Bleak Prospects for Renewables in Iran

EghtesadOnline: As long as electricity prices (generated with the help of fossil fuels) are not modified, plans to expand renewable energies will not materialize.

News ID: ۷۴۸۵۷۷

30 September 2019

The government reportedly plans to raise the current share of renewables from the current 841 megawatts to 5,000 MW by 2022. The aspiration appears to be a tall order because in addition to financial constraints, developing renewable plants remains a low priority for the government.

A major breakthrough in expanding renewable power is highly unlikely because no budget has so far been allocated to develop renewables by the government in the current fiscal year (started March 21), IRNA reported.

Since the domestic renewable energy sector is unable to compete with low-cost and subsidized fossil fuel-based electricity, individual investors won't risk their money, Financial Tribune reported.

The private sector is unwilling to embark on green ventures not only due to the Energy Ministry's reluctance to allow reasonable tariffs for electricity (produced by private companies), but also owing to the latter’s inability to compete with state power firms, most of which receive cheap natural gas as feedstock.

The production of 1 megawatt of electricity in a thermal station requires an investment of at least $1.5 million. This is while generating the same amount of power in a solar farm barely needs $550,000.

However, despite the noticeable difference, current policies do not entice private enterprises to take initiatives in the green sector.

Thermal power generation cost, including production and transmission, is 2 cents per kilowatt-hour. Electricity is presently sold at 0.7 cents per kWh.

It was not until 2015 that the Energy Ministry set fair tariffs to purchase clean energy produced by private firms (9 cents per kilowatt). The policy was a major incentive to attract local and foreign investment in renewable energy ventures.

However, soaring inflation and the new US economic sanctions imposed in 2018 tripled the import cost of most equipment, including photovoltaic (PV) inverters, panels and cables.

"Strangely, the ministry has not increased the tariffs and insists that producers sell what they produce for 20 cents at the rate of maximum 9 cents per kWh," Mohammad Javad Mousavi, a member of Iran Renewable Energy Association, complained.

Experts believe that investing in renewables is no longer economically viable, unless the government revises its policies.

Environmental Benefits

The gradual expansion of green energy since 2009 has helped Iran save close to 918 million liters of water in 10 years.

Over the last decade, close to 4.1 billion kilowatt hours of electricity were generated from renewable sources like wind farms and photovoltaic stations. For producing the same amount of power with natural gas, close to 1.1 billion cubic meters of the fuel would be required.

This amount (4.1 billion kilowatt hours) allowed Iran to reduce greenhouse gas emissions by 2.87 million tons, IRNA reported.

Curtailing greenhouse gas emissions to help safeguard the environment is among the major challenges facing nations.

Iran's installed power capacity amounts to 85 gigawatts, of which 841 MW come from renewable sources, such as solar and wind. Green sector investment in Iran has surpassed $1.1 billion.

Iran’s northwestern neighbor Turkey has increased its electricity production from renewable sources. Renewables account for 13 gigawatts of the country's total power generation capacity at 89 GW.

India’s renewable capacity currently stands at 79 GW. The figure amounts to 32 GW in Japan.

The UAE generates 15% or 8 GW of its power from green resources.

Jordan, Iraq, Saudi Arabia and Kuwait generate as low as 600 MW, 100 MW, 90 MW and 70 MW of renewables respectively.