Iran offers renewables investment incentives

Iran is offering foreign and private domestic companies tax incentives and long-term power purchase agreements (PPAs) to encourage investment and development of renewable energy generation projects in the country.

Speaking last week at the first Iran-European Union Business Forum on Sustainable Energy, the president of Iran’s Organization for Investment, Economic and Technical Assistance of Iran, Mohammad Khazai, said companies investing in renewables could receive a tax holiday of 5-13 years depending on where their plants were located and also that the government would agree to guaranteed 20-year output purchase agreements.

“Equipment imported to be used in the renewable sector [is] also duty-free if their quality and efficiency comply with the standards of the Ministry of Industry,” Khazai was quoted by Iran’s Financial Tribune as saying.

Futhermore, speaking at the same event, Energy Minister Hamid Chitchan said that investors in renewable projects using locally-made equipment in their plants would be allowed to charge 30% more than the normal rate paid by the government for electricity.

Iran is looking to make a significant boost in its nascent renewables sector, which currently has an installed capacity of 240 MW, a drop in the ocean of its total installed generation capacity of 75,000 MW. It does however hope to increase the share of renewables to 5,000 MW by the end of 2020, 4,000 MW of which is expected to come from wind power.

To this end, a delegation of Iranians involved in the sector recently visited Germany, where the solar and wind industries in particular are well advanced.

Iranian officials have stated that there are now some 490 private companies involved in developing solar or wind projects. Over the last four year, the government has approved 48 renewable projects requiring investments of around US$3.6 billion.

In early April a group of Italian investors expressed an interest in funding renewable projects in Iran’s southern Hormozgan province after visiting a solar energy site near Bandar Abbas. An official with the group said Italy was ready for cooperation with Iran on building solar and wind facilities after further discussions on the topic.

“We will start with small 25 megawatts (MW) solar plants as pilot, and in the next steps we’ll go for bigger plants,” an Italian official said, quoted in the Tehran Times.

More concrete progress is also being made. Following the delegation’s visit, Iran inaugurated a 10-MW photovoltaic (PV) solar plant in the central Isfahan province. The project was built over the last seven months in partnership with Greece’s METKA Group.

Another 30-MW solar plant is due to become operational in Khorasan province in the near future.

For its part, the Renewable Energy Organization of Iran (SUNA) is looking to attract US$10 billion of direct private investment by 2018, rising to US$60 billion by 2025.

Small projects aside though, several hurdles remain in the way of the country’s 5,000-MW ambitions. While foreign interest may be cementing, there are still concerns about the possibility of a return of international sanctions, as well as problems within the country’s electricity industry, all of which could hamper continued investment in clean energy.

Iran is not blind to the economic arguments for diversifying its energy mix. By expanding the amount of power derived from solar, wind and hydropower projects (HPPs), the country could reduce the amount of hydrocarbons –oil in particular – burnt for power generation and increase exports – whilst improving its emissions and air quality in the process.