A Win for Private Power Producers

EghtesadOnline: As per a government directive the Iran Power Generation, Transmission and Distribution Management Company (Tavanir) will henceforth not be the sole buyer of electricity from private power companies, an Energy Ministry spokesman said.

News ID: ۷۵۱۳۲۹

22 October 2020

“Based on the new decree, industrial units which need more than 5 million kilowatt hours of power per annum will be able to buy directly from private suppliers via the energy bourse,” Mostafa Rajabi Mashhadi was quoted as saying by Barq news.

After a contract is signed between a private power producer and private manufacturing unit, Tavanir will play a regulatory role and help transfer electricity from the power station to end user(s), he noted.

The energy ministry will provide infrastructure (cables, distribution system, etc.) but delivery will be undertaken by retailers and consumers will not pay the bills to the state-owned company.

After years of wrangling, disputes and debates the government has conceded and come to the conclusion that trade in electricity should be the function of the energy bourse and Tavanir should step back after decades of monopoly.

Mashhadi said that legal entities can buy electricity and sell it to either industries or repackage it via the energy bourse.

“A competitive electricity market in the long-term will allow customers to choose their power supplier from several companies, as opposed to being a customer to a single, state-owned distributor.”

In addition, electricity retailing in the bourse will not only make prices competitive but also increase the quality of services, the official noted.

Retail electricity is widespread in the US and Europe and consumers can choose the type of contract that best suits their needs.

Energy experts, including Ali Shams Ardakani, head of Energy Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture, insist that it is critical for the government not to be immersed in selling electricity to end consumers and let  private companies take over.

As enshrined in Article 44 of the Constitution to downsize the bloated bureaucracy, a large part of executive responsibilities of the Energy Ministry should be shifted to the private sector. But so far this had not been fully accomplished despite the increasing role of private companies in generating power.

Referring to the upside of the new directive, Mashhadi noted that the plan will help private power firms to deal in cash.

One main disadvantage of selling power to Tavanir is that the giant state-run company has been unable to meet its commitments on time and by extension has created enormous financial difficulties for private producers.

Exports

In related news, the portal quoted Mohammad Parsa, head of the Federation of Iranian Energy Exports Industries, as saying that exporting electricity can be more profitable if private firms are allowed to sell without unwanted and unhelpful government interference.

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, Tavanir sold 8.6 billion kilowatt hours of power to neighbors including Afghanistan and Pakistan in 2009 when installed power output was 49 GW. Now capacity has climbed to 60 GW but exports have declined 27% to 6.2 billion kilowatt hours.

Parsa said that the government and its diplomatic missions should act only as a facilitator to find the best possible channels between private firms and potential foreign clients.

“Iran’s neighbors need at least 50 GW of electricity every day, of which less than 8 GW is supplied by Tavanir and could decline further unless the government steps aside.”

Private electricity companies in Iran are able and willing to supply the needs of neighbors albeit if they are allowed to conduct their business independently, he stressed.