Currently, we are witnessing a mismatch in the supply and demand of electricity in the country; Now this matter can be examined from two aspects. First, from the supply side, which is unfortunately due to the lack of development of the country’s power plants, the loss of electricity in the distribution network, delays in power plant repairs, drought and the reduction of hydroelectric power plant production, etc., and the second is due to the increase in demand, which One part goes back to home consumers and this is a sign of the lack of consumption management programs, and on the other hand, in the last few decades, industries have been developed in the country, which were mainly energy industries, and even due to the relatively low price of energy in Iran, productivity Energy has not been given much attention.
But the thing that has caused us to witness the disharmony in supply and demand today is the neglect of economic mechanisms. Prices in the economy play a role far beyond the role of accounting, and relative prices determine the allocation of resources. In the long term, industries are formed in the country that are mainly energy-intensive, and even investing in technologies that improve consumption efficiency lose their economic justification in this situation. That is, the prices signal that the existing technology that has high energy consumption is a cost-effective technology.
When the structure of industries is based on these prices, it cannot be expected that electricity consumption will decrease, and precisely because of this, some believe that electricity consumption is not sensitive to prices. While in the short term, with price increases, consumption cannot be expected to decrease, and in the long term, the price of energy will affect the choice of technology and even the choice of which investment to enter and which investment not to enter.
On the other hand, when the price of electricity becomes lower than the equilibrium value of the market, it practically gives the signal to the private sector that the construction of the power plant is not profitable. As a result, the power plant is not built by the private sector, and this task becomes a sovereign task, and practically, over time, the country reaches a point where it faces a power deficit.
In fact, this is the result of ignoring the supply and demand mechanism in the economy. It is obvious that when the price is set lower than the equilibrium value, the demand increases and the supply decreases, and as a result, disequilibrium occurs. Facing this dissatisfaction, the government goes to the big companies and if they make such investments, they naturally lose resources for other investments that probably have a higher IRR. Meanwhile, the price of electricity is low and the economy of the power plant is not justified.
On the other hand, the relative price of energy in Iran has caused producers to not move towards fuel consumption optimization. For example, in the steel chain, between 22 and 40 kilowatt hours per ton of concentrate, between 26 and 55 kilowatt hours per ton of pellets, between 110 and 130 kilowatt hours per ton of sponge iron, and between 700 and 900 kilowatt hours per ton of steel. to be This is despite the fact that the electricity consumption standard for the production of each ton of steel is about 450 kilowatt hours. This means that we use twice the world standard of electricity to produce each ton of steel.
Although, since about four decades ago, the amount of energy consumption per ton of steel has been decreasing due to the research conducted and the new technologies used, and it has decreased by about 50%. Of course, the amount of energy consumed in steelmaking units depends on the type of production method, i.e. blast furnace or electric arc furnace. The blast furnace method consumes more energy than the electric arc method. In Iran, although the statistics are a little scattered, this difference reaches about 25%.
The problem related to the sustainable supply of energy at present, I would not say a challenge, but it is one of the main issues of the country’s steel industry. According to estimates, the loss caused by the lack of energy and the lack of profit related to it, in the field of mining and mineral industries, amounts to 160 thousand billion Tomans, and the activists of this industry have no choice but to invest in the field of power plants.
The outages of the last two years show that the economy of the electricity industry needs to be revived. Therefore, in order to solve this problem, the first step is to realize the price of electricity. The best available mechanism for electricity supply in the energy exchange is for customers such as industries that have large consumption and is the supply and demand mechanism.
When we leave the pricing to the supply and demand mechanism, in the long term, industries with high energy consumption and low added value will be eliminated, and over time, industries will be formed that are practically not energy-intensive at all, or if they are energy-intensive, not so much value. They create a high level whose production has an economic justification, and as a result, in the long run, the combination of industries that we have in the country will have an optimal form of consumption pattern, and practically no one will receive more subsidies by consuming more energy.
Ardeshir Saad Mohammadi – Managing Director of Mining and Metals Development Investment Company
