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BMI View: Plans to develop Iran's nuclear capacity are central to the country's power industry and its
ability to meet its energy requirements. Given huge international resistance, there is no certainty of
continuing nuclear availability, let alone additional reactors. Efforts to halt the nuclear programme will
persist and sanctions will make it hard to maintain a high level of investment. Iran would benefit from
more rapid development of its renewables potential as a means of reducing oil and gas dependency.
Conventional thermal sources are expected to remain the dominant fuel for electricity generation, with
many of the power projects that are currently under construction due to use gas. Expansion of Iran's
nuclear capacity is planned, but external political resistance means it is far from certain whether further
reactors will be built. Talks continue with the aim of ending the stalemate but, at the time of writing, no
breakthrough was imminent.
Key trends and recent developments in the Iranian electricity market include:
Majid Salehi, the managing director of Iran Power Development Company, has revealed
that around 23 new power plants will begin production by the end of the government's
tenure in the next Iranian year, starting March 2013. Investment of approximately IRR50trn
will be required for the projects, which will be developed as part of the energy ministry's
Mehr Mandegar programme. The 648MW Kermanshah Power Plant will be the first to start
production, while the gas-fired units of the Zanjan, Semnan and Shahround power plants
should become operational in the coming months. The ministry has granted permits for the
private sector construction of renewable energy power plants, with a combined production
capacity of 12 gigawatts (GW), according to Iran Renewable Energy Organisation's
Managing Director, Yousef Armodeli.
In late May 2012, Iran's government terminated a contract that was awarded to China for the
construction of the Bakhtiari hydropower plant in the south west of the country, according
to Energy Minister Majid Namjou. China's proposed US$2bn financial package for the
1,500 megawatt (MW) plant was rejected by the Iranian Central Bank, with the project now
being awarded to the Iranian Revolutionary Guard Corps' engineering arm, Khatam al-
Anbiya. The cancellation of the contract could have an adverse impact on the economic
relationship between China and Iran.
During the period 2012-2021, Iran's overall power generation is expected to increase by an
annual average of 2.47%, to 275.9 terawatt hours (TWh). Driving this growth is the build-up
of output from the country's first nuclear power facility, which was connected to the grid in
2012 and should be generating power on a commercial scale before the end of 2012. Nonhydro
renewables are expected to deliver average annual supply growth of 4.43%.
With Iran's 2012 real GDP expected to have decreased by 1.2%, BMI forecasts average
annual growth of 2.4% between 2012 and 2021. The population is expected to rise from the
current level of 75.6mn to 81.5mn during the period to 2021, and net power consumption
looks set to increase from 176.6TWh to 228.7TWh by 2021. During the period 2012-2021,
the average annual growth rate for electricity demand is forecast at 2.60%.
Thanks partly to the projected rise in net generation, growth of which falls somewhat short of
the underlying demand trend, Iran's power supply surplus is likely to stagnate over the
medium term, although the country is keen to develop its power export capability. A decline
in the percentage of transmission and distribution (T&D) losses from an estimated 17.3% to
16.3% will help balance the market. The estimated net export capability in 2021 is put at