Lack of New Investment Can Impair Power Sector

EghtesadOnline: An estimated $1 billon is invested in power sector per annum, but to meet growing demand in coming years this should at the least double, the Energy Ministry spokesman for the power department said in Tehran.

News ID: ۷۵۰۱۱۲

27 May 2020

“The number of electricity meters nationwide in household, agro and industrial sectors, which now exceeds 36.7 million, jumps by 1 million per year and lack of investment in the industry will not only hamper economic development but could also hinder normal life  in the rural and urban areas,” ISNA quoted Mostafa Rajabi Mashhadi as saying.

Installed power capacity of 84 gigawatts is enough to meet current demand, but lack of investment is causing concern and it is likely that the key sector could face serious shortages in the near future, he said.

Power consumption in Iran grows between 5% and 6%, but expansion plans have been undermined in recent years due to financial restraints, management issues and the role of energy subsidies.

“Replacing dilapidated equipment such as transformers in substations as well as in transmission and distribution lines are a priority.”

There are now 725 distribution transformers and 5,000 power transformers in the network that are an should be in line for decommissioning.

The cost of installing new transformers has risen dramatically and the result is that old equipment is used well beyond shelf life, which again leads to other problems and hurts the efficiency of the grids.

“Appropriate solutions have been developed in many countries to improve the life of transformers, and we are working to find ways to do likewise with the help of academia and industry stakeholders,” he added.

Reducing Debts

Reducing the volume of Energy Ministry debt to private power companies is also on the agenda as it could encourage such firms to continue investing in the industry. The ministry paid $900 million of its debt to private contractors in the past two years and is doing its best to settle the balance ($1.5 billion).

Referring to the state-run Iran Power Generation, Distribution and Transmission Company’s (Tavanir) limited revenue, including export and selling power to domestic subscribers, the ministry official noted that a part of export income ($1 billion form power export to Iraq) cannot be withdrawn due to the US sanction.

Iran is a large exporter and importer of electricity in the Middle East and sells power to Pakistan, Iraq, and Afghanistan.

Power projects worth $13 billion are on hold unless contractors are given full guarantees that they will be paid on time.

Due to the huge gap in the real energy costs and the bills sent to consumers, the government must annually pay $1 billion in subsidies only in this sector -- which is fast becoming prohibitive.

Power generation cost, including production and transmission, is close to five cents per kilowatt-hour, but subscribers are charged 1.4 cents per kWh because electricity is heavily subsidized in Iran.

“Foreign exchange rate has risen by 300% over the last decade. Metal prices (including steel) have surged at least six times and this is while electricity tariffs have barely increased by 1.7 times, placing a colossal economic cost on the already struggling government.”

As the world’s population swells, the need for power is increasing rapidly. According to the International Energy Agency, global energy demand will grow by 30% between now and 2040, with electricity consumption accounting for 40% of the total increase.

But continued reliability of the flow of electricity into businesses and homes depends on the health of the system that supports it. This includes all links in the electrical power train—circuit breakers, wiring, and transformers.