Iran's Electricity Industry and Hope for Sanctions Relief

While analyses regarding the prospect of Western companies re-entering Iran's energy sector post-sanctions continue, less attention is given to Iran's electricity industry; a sector that consumes one-third of the country's total gas production and over 20 billion liters of liquid fuel annually, contributing to 40% of air pollution in the country. A significant issue in this sector is the very low efficiency of power plants and the considerable waste of electricity production during transmission, which has even made the conversion of gas to electricity and its export uneconomical for Iran. The Mehr News Agency reported on Tuesday, July 6, that 'Iran's electricity consumption has once again set a record, with nearly 50,000 megawatts of electricity consumption, putting the national power grid one step away from widespread blackouts.' According to this report, 50,000 megawatts is the red line for peak electricity consumption set by officials of the Ministry of Energy for this summer, and according to the ministry's managers, once electricity consumption surpasses this red line, planned blackouts will commence nationwide. A report from the Iranian Electricity Network Management Company on Monday, July 5, at 2:40 PM recorded a 'historical record in the consumption of this clean energy in the country and even the Middle East' with consumption exceeding 49,776 megawatts. According to the official report from Iran's Ministry of Energy, the current electricity production capacity of the country exceeds 73,000 megawatts, while actual electricity production does not even reach 58,000 megawatts. The latest weekly update of the country's electricity production statistics published on the Ministry of Energy's website, covering statistics up to July 5, indicates that electricity exports during this period have decreased by 25% to about 2.5 billion kilowatt-hours, while electricity imports have increased by about 16% to 1.275 billion kilowatt-hours. (Watts is a unit of power measurement, and watt-hours is a unit of energy measurement). Over 82% of Iran's electricity is produced in thermal power plants. The efficiency of these plants, according to the Ministry of Energy, is on average 37%, which is a very low figure. In recent years, Iran has attempted to convert its gas and steam power plants, which have a 30% efficiency and a 57% share in total electricity production, into combined cycle power plants to increase their efficiency to about 45%, but so far it has only managed to raise the share of combined cycle plants in the country's electricity production to 25%. Additionally, due to the aging and wear of equipment, 14% to 18% of the electricity produced in the country is wasted during transmission, which is a very high figure. All these conditions have led some members of parliament and even government officials to protest the economic viability of electricity exports, as the income from raw gas sales is even higher than that from converting gas to electricity and exporting it. The historical record of electricity consumption reaching the 'red line for blackouts' comes at a time when the country's electricity production capacity increased by nearly 3,000 megawatts last year and is expected to increase by more than 2,000 megawatts this year, but if Iran does not improve the efficiency of its power plants, the growth in electricity production will not meet the growth in domestic needs. Meanwhile, over the past 100 days, Iran has consumed more than 17 billion cubic meters of gas, as well as 1.627 billion liters of diesel and fuel oil for electricity production. In recent years, due to gas shortages, Iran has supplied over 40% of the fuel needed for power plants through fuel oil and diesel, which, in addition to increasing fuel costs, has resulted in the production of over 220 million tons of air pollutants in the country. This amount is equivalent to 44% of the total greenhouse gas emissions in Iran. According to the World Bank, Iran ranks seventh in the world in carbon dioxide production, and according to estimates from the World Health Organization, the annual losses from air pollution in Iran are about $16 billion. Last year, Iran significantly increased gas supply to power plants from 36 billion cubic meters to about 50 billion cubic meters, leading to savings in the consumption of liquid fuels in this sector. For this year, it is planned that this figure will reach 57 billion cubic meters, but still, an additional 13 billion cubic meters of gas is needed annually to stop the consumption of liquid fuels in the country's electricity production, and given the growth in electricity production, the amount of gas supplied to power plants must increase annually. According to the International Energy Agency, the energy intensity (the amount of energy consumed divided by gross domestic product) in Iran is twice the global average. Considering the significant share of power plants in the consumption of primary energies in Iran, a way must be found as soon as possible to increase the efficiency of power plants and reduce waste in the electricity network. Nasratollah Sifi, CEO of the Iranian Fuel Optimization Company, stated on July 5 in an interview with Shana News Agency that 'all fuel optimization projects require technology,' adding that 'a 50% reduction in energy intensity requires an investment of $200 billion.' He noted that if energy consumption is not addressed, the situation that has currently arisen regarding water will also occur for oil and gas reservoirs, and with this trend, we will become an energy importer in eight years. In this context, the price of gas consumed by Iranians is 12.5 times lower than the 'global rate.'