Electricity Export More Lucrative Than Selling Gas

Electricity Export More  Lucrative Than Selling GasElectricity Export More  Lucrative Than Selling Gas

Revenues generated by electricity export are more sustainable than those of oil and gas, as power prices are less dependent on oil and gas prices in the global markets, director general of the Energy Ministry's Office for Developing Export of Technical and Engineering Services said on Monday.

“It is of great importance to establish a natural gas and electricity export coordination committee so that macroeconomic decisions can be taken under the supervision of Oil and Energy ministries to ensure a substantial profit for the country,” Bahram Nezamolmolki was quoted as saying by ISNA.

According to the official, during the last few years, oil prices have halved, decreasing from $100 to $50 per barrel and the same scenario has repeated for natural gas prices, which have suffered a 44% decline, falling from 45 cents per cubic meters to 25 cents.

Nevertheless, electricity export prices have never undergone such drastic changes, plummeting from 12 cents per kilowatt hour to 10 cents in case of Iran's export to Iraq.

Referring to the International Monetary Fund predictions, Nezamolmolki noted that oil and gas prices will not surge in the foreseeable future, hence electricity export revenues seem to be more guaranteed than those of gas, for which reason electricity sector should be given a more prominent role in economic development.

"Not only is electricity an exportable commodity, but it also enjoys other unique features that distinguish it from gas," he said, noting that electricity production rate can be kept below 10%. Moreover, seasonal peak differences with neighboring states can facilitate power exchange, resulting in boosting power plants' efficiency.

Underscoring the fact that private sector needs to be supported to tackle its production and export challenges, the official hoped that forming the committee can help address structural difficulties in the electricity sector, including attraction of foreign investment and entering international markets.

  Electricity Export Hub

Stressing on Iran's capability to turn into a regional electricity export hub regarding its untapped infrastructures and skilled workforce, he added, "Notwithstanding Iran's 10-year record in electricity exchange with regional countries, surprisingly no plans have been made to make it a regional hub yet.

Pointing to measures taken by Iran's competitors, including China, Qatar and Saudi Arabia, to extend their national grid to export electricity to Europe, Nezamolmolki said, "The Persian Gulf littoral states have taken serious steps to transfer their electricity to Europe by extending a subsea cable from the Red Sea to the Mediterranean Sea. Also, the Chinese have embarked on constructing power plants in Pakistan and synchronizing Turkey's power grid with that of Azerbaijan."

Asked about the advantages of connecting Iran's electricity grid to that of other countries, he noted that this can be of great benefit to Iran both economically and technically, as Iran will have to keep pace with the latest state-of-the-art technology.

"Furthermore, a regular electricity exchange with other states can remove political tensions and lead to more political stability," he said.

The official believes that electricity and gas sectors both play a major role in economic prosperity, yet the former's profit margin is much higher as natural gas cannot be converted to high value-added products.

He stressed that power industry cannot progress unless private sector breaks the monopoly of electricity export and the Energy Ministry should pave the way for the presence of private enterprises to play a major role in this field.

On the critical issue of electricity export, Nezamolmolki said Iran Power Generation, Transmission & Distribution Management Company is in charge of purchasing electricity from power plants and private enterprises are bound to sell their electricity to the company.

"Due to financial constraints and infrastructural shortages, the private sector is not engaged in power export, which explains why they do not show any interest in investing in this sector," he said.

Iran’s electricity industry ranks 14th in the world and first in the Middle East in terms of electricity generation with an installed power generation capacity of 74,000 megawatts.