PÖYRY POINT OF VIEW REPORT / 8 Dec 2016
The case for investing in thermal power projects in Iran
Iran is one of the Middle East region’s largest economies with a population of 80 million and a peak electricity demand of 47 GW. The lifting of sanctions has sparked renewed interest in Iran amongst power developers and investors.
We expect peak demand in Iran to grow at a rate of between 2 to 3 GW in the coming years. This will drive a need for new power capacity. In addition to this, we estimate that almost 20 GW of Iran’s thermal power capacity is more than 25 years old and this capacity could be replaced or upgraded to improve efficiency and reduce gas consumption.
There is wide-spread recognition that while nuclear and renewable capacity is being considered, significant investment in new thermal power capacity is needed. 56 % of the current capacity is owned by the government at present, however going forward it is expected that new capacity will be developed by the private sector.
In this article, we review the case for thermal power investment in Iran and find that the prospects and potential returns are exciting. The high potential returns come with risks which are greater compared to some other markets in the Middle East region. Power investors need to make a significant effort to understand these.