THINKING OUTSIDE THE BARREL

Iran 2017 | GREEN ECONOMY | FOCUS: RENEWABLE ENERGY

Although Iran sits on top of the world's second-largest natural gas reserves and the world's fourth-largest oil reserves, one would be mistaken to assume the transition to greener means of energy is amiss in Tehran's energy vision.

As a signatory of the Paris Treaty, Iran is well aware of its responsibility in reducing hydrocarbon emissions. Moreover, the pollution that many of its citizens have to endure on a daily basis as a consequence of heavy traffic and gas flaring is said to be the cause of thousands of deaths every year, and is a major concern to its population. But accelerating its move into renewable energy does not only make sense from a moral perspective; it is also an economic imperative.

The ancient Persian prophet Zarathustra taught the existence of four sacred elements: air, water, earth, and fire. He surely witnessed the power of the sun, wind, and the rivers that flowed through his land. Though three millennia later, we can assume with a high margin of safety he did not anticipate the generation benefits wind, hydroelectric, geothermal, and solar power could bring to the world.

Iran has great geographical advantages for the production of solar and wind energy. A large part of the country enjoys 300 days of sunshine each year, and the Atlantic, Mediterranean, and Indian Ocean currents that pass through Iran provide excellent conditions for wind farms with consistent returns. The earliest recorded windmill design comes from Persia somewhere around 500-900AD, so the country is no stranger to wind energy. Moreover, the presence of rivers has enabled the country to put into place a hydroelectric infrastructure from as early as the 1950s.

Hydroelectric power used to be Iran's prime source of renewable energy, and its dams amount to a theoretical total capacity of 11,800MW. However, widespread drought has seriously decreased their efficiency. The future of hydroelectric power as a meaningful contributor to Iran's energy mix seems to depend on the country's ability and determination to put a stop to the ongoing fall of water levels.

In spite of these many advantages in energy generation from renewables, the contribution of renewable sources of energy to Iran's total power generation capacity is still small. Iran's current nominal power generation capacity is 77,000MW, of which nearly 90% comes from the combustion of fossil fuels.

At the start of the current Iranian year, in March 2017, installed capacity of non-conventional renewable energy, mainly wind and solar, amounted to 100MW, which is set to grow to 1,000MW by year-end. By the end of the Sixth Development Plan in 2022, which requires the government to focus on clean energy, it is set to reach 5,000MW. Utility-scale wind farms will be the key to these plans with a projected capacity of 4,500MW, while solar projects will make up the difference.

Iran's only operational source of nuclear energy is the Bushehr Nuclear Power Plant. Currently, its only reactor generates 1,000MW, but the construction of two additional units of roughly equal capacity has just begun. Moreover, Iran is building a geothermal power plant in the Ardabil province, in the northwest of the country, with an initial capacity of 5MW and a potential capacity of 25MW. This will be the first geothermal plant in the country, and indeed in the Middle East.

There is no lack of interest among foreign investors to play a role in the development of new wind and solar projects. In February 2017, Iran's Minister of Energy Hamid Chitchian announced his ministry's approval of USD3 billion in foreign investments, which will finance the development of wind and solar projects with a total capacity of 1,500MW. More investments are to be expected, as the ideal weather circumstances make wind and solar energy projects in Iran particularly lucrative.

Notwithstanding the trend toward renewable energy, Iran will want to monetize on its abundant hydrocarbon reserves. Steering away from fossil-fueled power plants will free up oil and gas for export purposes or petrochemical production. Iran is the largest electricity producer in the Middle East, and a greener energy mix is a big deal.