22 R. MILLS
1990s strengthened awareness of the need for power sector expansion and
reform. A wholesale electricity market with a regulator was established
in 2003, 6 and in 2004, Tavanir was allowed to list 65% of subsidiaries
on the Tehran Stock Exchange, and a separate (though 100%-Tavanir)
entity was established to operate the electricity transmission system. 7
The privatisation decree of July 2008 permitted privatisation of major
enterprises, 8 albeit excluding the upstream oil and gas sector. Electricity
transmission and distribution remain state-owned, but private investment
has been encouraged in independent power producers (IPPs) from about
2003, with investors entering the sector from 2005, including for renewable projects, and the majority of power plants have been privatised. 9
However, much of this privatisation, particularly under then President
Ahmadinejad, was really pseudo-privatisation, with insiders and parastatal
organisations taking control of state assets. 10 Though Quest Energy of
Dubai was negotiating for an IPP in 2008, it was not until 2016 that the
first foreign company, Unit Group of Belgium, was successful in signing
an IPP agreement in Iran (in this case, 6020 MW of gas-fired plants). 11
There have been attempts to privatise dams and their hydroelectric
facilities, but these did not succeed because water resources are strictly
property of the state, so they continue to be owned by the Iran Water
and Power Resources Development Company, established in 1989.
By 2017, the Energy Ministry owed private producers the equivalent
of $6.8 billion, because of non-payment by some of its users, particularly industries, and because of the gap between electricity supply costs
and regulated prices. 12 Political opposition and fears of protests have
prevented prices being increased sufficiently to cover costs.
From the late 1990s onwards, there was a lively debate in Iran
concerning the best way to use the country’s massive gas reserves, which
the discovery of South Pars and other fields had by then elevated to the
largest or second-largest (after Russia) in the world. This was reminiscent
of the policy question in the 1970s concerning depletion of Iran’s oil
reserves (see below). Options for gas use including domestic power generation and industry (including petrochemicals), transport (compressed
natural gas or CNG for vehicles), residential distribution for heating and
cooking, reinjection in mature fields for improved oil recovery, and export
either by pipeline or as liquefied natural gas (LNG).
This debate was partly couched in economic terms, but largely resolved
by political exigencies. In rough descending order of priority, the competition at times of shortage was resolved as residential, transport, power,
1990s strengthened awareness of the need for power sector expansion and
reform. A wholesale electricity market with a regulator was established
in 2003, 6 and in 2004, Tavanir was allowed to list 65% of subsidiaries
on the Tehran Stock Exchange, and a separate (though 100%-Tavanir)
entity was established to operate the electricity transmission system. 7
The privatisation decree of July 2008 permitted privatisation of major
enterprises, 8 albeit excluding the upstream oil and gas sector. Electricity
transmission and distribution remain state-owned, but private investment
has been encouraged in independent power producers (IPPs) from about
2003, with investors entering the sector from 2005, including for renewable projects, and the majority of power plants have been privatised. 9
However, much of this privatisation, particularly under then President
Ahmadinejad, was really pseudo-privatisation, with insiders and parastatal
organisations taking control of state assets. 10 Though Quest Energy of
Dubai was negotiating for an IPP in 2008, it was not until 2016 that the
first foreign company, Unit Group of Belgium, was successful in signing
an IPP agreement in Iran (in this case, 6020 MW of gas-fired plants). 11
There have been attempts to privatise dams and their hydroelectric
facilities, but these did not succeed because water resources are strictly
property of the state, so they continue to be owned by the Iran Water
and Power Resources Development Company, established in 1989.
By 2017, the Energy Ministry owed private producers the equivalent
of $6.8 billion, because of non-payment by some of its users, particularly industries, and because of the gap between electricity supply costs
and regulated prices. 12 Political opposition and fears of protests have
prevented prices being increased sufficiently to cover costs.
From the late 1990s onwards, there was a lively debate in Iran
concerning the best way to use the country’s massive gas reserves, which
the discovery of South Pars and other fields had by then elevated to the
largest or second-largest (after Russia) in the world. This was reminiscent
of the policy question in the 1970s concerning depletion of Iran’s oil
reserves (see below). Options for gas use including domestic power generation and industry (including petrochemicals), transport (compressed
natural gas or CNG for vehicles), residential distribution for heating and
cooking, reinjection in mature fields for improved oil recovery, and export
either by pipeline or as liquefied natural gas (LNG).
This debate was partly couched in economic terms, but largely resolved
by political exigencies. In rough descending order of priority, the competition at times of shortage was resolved as residential, transport, power,