State Role Limits Electricity Export by Private Firms

State Role Limits Electricity Export by Private Firms
State Role Limits Electricity Export by Private Firms

Although the government announced that the private sector is authorized to export 25 percent of electricity, this could not take effect as the government remains in charge of distribution networks, former chairman of the Iranian Electricity Industry Union, Mohammad Parsa, was quoted Tuesday by ILNA as saying.

The private sector is dependent on the government, since supply of electricity from power stations to other locations is carried out by the energy ministry. Moreover, when electricity is purchased from abroad, the private sector must rely on government to swap it.

"Despite authorization, the operational mechanisms are not in place for the private sector to export electricity," Parsa said, referring to the difficulties the private firms face when swapping electricity through governmental transit stations. For the private sector to invest in the key power sector, in distribution networks, and in construction of power stations, a clear operational plan must be put in place by the government. In this regard, "the government also needs to repay post debts to give assurances. Private investors are not eager to invest in the electricity sector unless robust assurances are in place," Parsa asserted.

Iran’s electricity industry ranks 14th in the world and first in the Middle East in terms of power generation with an installed capacity of 67,806 MW. The country is the largest exporter and importer of electricity in the Middle East and exports electric power to Armenia, Pakistan, Turkey, Iraq, and Afghanistan. Azerbaijan and Armenia supply electricity to Iran under a swap agreement.

Natural gas is the largest source of fuel for electricity generation in Iran, accounting for almost 70 percent of total generation, according to US Energy Information Administration (EIA). 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 that came online in 2011 but did not start commercial production until 2013. As a part of Iran's energy subsidy reform, the government announced in early 2014 that electricity prices would increase by 25 percent as subsidies were scaled back. The government hopes that the price increase will ease consumption growth and pressure on its generation system, particularly during peak demand times. Iran is planning to expand its underground natural gas storage capacity to ensure that enough natural gas is available during peak demand periods to avoid electricity supply shortfalls in the future.