricity, Kameli said, adding that companies have six months to conduct feasibility studies and make the final decisions.

One of the main reasons the Oil Ministry has embarked on electricity export is to diversify natural gas exports, according to the official. "One way to diversify natural gas export is to convert it into power, a measure that the ministry has recently embarked upon" and insists on expanding with the aim of generating value added.

Share of investors is proportional to the price at which electricity is sold in the target markets, comprising costs of energy conversion and distribution and marketing costs, plus a reasonable profit margin. The difference between this figure and the final selling price in each market will belong to the National Iranian Oil Company and the NIGEC.

The energy ministry wants to further develop the electricity industry by attracting private sector investment in new projects. Private firms will choose the location of power plants and the NIGC will be responsible for gas supplies to the plants.

Natural gas is the largest source of fuel for electricity generation in Iran, accounting for almost 70% of total generation. Oil, hydropower, coal, and non-hydro renewables make up the remaining fuel sources used to generate electricity, with marginal generation from Bushehr nuclear power plant and other sources of renewable energy including solar and wind power.

The electricity system in Iran (production, transmission and distribution) is centralized and owned by the government. However, the present government has been actively encouraging private companies and offering incentives to join the key sector apparently with little success. The private sector is of the opinion that producing and supplying electricity in Iran is not a very attractive venture due largely to the 'low prices' and the government subsidies to consumers. Generating each kilowatt hour of electricity costs 680 rials (about 0.027 cents) while it is being sold for 430 rials (about 0.017 cents).