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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.

As a result of significant state investment in the generation sector, a number of new power plants (mainly hydroelectric and combined-cycle) have come online in recent years. 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.

Key trends and recent developments in the Iranian electricity market include:

- During the period 2012-2021, Iran’s overall power generation is expected to increase by an annual average of 2.75%, reaching 258.2 terawatt hours (TWh). Driving this growth is an annual 3.41% gain in gas-fired generation and a 2.15% rise in hydropower, accompanied by the buildup of output from the country’s nuclear power facilities. Non-hydro renewables are expected to deliver average annual supply growth of 4.90%.

- With Iran’s 2011 real GDP assumed to have increased by 0.9%, BMI forecasts average annual growth of 2.5% between 2012 and 2021. The population is expected to rise from the current level of 74.8mn to 81.5mn during the period to 2021, and net power consumption looks set to increase from 156.2TWh to 209.8TWh by 2021. During the period 2012-2021, the average annual growth rate for electricity demand is forecast at 3.00%.

- Thanks partly to the projected rise in net generation, growth of which falls short of the underlying demand trend, Iran’s power supply surplus is likely to decrease over the mediumterm, 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 18.5% in 2011 will help balance the market. The estimated net export capability in 2011 is put at 4.2TWh, but could be no more than 2.8TWh by 2016, recovering to 4.0TWh in 2021 if capacity expansion begins to accelerate.