Iran Announces Big Increase in Renewable Power Purchase Prices

EghtesadOnline: The guaranteed purchase price paid by the government for renewable power generated by private companies has, on average, increased by 65%.

News ID: ۷۴۸۷۰۶

14 October 2019

A new directive to raise tariffs (for the private sector producers) was announced by Energy Minister Reza Ardakanian the minister on October 13 to encourage investment, the Renewable Energy and Energy Efficiency Organization (Satba) reported.

The minister said at the weekend that the new prices for generating electricity from biomass have risen by 50% per kilowatt, reaching 3.6 cents/kilowatt hour.

Referring to tariffs in different types of power stations including wind farms, solar farms, hydroelectric dams, he said prices have risen by 30%, 30% and 150% respectively, Financial Tribune reported.

The new tariffs are 4.9 cents per kWh, 5.7 cents per kWh and 4.4 per kWh for photovoltaic, wind and hydroelectric dam plants respectively.

By offering higher prices the government is trying to encourage private enterprises to invest in renewables because the firms played an important role in the development of green energy in the recent past, the official said.

Private companies have invested $1 billion in the gradually expanding renewable sector, mainly solar and wind. Due to government funding constraints, private firms are expected to play a bigger role in promoting clean energy if the purchasing prices are reasonable.

The policy to raise the prices comes at a time when some 200 companies active in the renewable sector are facing insolvency.

Volatility in the currency market and the Energy Ministry's reluctance to allow fair and reasonable tariffs for electricity produced by private companies are among root causes why companies are averse to putting money in this industry.

In 2015 the ministry set reasonable tariffs to buy clean energy produced by private firms (6 cents/kilowatt hour). The move produced results and was a major factor in attracting local and foreign investment in renewable energy.

However, rampant inflation at times leaning on hyperinflation, and the new US economic sanctions announced in 2018 tripled import costs of most equipment including photovoltaic inverters, panels and cables.

Iran has a diverse climate of vast windy lands and more than 300 sunny days a year, which makes it ideal to tap into wind and solar power.

More than 80% of electricity demand is met by thermal power plants that run on fossil fuels.

In 2015 the ministry set reasonable tariffs to buy clean energy produced by private firms (6 cents/kilowatt hour).