Iran is an exciting new market for renewable energy, with a high demand for electricity and numerous incentives from the government to encourage a switch from hydrocarbons to renewable energy.
Iran’s policy makers have recognized the potential of the renewable energy sector and have taken steps to exploit it. Through the new terms of the Power Purchase Agreement and tariff rates, Iran hopes for an increase in foreign investment in this sector.
Iran’s energy production market is dominated by fossil fuels that satisfy 91.8% percent of Iran’s total energy demand. Nuclear electricity provides 2.3% of energy, while Hydropower stands for 5.7% of total power generation and 0.2% comes from other renewable sources, mainly wind (53.88MW), biomass (13.56MW) and solar (0.51MW).
The Iranian Power Generation, Transmission, Distribution and Management Company estimates that Iran’s renewable energy capacity will be able to provide 10% of the country’s energy requirement within 5 years.
Iran is an ideal location for solar projects as it is located on the world’s “Sun Belt” enjoying high solar irradiation and an average of 300 sunny days per year. The country also has the potential to produce 1.4GW of wind power as it is located in a low pressure region surrounded by high pressures areas.
Iran’s 6th Development Plan (2016 to 2020) states installation of 5GW of renewable energy within this period as well as plans for an additional 2,5GWW by 2030.
Iranian government reduced bureaucracy in its energy sector, streamlined its licensing process, and presented competitive incentives to R.E. infrastructure developers and equipment suppliers. For instance, the Renewable Energy Organization of Iran modeled its new feed-in tariff policy on the German equivalent, guaranteed government purchases of power for 20 years, and introduced a 15 percent tax reduction for companies that use domestic components.
The tariff rates offered by the government will soon reduce to be competitive with the rates offered elsewhere in the region. Developers entering the market today may take some risk but they will reap greater rewards for the next 20 years because of higher tariff rates offered now.
The attractiveness of Iran’s renewable energy potential has not gone unnoticed. Brittany’s Quercus recently announced an investment of 500€ million to build a 600MW solar power plant in Iran. Other investments include a 48MW wind farm, a 50MW solar plant to be built by an Italian company and two PV-Solar plants of 7MW to be built by German companies. Furthermore, a Danish company announced the construction of a wind turbines facility in Iran and a Spanish company has signed an 18 month contract to supply technical services to the Renewable Energy Organization of Iran.
The head of the Ministry of Energy has recently stated that Iran is planning to tender 1GW of wind and as much as 3GW of solar projects. This process will begin later this year and will take place over several stages.
This article was first published at Reflets Magazine N.98 from ESSEC Business School. http://www.alumni.essec.edu/fr/magazine-fr/