renewable energy in iran

renewable energy in iran

The parliamentary elections held on 28 February 2016 About Renewable Energy in iran, which significantly strengthened the position of President Hassan Rouhani and his supporters from the moderate faction, have shown that the opening of the Iranian market is also backed by the Iranian people.

Until today, the Iranian power market has been shaped mainly by conventional energy sources. Not at least, this is a consequence of the fact that Iran holds large crude oil and natural gas reserves. Moreover, it was not before 2013 that the first nuclear power plant with a capacity of 700 MW in Bushehr became fully operational.

According to plans, two more reactors will be built on the site of the Bushehr nuclear power plant, each with a capacity of 1,000 MW.1 The list of contractors includes a Turkish energy company which was engaged to construct seven gas-fired power plants with an investment volume of EUR 3.7 billion (after currency conversion).

The power plants with a total capacity of 6,020 MW are said to cover 10% of Iran's energy consumption.2

The supply of electricity in Iran is in the state’s hand and the responsibility of the Ministry of Energy, with the state-owned Tavanir holding company operating under the Ministry's auspices .

One of Iran's six institutions that were assigned special tasks is " renewable energy in iran Organization of Iran" (SUNA), a state enterprise responsible for organising and promoting the development of renewable energy in iran.

The 2013 total installed capacity of 70.2 GW is composed of the following technologies:

The installed capacity of renewable energy in iran was 10.4 GWel and is mainly attributable to hydro power.

Deep geothermal energy does not play any significant role in Iran yet but it is a very promising source of energy (its economic potential is estimated at about 35.7 GWel ) In this segment, some regulatory efforts from the state will be required and an appropriate regulatory framework for investment will have to be formulated.

Within the framework of the sixth five-year development plan (2016 to 2020), the Iranian government wants to increase the share of renewable energy in iran up to 5,000 MWel  of installed capacity (excluding hydro power) until 2020.

The government intends to achieve this goal by guaranteeing the purchase of power also from non-state power plants at special feed-in tariffs. The potential production volume from renewable energy in iran per year is allocated as follows:

•    Wind: 8 TWh
•    PV: 16 TWh
•    Biomass: 23 TWh

In the future, a particularly strong focus will be on wind power. So far, wind farms have been installed in Manjil (Gilan), Binaloud (Khorasan-e Razavi), Safeh (Isfahan), Sarein (Ardebil) and Takestan (Ghazvin).

In this context,  a delegation trip organised by Wirtschaftsförderung Sachsen GmbH for German companies at the end of May 2016 should be mentioned, which helped initiate talks between wind farm developers and the Iranian Ministry of Energy. During the talks, the Iranian ministry emphasised that project developers would have to arrange for pre-financing on their own.

The ministry also expects that projects will help transfer certain know-how and create jobs in Iran. In addition, Iran expects to benefit from technical support, e.g.

thanks to Germany's experience gained on many renewable energy in iran projects involving connection of power plants to the grid.5 Iran offers excellent conditions also in photovoltaics. With about 300 days of sunshine per year and a global radiation of about 2.5 to 5.5 kWh/sqm depending on the location, the solar potential in Iran is more than twice as high as in Germany (about 1.1 kWh/sqm).

If financing that is more favourable in the medium term is provided, e.g. by international banks, the PV production costs will become competitive also in Iran.
Additionally, Iran boasts a high electrification rate (98.4%) so it is possible to connect PV power plants to the grid in most areas due to the network density.2 Only in 2014, the Iranian government invested USD 60 million in solar projects.

4Since April 2016, three German photovoltaics companies have been in talks with the Iranian decision-maker: SCHMID Group, based in Freudenstadt, and Industrial Development and Renovation Organization of Iran (IDRO), whose objective is to develop Iran's industry sector and to accelerate the industrialisation process of the country, signed a Memorandum of Understanding (MoU) concerning the construction of a solar module manufacturing facility in Iran.

6Moreover, Planet in Green, a special-purpose vehicle based in Bad Salzuflen, signed a 100 MWp Power Purchasing Agreement (PPA)  with SUNA7 and a German-Spanish investment company (name unknown) went into talks with Bakhtar Regional Electricity Company about the construction of a 50 MWp solar farm.

8On its website, SUNA has published many press releases about various rounds of talks between renewable energy in iran investors and relevant authorities, with the talks being aimed at exchanging contemplated project ideas.

In addition to investors from the Netherlands, Germany, Turkey and Denmark, the list includes RMX Tech, Graphite Energy, Çalık Enerji, Welltec and Vestas

What does the incentive system look like?

The incentive system for Renewable Energies in Iran is based on three instruments:
•    fixed feed-in tariffs;
•    National Development Fund of Iran; and
•    special duty on electricity.

In June 2015, the parliament adopted amendments to the rates of feed-in tariffs, which include two new essential regulations. First of all, the term of power purchase agreements (PPA) that provide for a guaranteed feed-in tariff was extended from 5 to 20 years and the funding approach was substantially changed.

The uniform tariff based on avoided costs for fuel and CO2 emission that is applicable to all technologies has been replaced by a remuneration that differs according to technology and is based on the respective power generating costs (Levelized Cost of Electricity, LCOE).

This creates a much more attractive environment for project planners and investors focusing on renewable energy in iran – not only due to the differentiated handling of the individual technologies but, in particular, because of the long-term planning security in this business area.


Invite to Invest

Iran’s Sixth Development Plan also provided for the installation of 500 MW of new solar capacity by 2018. Iran’s climate is diverse, and many of its regions are arid. Because the south, northwest and southeast regions receive around 300 days of sun per year, they are uniquely suited for solar energy. The Iranian government has prioritized the central region in particular due to its climate and proximity to the national power grid.


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