Energy Ministry Exempted From Subsidy Plan

Energy Ministry Exempted From Subsidy PlanEnergy Ministry Exempted From Subsidy Plan

The Cabinet exempted the Energy Ministry from paying to the Targeting Subsidies Organization as of the beginning of the new Iranian year (starting March 20, 2016), Energy Minister Hamid Chitchian said on Thursday.

Chitchian made the statement on the sidelines of the Sixth Conference on Thermal Power Plants (Gas, Combined-Cycle, Steam) held in Iran University of Science and Technology in cooperation with MAPNA Group from January 18-20, Mehr News Agency reported.

"The annual electricity sale is estimated to be around $4 billion, $1 billion of which have been given to the Targeting Subsidies Organization since 2010 to be extended to people as part of Iran's energy subsidy reform," he said.

The Subsidy Reform Plan, launched in 2010 by former president Mahmoud Ahmadinejad, removed heavy subsidies on food and energy, and instead paid 450,000 rials ($13) to almost all Iranians on a monthly basis.

According to the minister, as per the Cabinet's approval, the Energy Ministry is exempted from paying its share of $1 billion per annum to the Targeting Subsidies Organization so that it can settle the whopping $11 billion of unpaid dues to private sector contractors.

Pointing to the new plan to repay water and electricity contractors' unpaid dues, the minister said, "We have managed to settle about $1 billion of our overdue debt to non-government contractors by selling Islamic Treasury Bills, of which $500 million were paid to MAPNA Group and the rest to other contractors."

Asked about foreign and domestic private sectors' conditions in post-sanctions era, Chitchian noted that both sectors will enjoy the same opportunities.

"Interestingly, the domestic private sector can take advantage of the new era as the government is committed to support it to invest in projects whose profit margin is higher. Both sectors are provided with the same guarantees concerning the return of their investment," he said.

Underscoring Iranian thermal power plant experts' competence, the minister said, "Not until long time ago, most thermal power plants were designed and became operational with the help of foreigners. Nonetheless, domestic manufactures, one of which is MAPNA Group, can guarantee the future prosperity of the country's electricity industry as they have achieved major breakthroughs in less than 25 years.

He stressed that similar to Japan, Germany and the US, Iran is capable of meeting 90% of its electricity needs domestically."

Chitchian believes that the manufacturing industry cannot succeed unless it is constantly updated with state-of-the-art technology.

"As long as there is no competition, industries cannot experience development," he said.

"As European designed turbines are not compatible with Iran's high temperature, they decrease the power plants' capacity."

Although combined-cycle power plants' efficiency stands at 60%, plans have been made to utilize H and F-class turbines in combined-cycle plants since they can raise efficiency.

Calling for concentration on building not only turbines with lower capacities but also combined heat and power, he noted that such a strategy will help increase the efficiency of the whole power plant by recycling the heat and handling the economic crisis.

In thermal power stations, mechanical power is produced by a heat engine that transforms thermal energy, often from combustion of a fuel into rotational energy. Most thermal power stations produce steam, so they are sometimes called steam power stations.

Cogeneration or combined heat and power is the use of a heat engine or power station to generate electricity and useful heat at the same time.

Iran's nominal power generation capacity stands at around 74,000, with 61,000 MW coming from thermal power plants, 12,000 MW from hydroelectric plants and only 1,000 MW from nuclear power.

According to the official, based on plans, 5,000 MW of electricity should have been added to the national grid annually, only 1/3 of which has been realized.

Electricity consumption has witnessed a 5.5% rise during the last 10 years, yet it is projected to increase by 8% next year, which explains why attraction of foreign investments tops the ministry's agenda.