Green Revolution

Although Iran was OPEC’s second-largest exporter of petroleum products in 2016, changes have been brewing in the Islamic republic’s green economy sector. Investment in renewable technologies has risen thanks to the government’s desire to hedge against uncertain oil prices, and the lifting of cumbersome sanctions has opened up new avenues for FDI. Significant wind, solar, and biomass electrical generation projects currently underway are expected to increase renewable energy production capacity to 700MW by the end of 2017 and 5,000 MW by 2021. In the longer term, the increased utilization of such programs is expected to create positive externalities that will boost agricultural production and health outcomes by cutting harmful emissions, generating cheaper power, and creating a new electricity export market.

Iran’s efforts to boost its green economy can be traced back to 2010, when the government unveiled plans to add 2,000MW of renewable energy as part of its 2010-2015 five-year plan. This original plan included contracts to build more than 1,100MW of biomass and wind energy systems. In 2012, Iran allocated more than USD500 million for renewable energy projects, to be distributed in the form of loans from smaller developers. However, its efforts at developing green technologies took a significant hit in 2012 when the US and EU imposed severe sanctions upon Iran in retaliation for not limiting its nuclear program. The Western-imposed sanctions effectively cut Iran’s financial system off form the rest of the world and eliminated the Islamic Republic’s ability to import technologies or conduct business with foreign firms. As a result, development in the renewable energy sector stalled as Iran dealt with the ensuing economic contraction.

The 2016 lifting of almost all of the sanctions gave the renewable energy sector a new lease on life. Free to work with foreign firms again, Iran began quickly moving to upgrade its outdated renewable infrastructure, setting new regulations aimed at drawing foreign investment. In 2016, the Iranian government announced that it would increase guaranteed contracts length from five to up to 20 years, streamline the permit process for foreign investors, and offer subsidies for companies that use local equipment to produce renewable energy. In the year since returning to the global market, firms from a number of European and South Asian companies with extensive experience in the renewables industry have begun to make contact with the government over a number of different initiatives.
Some major projects have already come to fruition. July 2017 saw the inauguration of the Mokran Solar Power Plants Complex, Iran’s largest solar project yet. The USD27-million plant, which was constructed and supervised by Swiss and German firms, has a capacity of 20MW over its 44ha. Solar is a natural fit for Iran’s green energy ambitions: the Islamic Republic has more than 300 sunny days a year, giving it some of the highest potential for inexpensive solar energy in the world. Rapid improvements in technology have dramatically lowered the price of solar energy in recent years, and Iran stands to benefit greatly from expanding its solar energy grid. Work on additional projects is already well underway; Iranian firm Mokran has started construction on a USD140-million solar park that is expected to produce 100MW once completed.
The Iranian government is also promoting the use of residential photovoltaic units as a way to increase green energy production and raise awareness in the Iranian population. Though small—installations would be under 100kW—residential solar panels have the potential to result in significant energy and financial savings when adapted on a larger scale. The Iranian government is currently in the midst of a push to spread awareness of the units and offering tariffs that count against monthly electric bills with the potential for further payments if surplus electricity is sent to the grid. Three solar panel factories currently being built in Iran should help maximize the economic and social benefits of the industry and ensure that renewable technologies become a well-integrated part of the Iranian economy. The potential benefits are enormous: by producing more energy without the use of oil and natural gas, Iran would gain a new degree of self-sufficiency, lower energy costs, reduce harmful environmental emissions, and increase revenues from its traditional energy industry by increasing the volume it can export.