Power Plant Fuel Price Reform, Value-Added Tax and Electricity Demand in Iran: A System Dynamics Approach

It is expected that amendments in the price of power plants'' fuel result in the increase of electricity price and a reduction in electricity demand، especially in the long run. To assess the quantitative effects of the amendments، we''ve developed a system dynamics model for the electricity market in Iran consisting of demand، price and generation modules. The model has been simulated for a ten-year period، using powersim software. The results indicate that if the subsidized prices for power plant fuel maintain، electricity shortage of more than 300 terawatt hours shall be unavoidable in 1400. However، price increases، as recently enforced by the Subsidy Reform Law، lead into higher electricity prices and bring equilibrium back into the electricity market. Enforcing value added tax in the electricity market will also result in an extra 5. 4% electricity demand reduction.