Iran: Private Sector Signs $12b of Power Plant Deals in 4 Years

The private sector has struck deals worth $12.35 billion in nearly four years to expand electricity output capacity.

A report by IRNA added that the power plant construction deals, signed between March 2013 and Sept. 2017, are aimed at adding close to 20,000 MW of new capacity to the national grid.

The bulk of planned investments, $8.45 billion, are directed at thermal power plants that run on natural gas, an abundant fossil fuel in Iran. Close to 15,400 MW of new thermal capacity is hoped to come on stream by 2022, the end of the Sixth Five-Year Economic Development Plan.

The report also represents a positive shift toward renewables, which has been largely driven by the lifting of economic restrictions in January 2016. This eased the return of foreign investors to Iran's power industry.

Some $2.6 billion worth of contracts have been signed for 1,800 MW in new wind and power capacity since 2013.

Iran's installed power capacity stands at around 77,000 megawatts, including some 62,000 MW in thermal capacity and only a few hundred megawatts of renewables.

Small-scale power installations with a distributed generation system are also set to expand by 2,000 MW through investments worth $1.25 billion.

Distributed generation, or DG, refers to electricity produced in small quantities near the point of use. It reduces the cost and complexity associated with transmission and distribution, while offsetting peak electricity demand and stabilizing the local grid. Most small-scale units in Iran are powered by diesel.

Officials say Iran needs to expand power generating capacity by 5,000 MW annually, or 20,000 MW in four years, to meet rising demand at home and expand its footprint in the regional energy market.

In roughly the same period, installed power generating capacity of renewables, including wind and solar, is envisioned to increase by 5,000 MW.

Iran enjoys enormous potential for the production of different kinds of renewable energies, including geothermal, solar and wind power, according to environmentalists and experts.

The oil and gas producing nation aims to raise the share of renewables in its power mix to 7,500 MW by 2030 as part of its pledge to the Paris Agreement to help hold the average global temperature below 2 degrees Celsius.

East Asian firms have joined the ranks of European companies in a race to tap into Iran's underdeveloped renewable energy market, which is attracting billions of dollars in finance for new solar and wind projects.

According to government reports in October, foreign investors had proposed over $4 billion worth of renewable power projects since the lifting of sanctions.

Some experts say a lack of competition in an energy market largely dominated by the public sector is holding back the renewable industry.

The Energy Ministry says it hopes to launch 1,000 MW of renewable capacity a year through 2022 with the help of the private sector.