The private sector plans to construct 30 power plants with the capacity of generating 22,000MW of electricity in Iran.


Abundant sources of energy and greater demand in domestic and foreign markets have led to an increase in investment in power generation in the country. Skilled manpower and the ability to produce power generation equipment domestically are the other incentives for developing the sector.


According to deputy energy minister for power affairs, a number of steps have been taken to expedite investment in the sector including granting loans to investors from Foreign Exchange Reserve Fund.


Mohammad Ahmadian points out that the government aims to accelerate investment in thermal power plants.
He hopes that the private sector will begin executive operations to set up steam and gas-fuelled power plants as this could lead to the generation of over 22,000MW of electricity in five years.


Since the government cannot fund the projects alone, it has given a major share of the industry’s development projects to the private sector during the third and fourth five-year development plans (2000-10).


The cost of generating one kilowatt of electricity from gas-fuelled and steam power plants stands at US$300 and US$650 respectively.


Based on these estimates and given the demand for 22,000MW of electricity, some US$7bn should be invested in constructing power plants during the Fourth Five-Year Development Plan (2005-10).


However the electricity should be sold to customers at market rates.
Measures have been taken to set up a power market. Once such a market is organised and the private sector can export electricity, the industry can play a role in global markets.
The power generation industry has huge potentials which also make it lucrative for foreign investors, claims Ahmadian.


However some obstacles have to be overcome to draw capital to the sector.
Ahmadian says that the private sector has had some unsuccessful experiences in constructing power plants, citing the failure in the construction of 500MW power plant in Semnan.
He attributes these malfunctions to the lack of transparency in the power market and absence of well-defined policies on balancing energy supply and demand.


Negotiations have been held with foreign investors to construct power plants. Ahmadian elaborates that two companies from Malaysia and Saudi Arabia have shown interest in constructing plants in Tabriz, East Azarbaijan province, and one UAE-based firm has applied for setting up a power plant in Fars province.


The success of these projects depends on the openness of the market and there is no other alternative given the domestic need for investment.