Rising demand for electricity, coupled with chronically inadequate physical and financial infrastructure, means the region’s emerging markets have enormous potential for private power developers.
But the governments must overcome a series of challenges if they want to attract investment into their electricity sectors.
In Lebanon, Beirut’s failure to set up an electricity regulator means private developers cannot yet build much-needed new plants, while in Jordan, the government is under pressure to cut corners in the tender process to expedite construction of the country’s much-needed third privately developed power station.
Iran offers the biggest opportunities. Tehran wants to add 29,500MW of generation capacity by building and expanding a total of 40 power plants over the next six years, of which 21 will be privately built.
But two factors are keeping investors away.
First, trade sanctions against Iran are deterring the big developers from investing in the country because of the impact on their US trade.
Second, Iran’s proximity to the GCC means Tehran is losing out as investors choose to go to the less challenging market.
This lack of interest from large firms means Tehran will have to rely on continuing investment from quasi-governmental, domestic companies until the sanctions are lifted.