The Iranian power industry is crossing through a natural monopoly to competitive markets and a new structure in which producers are competing for energy supply. Based on global statistics, energy intensity in Iran is 4 times the world average energy consumption. The intensity of electricity is 3 times this amount, which results from institutionalized problems in energy consumption. Iran power industry has a turnover of 8 bn USD a year. By the year ended March 2017, the number of power sector subscribers has reached 33,831,000 of which 27,370,000 are in-home power subscribers.
– World 14th ranking in power generation
– Increasing nominal capacity to 76,428 MW
– Increase average efficiency of total & thermal power plants
– Power loss reduction of transmission network in recent years by 10.7%
Nominal installed capacity increased to 3.1%, reaching 76,428 MW, of which Iran ranked 1st in the region, 3rd in Asia and 14th in the world, since the year ended March 2016.
83.6% of Iran power generation capacity is related to thermal power plants and 16.4% is for renewable power plants.
The electric power generation index grew by 3% with 289 bn kw/h, of which, 283 bn kw/h (almost 98%) generated by Ministry of Energy power plants and the private sector and the rest was related to large industries in the year ended March 2017 comparing the previous year. The combined generation capacity at peak consumption was 51,579 MW in the year ended March 2017; the capacity of thermal power plants increased by 5.6% to 42,761 MW and the generation capacity of hydropower and nuclear power stations by 2.2% to 8,818 MW. Power per capita generation is 3,578 kWh.
Combined cycle and hydroelectric power plant accounted for 47.2% and 38.7%, respectively, with the largest share of power generation. Despite owning 14.9% of installed capacity, Hydroelectric power plants account for 7.5% of total power generation.
By 2016, Iran ranked 14th with an upgrade rating since 2015.
Power plants efficiency
Total power plants and thermal power plants efficiency has been increasing by about 3.3% to 41.1% and thermal power efficiency with a growth of 1.1% to 37.8%, in the year ended March 2017. The efficiency of steam, gas and combined cycle and diesel plants was 36.7, 31.5, 46 and 34.9, respectively, in the year ended March 2017. The vision in the 6th Development Plan is to increase the efficiency of power plants by 60%.
A significant proportion, more than 15%, of power produced in distribution network has been wasted in the year ended March 2013, but in recent years, the improvement in power distribution networks and continuous challenging with unauthorized use of power led to a reduction in losses of power distribution networks from 15.2% to 10.7% between 2013 and 2017.
Power consumption amounted to 241 bn kWh, up to 5.9% in the year ended March 2017 year-on- year. Power consumption in household and industry sectors accounted for 33.2% and 32%, respectively. Iran power consumption per capita is 2,982 kWh and ranks 15th in the world. Household and industrial consumption are respectively 33.2% and 32% as the largest share of power consumed.
Power consumption intensity
For each one USD of GDP, 1.13 kWh power was consumed and power intensity decreased by indicating improved power consumption, in the year ended March 2017.
After Saudi Arabia, Iran ranks 2nd in power consumption in the Middle East and the world 15th consuming 1.17% of world total power consumption in 2016.
Export and Import
In the year ended March 2017, export dropped by 23% and import grew by 3%, as Iraq was Iran’s major destination, accounting for almost 76% of total export, while Turkmenistan being power import origin for 71%.
Power plants fuel
Natural gas is considered as Iran’s major power plant fuel. Natural gas consumption increased by 5.2% and gasoline and fuel oil consumption decreased 1% and 34.3%, respectively, in the year ended March 2017.
Iran is considered as one of the richest countries in energy resources. In addition to the vast reserves of fossil fuels and non-renewable resources such as oil and gas and has high potentials of renewable energy including wind, solar, biomass and geothermal. There is very high potential for development of wind and solar renewable energy and given needed investments, there would be even power supply for Europe. The current Iranian power plant capacity in renewable energy sector is only 1% of energy portfolio and a 5,000 mw renewable energy is predicted in 2021. In renewable power generation, Iran had the 1st place and a growth of 19% in the Middle East, in 2016 year-on-year.
Totally, installed capacity of renewable energy reached about 340 MW by the year ended March 2017 by private and public sectors and according to contracts concluded, another 600 MW is expected in renewable energy, reaching total capacity of 1,000 MW, by the year ending March 2018.
Currently, there are 4.1 bn USD demand of foreign investment in renewable energy plants, of which about 400 mn USD has been contributed, installed and put into operation. According to the Sixth Development Plan outlook, a 5% share of renewable generation capacity is to be installed by 5,000 MW.
According to Global Energy Statistical, Iran’s share of renewable energy from total generated power was 7.17%. The average share of new energy from total power produced in the Middle East was 2.36%, indicating Iran’s highest comparative growth.
Iran has a lot of wind power capabilities, exceeding European potential. It is possible to generate power at less than 60 cents EUR per kwh, since the profound wind blowing. The share of wind and solar energy of total power generation has increased by 15.4% in 2016 compared to the previous year.
Iran is one of the countries with high potential in solar energy, since enjoying 300 sunny days in more than two-thirds of the country and an average radiation of 4.5 to 5.5 kwh/sq m.
By converting deserts into solar energy absorption systems, Iran can provide wider areas in power supply. In the 6th Development Plan, it is expected the amount of installed solar capacity will reach 500 to 1,000 mw by 2020.
Iran has a capacity of 1,000 MW waste incineration. The Middle East biogas plant was the first Iranian biomass power plant with a capacity of 650 kw in 2008.
Considering renewable energy importance and private sector financial problems, the government has taken measures such as tax exemption, purchasing guarantees and other supportive policies. The government has ensured renewable energy purchase.
- According to the Act (Power Purchase Agreement-PPA), a contract for power purchase of renewable energy plants for 20 years will be concluded.
- Renewable power plants license holders are subject to exemptions, in case they import parts and equipment for installation.
- In order to facilitate investment contracts and attract investment, domestic banks are required to consider the concluded PPA and buy-back contracts of private sector with public organizations as acceptable guarantee for bank facilities.
- The private sector is tax exempted for 10 years in less developed areas and for 5 years in other areas; also, in case of establishing these units in industrial towns and special economic zones, the exemptions in less developed areas is set by zero tax for 13 years.
- Bill of payment don not subject to value added tax.
- Since the beginning of the year ended March 2016, on with the change in guaranteed purchase price, if the domestic and foreign investors use Iranian technologies and equipment to generate power, Ministry of Energy will contribute an extra 30% to the base price. With this incentive policy, investment in renewable energy for foreign companies will be provided.
Sanctions & post-sanctions
After sanctions, legal promotion were provided by the government and some barriers to renewable energy development were eliminated, renewable energy PPA, for instance, was guaranteed for 20 years. During this time, different European and Asian companies visited Renewable Energy and Energy Efficiency Organization (SATBA) and applied for renewable power plants license to the Ministry of Energy as a trustee and buyer, which resulted in 99 contracts with a capacity of approximately 1,589 MW through a PPA mechanism from January 2016 to mid-July 2017. Additionally, after JCPOA, 6 bn USD contract has been signed for establishing power plant, provided that supported through foreign financing.
After sanctions lifting, renewable energy production constrains have been reduced and legal bases have been provided. Reducing power loss and cost, providing power distribution and facilitating service delivery are important post-JCPOA prospects. Therefore, less willing companies from Japan and South Korea developed their relations with Iran.
According to the International Atomic Energy Agency (IAEA), Iran has been one of the Middle East’s key players in green energy. The agency estimates that Iran has added 10,606 MW to renewable energy production in 2016.
A contract between Fars Investment Services Center and Austrian Benefit & Solar Company for 100 mn EUR in Abadeh and IzadKhast for establishing four solar power plants.
The Norwegian Saga Energy were signed 4 bn USD for a 2 GW solar power plant.
- Power Purchase Agreement by Electric Power Company (Tavanir) with power plants
- Suitable infrastructure for power industry development
- More technological capabilities and less demand for imported technologies
- Pursuing long-term nuclear energy by Iran
- Currently, financial balance between payments and received is a major problem for electric industry
- Power distribution networks burnout
- Increased power consumption
- Costly power industry
- Low renewable power production
- Reduced civil development and infrastructure projects and no inclusion of development projects in power industry
- Power loss about 15% during transmission and distribution phase
- Production of silicon solar cells and Nano generation, megawatt wind turbines, fuel cells, sterling engines and many other technologies is as future agenda of Ministry of Energy.
- Due to the geographical and climatic condition and temperature differences, Iran can be an energy hub in the region to exchange power.
- The regional market, which provides opportunity of power industry export including technical, engineering and equipment services for the Ministry of Energy and private sector
- Iran has an untouched industrial country, without power industries development which industrial growth will not be achieved.
- As one of the world first 8 countries in radiation and wind density in some areas, about 30 MW wind and solar power production is predicting.
- Ministry of Energy delayed debts to power plants
- Power demand volatility throughout the year
- Unreal power price
Power industry needs investment for two reasons:
1-Electrical equipment and power plants are getting worn out. Currently, 30% of Iran’s power network is worn-out and needs rebuilt. Accordingly, use of private sector potentials and foreign knowledge-based companies to improve distribution network is required.
2- In order to prevent of power production deficiency, creating new power plant capacities is needed
- The current renewable energy tariffs are reasonable to investors in comparison with many countries.
- Since Iran is rapidly developing upstream and downstream industries, power generation is economically justified and the need for clean energy to generate electricity is affirmed. Thus, the government support the industry and there are no restrictions on power generation in Iran. Investors contribute on generating power from wind and solar power plants and other new indicators such as earth gravity and inland heat.
- Powerful Transformer (existing unit’s development)
- Hybrid Solar Dryer
- Solar cells (wafer production stage)
- Inverters and controllers (existing unit’s development)
- Synchronous optical networking (SDH )