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Analysis: Iran takes action to enable renewables growth

IRAN: In a bid to encourage wind-power deployment, the Iranian government is working to speed up the permitting process and remove barriers to finance.

Iranian parliament - the government is simplifying permitting process for renewables
Iranian parliament - the government is simplifying permitting process for renewables

Compared with previous administrations, the current government, elected in 2013, is far more supportive of renewables, mainly because of the great potential and to push for economic growth through investment. "The government is dedicated to facilitating rapid expansion," said Hashem Oraee, president of the Iran Wind Energy Association (IRWEA).

The government has restored overall responsibility for permitting to renewable energies organisation Suna. For a while under the previous regime, applications also had to go through state-owned power utility and transmission company Tavanir, where they would get bogged down, Oraee said.

A number of other ministries were also involved. Suna aims to complete the process within three months, compared with the present average of two years.


Payments to producers will also now come from Suna rather than Tavanir, which should mean they are processed faster. And, once the relevant decree is signed, Tavanir will have to pass on to Suna a share of the money levied on customers' bills to support the expansion of renewables, Oraee said.

Because of international sanctions, finance has been a major obstacle to wind development in Iran, with money transfers almost impossible and local banks starved of capital.

While the National Development Fund is willing to help, it has to channel funds through Iranian banks. These do not offer project finance because of the level of uncertainty, both political and of project returns, but instead demand more liquid assets, such as city-centre real estate, as security.

The government and industry are exploring ways to release the log jam, such as providing sovereign guarantees or establishing a renewable-energy fund.

Despite the barriers, the success of the recent IRWEA conference shows there is a huge appetite for investors to participate, Oraee said. One of the main drivers is the generous tariff introduced in 2014 - which currently stands at around $0.17/kWh (€0.15/kWh) guaranteed for five years.

The huge potential market is another attraction. Although the previous target of 5GW of renewables by 2018 has been cut to a more realistic goal of 5% of electricity generation by 2020, this translates into at least 2.5GW. Of this, more than 2GW will be wind, IRWEA estimates.

The country currently has just 127MW turning. Most are based on Vestas 660kW turbines, elements of which were originally made locally under licence by the Sadid Industrial Group.

Developers in search of larger, more modern machines have recently started importing them.

This is despite sanctions, which have made it impossible to deal directly with European and American companies, although it has been easier with Chinese and Indian, both in regards to obtaining permission to export the technology and to being paid.

Developers have used their hard-currency held outside Iran and dealt through third parties to source their turbines.

Used and diverted

So far, eight Furhlander 2.5MW units and a Windey 1.5MW machine from China have been installed, while 30 second-hand GE 2.5MW turbines are slated to follow this year, apparently diverted from a North African project that fell through.

As it looks increasingly likely that sanctions will be lifted, probably in a phased manner, the big manufacturers are keeping a close eye on the market. Among them, Vestas and Siemens are said to have opened lines of communication, while continuing to comply fully with sanctions and any legal requirements.

Plans for local manufacturing have also been revived with the government change in 2013. Blades, towers and generators are the most likely, but investors need a better vision of the market, Oraee said.

While Iran has a strong industrial base, sanctions mean factories are outdated and require major upgrades. There is also concern among local manufacturers about foreign competition, with Mapna and Saba Niroo pushing for import tariffs.

Oraee disagrees, warning of the dangers of overprotection. Instead, Iran could introduce a support system as in Turkey to encourage local industries, he argues. What is certain, if or when sanctions are lifted, Iran will be a market to watch.

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