Despite having some of the world’s largest hydrocarbon reserves, Iran is investing heavily in renewable energy. This focus is part of a strategy to become a major regional energy and electricity hub.
It’s no secret that Iran is one of the most energy-intensive countries in the world, with highly inefficient energy use that has been exacerbated by consumer subsidies. According to a recent study, per capita energy consumption in Iran is ten times greater than that in the European Union.
The national energy strategy is intended to reduce domestic hydrocarbon demand in order to free up oil and gas production for export. The strategy has two main components: the expansion of power generation through renewable technologies; and the improvement of energy efficiency.
Although the subsidy reforms of the past seven years have somewhat improved the situation, Iran’s energy consumption and dependence on fossil fuels remain high. At the same time, the country is experiencing water stress, and air pollution has become an acute problem.
Boosting renewable energy output
Efforts to utilise the enormous potential of renewable energy have accelerated in the past few years. The Renewable Energy Organisation of Iran (SUNA) is a dedicated department in the Ministry of Energy. It has drafted plans outlining financial support, as well as nuanced ‘feed-in tariffs’, for the industry.
The National Energy Plan projects, with wind and solar power capacity of 5,000 MW, will be installed by 2018, and this will rise to 26,000 MW by 2022. These are very ambitious targets considering that only 200 MW of the national 74,000 MW power generation capacity is currently produced from renewable energy.
Despite this paltry figure, geography clearly shows that Iran has the potential to produce large amounts of renewable energy, especially from wind and solar power.
The bottleneck, however, will be the availability of capital and technology. SUNA is seeking to attract US$60 billion of domestic and foreign investment by 2025. The national grid is also being upgraded to cope with an influx of renewable energy.
So far, contracts for 900 MW of renewable energy projects have been signed and others are being negotiated or considered. SUNA has also allocated a budget of US$60 million to support the solar industry. This will primarily be paid in the form of grants to domestic companies that position themselves to enter this industry.
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This is an excerpt from an article in our monthly Iran Strategic Focus publication.
