Iran is becoming a highly attractive emerging market for renewable energy projects.Iran is becoming a highly attractive emerging market for renewable energy projects.The government announced the target of 5,000 MW of installed capacity from renewable power plants in the next five years and has implemented laws guaranteeing power purchase for a period of up to 20 years at very lucrative tariffs.

This briefing gives an overview of the conditions, procedural steps and challenges of implementing renewable energy projects in Iran.

Geographic and climatic conditions

The geographic and climatic conditions in Iran are very favorable for renewable energy. With a huge land area of 1,648,195 square kilometres, the Alborz Mountains in the north-west, the deserts in the East, the Caspian Sea in the North and the Persian Gulf in the South, it comprises a wide variety of natur l environments. The country enjoys an outstanding DNI (direct normal irradiation) ofup to 5.5 kWh/sqm/day and an average of 300 sunny days per year.

In particularthe central and southern regions of Iran have high solar irradiation, such as the provinces of Yazd, Fars and Kerman with a DNI of about 5.2 to 5.4 kWh/sqm/day.Similarly, there is huge potential for harnessing wind energy. According to a presentation of the Renewable Energy Organization of Iran (SATBA) it estimates the potential installed capacity of wind power to be 30,000 MW.Iran’s high level of energy consumption and CO2 emissions, and costly electricity production by fossil fuels which are highly subsidised by the government, are just some of the reasons why Iran’s policymakers are keen to utilise these natural conditions to attract private sector investments in the renewable energy market.


Guaranteed power purchase for a period of up to 20 years 


To increase incentives for investing in renewable energy, Iran amended its laws in 2015. The previous regulations provided for a term of only five years for the power purchase agreement and a uniform tariff for all types of technology. Pursuant to the new laws, a new system of feed-in tariffs differentiating by type of technology has been implemented. Moreover, the guaranteed period for power purchase has been extended to 20 years (except for turbo expanders, waste recovery in in dustrial processes and hydro power plants, for which the term is only 10 years). However, the term of the agreement starts with the signing date, hence, the construction period falls into the 20 years’ period, and this should be taken into account in the financial modelling.The power purchase agreement is entered into with SATBA, a subdivision of the Ministry of Energy in Iran specifically established for renewable energy matters and responsible for planning, policy making and promotion of renewable energy. SATBA is managed and supervised by TAVANIR, the power generation, transmission and distribution holding company in Iran.