Post-sanctions Iran to face serious power crisis

Business Materials 24 August 2015 14:57 (UTC +04:00)
Despite significant power production growth, Iran's electricity export plunged in 2015
Post-sanctions Iran to face serious power crisis

By Dalga Khatinoglu

Despite significant power production growth, Iran's electricity export plunged in 2015.

The reason is soaring domestic consumption, but during the post-sanctions era, it's expected the country's industrial sector will revive and the power needs will increase by 20 to 25 percent in this sphere.

According to the latest weekly report, released by the energy ministry, Iran has exported 4 billion kWhs of electricity from March 21 to August 8, while the figure for January 1 to March 20 was 2.2 billion kWhs. Therefore Iran's power export in 2015 stood at 6.2 billion kWhs, about 15 percent less than 2014. On the other hand, the country's electricity import increased by above 10 percent to 2.4 billion kWhs in 2015.

According to official statistics, Iran's power generation capacity increased by 558 MWs and additional 1,734 MWs of power would add to the total capacity by the end of current fiscal year, (March 20, 2016) the power generation capacity would reach above 75,000 MWs. This figure is more than two times the power production capacity in 2004.

Iran's industrial sector consumes about 35 percent of total electricity consumption, while this sector works at about 70 percent of capacity due to sanctions.

According to Energy Ministry, Iran's industrial sector consumed about 75 billion kWhs last year, indicating about 4 percent increase Y/Y, while the total consumption was 219 billion kWhs.

However, according to Iranian officials, the industrial sector, especially the petrochemical and auto production units would become fully operational next year, after international sanctions on the country are eliminated. Therefore, it's expected that industrial sector's power consumption to reach about 100 billion kWhs next year.

The Iranian government also plans to double both auto and petrochemicals production level to 3 million and 120 million metric tons per year in five years.

And while the housing sector's electricity usage increased by more than 5 percent last year to 70.5 billion kWhs, it seems power output growth will not meet soaring annual consumption levels.

Increasing output is not a solution

First of all, Iran should decrease expenditures for power generation. The country has increased gas production capacity by 100 million cubic meters per day (mcm/d) last year, and the same growth is expected to happen in 2015. However, according to Energy Ministry's reports, Iran has been consuming huge amount of liquid fuels in power plants.

Iran's power plants have consumed about 27.166 billion cubic meters of gas (+12 percent) and 1.4 billion liters of diesel (-43 percent) as well as 2.276 billion liters of fuel oil (-28.9 percent) since March 21.

Iran needs more than 20 billion cubic meters of gas to cut the liquid fuels consumption in power sector. On the other hand, Iran's power plants production capacity is above 74 MWs, but the actual production level is less than 58 MWs.

The third problem is the low efficiency of power plants.

Iran has aimed to change all of gas thermal power plants into combined power plants (CCPP) with 45 percent efficiency, which shares only 25 percent of the country's total power generation capacity, while the thermal power plants share more than 80 percent of total power production. Iran should accelerate changing all thermal power plants to CCPP.

There is also a huge power loss during the transmission and distribution process, which reaches around 40 billion Kwhs, or more than 14 percent of total actual electricity energy generation capacity. Iran hasn't been able to optimize the situation.

Iran should optimize the efficiency of thermal power plants, which stands at 37 percent on average. The country needs about $700 million to $850 million to increase power plants' efficiency by one percent, according to Iranian officials.

According to official stats, some 222 million metric tons of pollutants were emitted as a result of using fossil fuel in power generation in 2013. This means that about 37 percent of CO2 emissions in Iran were caused by power plants in the mentioned year.

Air pollution costs $16 billion for Iranians annually, according to the World Health Organization.

Edited by CN

Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service. Follow him on @dalgakhatinoglu