Iran’s current power demand of 72,000 megawatts will rise by 35,000 MW over the next five years, the head of the Planning Department in Iran's Thermal Power Plants Holding Company, a subsidiary of the Energy Ministry, said.
“To meet rising demand, close to $25 billion should be invested in the sector during the period, otherwise the gap between supply and demand will keep widening with irreparable consequences,” Amir Doudabinejad was also quoted as saying by the Energy Ministry’s news portal.
Thermal power stations account for 90% of Iran’s total power output, he added.
He noted that 64 gigawatts of the need are met by 130 thermal power plants that are regularly overhauled to maintain their maximum production capacity.
“The rest of the demand is managed by solar and wind farms, hydropower plants, Bushehr nuclear facility and small-scale power plants with distributed generation systems,” he added.
The current 10 GW gap between supply and demand will widen further, if output capacity does not increase proportionally.
According to the official, power plants’ efficiency is projected to increase by 2% to reach 41% either by constructing new plants or upgrading the outdated facilities.
“Converting single-cycle power plants to combined-cycle units can help reduce natural gas consumption in power plants by 10 billion cubic meters per year.”
The TPPHC official noted that close to 2 GW have been added Iran’s power supply capacity over the last 12 months and the same volume will be added to the national grid by March 2024.
“In addition, startups have helped TPPHC to raise its capacity by 1,500 MW since 2022,” he added.
Underinvestment
According to Alireza Kolahi-Samadi, a member of Tehran Chamber of Commerce, Industries, Mines and Agriculture, the government's huge budget deficit has led to underinvestment in Iran's power development projects and the country will have to face the devastating consequences sooner rather than later.
The Energy Ministry is heavily indebted to private sector power producers and it has not been able to settle its growing unpaid dues over the last 10 years, he added.
The official noted that if the ministry cannot keep its vows to banks and contractors, the whole sector will have to sustain major losses.
Kolahi-Samadi, who is also the head of the Board of Directors at Iran's Electrical Industry Syndicate, noted that as soon as banks understand that they have to sign a contract with the Energy Ministry, they avoid signing agreements as they are sure it is very unlikely to get their money back.
The official believes that the government’s plans to curtail demand by changing working hours in state-run offices and encouraging consumers to use less power during peak hours are all temporary solutions and the problem cannot be handled unless electricity is sold at real prices.
Imposing higher tariffs on those who exceed reasonable consumption limits is the most effective way of convincing the public to consume electricity prudently.
The experience of developed countries shows that the only solution to compel subscribers to use power judiciously is by revising prices and imposing a surcharge on heavy consumers, which should cover real prices that include the costs for generation, dispatch and transmission.
Power Bills
According to Kolahi-Samadi, long gone are the days when consumers could be advised to moderate their usage and cut down their power bills.
“Large consumers must be levied much higher prices compared to regular users. There must be a tangible difference between electricity tariffs in peak and non-peak hours so that subscribers feel the necessity to scale down consumption," he said.
"By adopting such an approach, more consumers will opt to purchase efficient appliances to ease power demand, while officials won't have to plead with people to turn off more lamps."
He argues that policy- and decision-makers have adopted a wrong approach in not charging subscribers based on a stepwise pricing scheme, in which all consumers are charged a fixed price per kilowatt-hour, but a surcharge is imposed if consumption exceeds certain brackets.
According to the official, the same plan can be implemented in industries and agriculture.
Kolahi-Samadi laments the "inexpensive power prices" and says low tariffs have encouraged farmers to equip their wells with electric pumps, which normally work for three months non-stop, which scenario definitely translates into wasting public and national funds.
