Private Firms Left Behind

EghtesadOnline: Exporting electricity can be more profitable if private firms are also allowed to sell, without state interference, the power they generate, head of the Federation of Iranian Energy Exports Industries said in Tehran Saturday.

News ID: ۷۵۰۵۳۵

26 July 2020

Recalling government pledges to let private sector export electricity, Mohammad Parsa said: “State officials have no blueprint to allow the presence of non-government organizations, cooperatives and private companies in this sector. Small wonder power exports have fallen by 27% in the last nine years,” Barq News reported.

Installed power production capacity has risen 23% since 2009 and is near 60 gigawatts, but exports have decreased in the past decade, he said.

According to the Energy Ministry, Iran Power Generation, Transmission and Distribution Management Company (Tavanir) sold 8.6 billion kilowatt hours of power to neighbors including Afghanistan and Pakistan in 2009 when installed power output capacity was 49 GW. Now that capacity has climbed to 60 GW, exports have declined 27% to 6.2 billion kilowatt hours.

Tavanir is in charge of purchasing electricity from power plants and as per law private companies must sell to the state giant.

Parsa believes that the government via its diplomatic missions should act only as a facilitator in finding the best possible channels between private firms and potential foreign clients. So far this has not happened and the state continues to dominate power export.

“Iran’s neighbors need at least 50 GW of electricity every day, of which less than 8 GW is supplied Tavanir. This volume too will plummet unless the government steps aside.”

Private electricity companies in Iran are capable of meeting the needs (50 GW/day) of neighbors if they are allowed to conduct their business independently, he stressed.

In contrast, Energy Minister Reza Ardakanian insists that involvement of non-state players in electrify export will have an adverse effect on tariffs because (then) prices will become competitive and to the detriment of Tavanir.

A kilowatt of power is sold between 9 to 11 cents now and if private companies join this trade prices will fall, he has been quoted as saying.

Ali Shams Ardakani, head of the Energy Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture believes the problem can be resolved if power is sold on the energy bourse,

Import-Export Data

According to Iranian Electrical Power Equipment Manufacturing and Provision Company (SATKAB), a subsidiary of the Energy Ministry, of the total 6.2 billion kWh of power exports in 2019, 6 billion kWh was exported to Iraq and the balance to Afghanistan (775 million kWh), Pakistan (516 kWh), Armenia (53 kWh) and Azerbaijan’s Nakhchivan Autonomous Region (33 million kWh).

In sum, Iraq, Afghanistan, Pakistan and Armenia accounted for 83%, 10%, 6.5% and 0.7% of Iran’s power export, respectively, last year.

SATKAB data show Tavanir imported 1.3 billion kWh of power in the mentioned period, mostly (1.2 billion kWh)  from Armenia.

Under swap deals, Iran exports electricity to Armenia and Azerbaijan in winter and imports in summer.

According to Amir Anvari, managing director of Saba Power and Energy Industry Holding Company, who is a proponent of the private enterprise, despite the Energy Ministry’s claim that it has privatized over 50% of power plants, the privatization plan has gone astray.

Senior government officials have “never had a proper understanding of privatization” and this shows why their plans have always failed to produce the desired results.

"So long as executive officials see private enterprise as their rival, privatization policies will pale in front of Article 44 of the Islamic Republic Constitution," he said.

Article 44 says large parts of executive (government) responsibility in the key energy sector should be transferred to private firms. But for whatever reason this has not been fully implemented despite the fact that private companies play a key role when it comes to producing electricity.