Will Iran turn to PV?

The latest installment of news regarding Iran’’s PV market was the signing of an agreement between the British Photovoltaic Association (BPVA) and The Renewable Energy Organisation of Iran (SUNA) in mid-July. The agreements aim “to promote and co-ordinate the development of up to 1 GW of ground-mount solar projects, transfer of know-how and expertise including certification and standardisation of products and installers which would enable Iran to develop a successful rooftop solar programme,” said the BPVA. The agreements also cover the development of a 500 MW module manufacturing plant.

The emergence of Iran as an attractive energy market destination follows the lifting of western sanctions that had deeply restricted trade with the country. The deal is between Iran and the U.S., U.K., France, China, Russia and Germany. Consequently, a new era of economic development is expected to start in Iran, with energy investments an important step to be achieve this. A discussion at the Growing Economies Energy Forum, organised by EnergyNet in London at the end of June, showcased what could be expected.

Iran’’s solar development: a gradual process

The Forum’s most meaningful observations on Iran came from Urban Rusnák, secretary general at the International Energy Charter, a Brussels-based institution that aims to promote and protect foreign investment from member countries of the Energy Charter Treaty.

Rusnák told the Forum that after years of state control, Iran now appears to be reforming its energy market and inviting private stakeholders. However, he estimated that, despite the influx of foreign investors, Iran is not going to turn to renewable energies immediately; rather it will develop the sector gradually. Iran’s policy makers are still in favour of natural gas, added Rusnák.

The reason for this, said Rusnák, is that the country has some of the world’s largest gas and oil reserves and “they [Iranians] are not going to leave fossil fuels on the ground.”

On a more positive point, Rusnák noted that Iran’s politicians are not in denial of climate change. In fact, Iran has been severely impacted by climate change and, according to his observations during his visits to Iran, the country’s environmental agency enjoys a high profile in policy circles.

Renewables to compete with gas

Similar to Rusnák, Murat Çolakoğlu from PwC Turkey mentioned that today renewable energies provide less than 1% or Iran’s electricity, with more than 80% coming from fossil fuel-based generation. Çolakoğlu and Rusnák seemed to agree that solar and other kinds of renewable energy will have to compete with a well-established gas market.

Çolakoğlu added that Iran has heavy policy work to be done in order to facilitate foreign investments. Investors want to see a conceivable energy future, he said, and for this reason Iran’’s policy-makers need to establish clear legislature and legislative infrastructure (e.g. independent regulatory bodies). Once that is in place, foreign investors will feel that the rules of the policy making are stable and predictable.

According to Çolakoğlu’s information, current renewable energy subsidies in Iran pay up to five times more than market value, which is a source of concern. Such a case should be examined carefully, because nobody wants to see another solar market bubble. On the other hand, Iranians are seemingly familiar with subsidies since, as many Forum presenters pointed out, the country’s energy sector is heavily subsidised, costing about 12% of its GDP.

Nevertheless, Iran needs more power in the immediate future, concluded the Forum attendants. The country is considered by some as the Germany of the Middle East due to its plentiful manufacturing units and capacity.

Mohammad Hassan Habibollahzadeh, Iran’s ambassador in the UK, who also spoke at the Forum, said that today in Iran there are 115 power plants that are about 40 to 45 years old. These plants will need to be upgraded just as the electricity grid will need to be. SUNA, revealed the ambassador, is also currently processing 5 GW of renewable energy licenses, with the aim of facilitating the so-called build-operate-transfer projects.