Electricity prices must be "fair" to be able to curb the excessive consumption in Iran, Energy Minister Hamid Chitchian said, in a renewed appeal for revision of electricity tariffs that analysts say would not go well with the public.
"Reasonable prices will lead to judicious consumption, more investment and stronger participation of private companies in the power industry," Chitchian said in a TV interview.
Noting that Iran’s electricity consumption reached a new peak of 52,693 megawatts last week, Chitchian stressed that the increase in consumption not only stems from higher demand to cooling systems in the hot summer, but also from low electricity tariffs.
“Electricity prices in Iran are the cheapest in the region. People are indifferent to the way they use electricity," Chitchian said, adding that to save energy and reform consumption patterns subsidies must be cut to push tariffs closer to real prices.
He said some believe that a price rise will harm consumers, "but this is not the case because prices will be calculated subject to the amount of consumption (progressive basis)."
The new consumption record, the highest since records started nearly a century ago, came as high temperatures nationwide pushed power consumption to new highs.
Last year’s highest-registered peak demand was a little above 50,170 MW.
Officials say Iran’s power grid has the capacity to sustain a peak usage of 54,000 MW this summer without suffering outages.
Low Investment
According to Chitchian, if electricity is not sold at higher prices, investments in the sector will remain sluggish. “The situation will be such that increase in electricity prices will be inevitable in the long run.”
He recalled that many power companies are currently incurring huge losses due to the "unreasonably low prices."
He recalled that in neighboring Iraq and Afghanistan, with considerably lower per capita income compared to Iran, electricity costs around 10 cents per kilowatt-hour while Iranians pay 3 cents per kWh.
On the critical need to raise power production capacity by 6% annually, he said in the developed countries the annual increase in power production is normally less than 1%.
Iran's sixth five-year economic development plan (2016-21) calls for an annual 5,000-MW rise in power production capacity.
Installed power generation capacity is now 75,000-MW. Around 61,000 MW is produced from thermal plants, 12,000 MW from hydroelectric plants and 1,000 MW from nuclear power. Barely a few hundred megawatts is produced from renewables.
To increase the country’s power grid sustainability, Iran is exploring plans to synchronize its network with some of its neighbors in the north and in the Persian Gulf.
Respected economists and analysts have for decades appealed to the masses to cut down on electricity, water, gas…consumption. On the other hand, successive governments never lose the opportunity to make their case that the present pattern of consumption is simply not sustainable. Many households have risen to the occasion, obviously with an eye on their own pocket books, and reduced electricity and water consumption. But it seems this has not been enough because the utility bills that come in with terrific speed are higher and the government still claims that the present tariff (despite the removal of subsidies) is far apart from real prices!
