Iran’s Renewable Energy Sector Poised for Growth

Higher energy costs should be a boost for Iran’s renewable energy.

al-monitor A general view shows smog over northwestern Tehran, Nov. 23, 2010. Photo by REUTERS/Raheb Homavandi.

Topics covered

nuclear, private sector, power, oil, iran

Jul 26, 2013

Despite sanctions, as well as political and economic hiccups, Iran remains a sizable economy with its own energy dynamics. Not just because of its vast hydrocarbon resource base, but also because of its desire to be the region’s top technological and economic powerhouse, Iran is compelled to attend to the question of how to provide for the energy needed to fuel economic and industrial growth.

Presently, Iranian developments are heavily influenced by external sanctions and internal subsidy reforms. Within the framework of the subsidy reforms, which started in December 2010, it has been envisaged that all blanket subsidies would be removed by the end of 2015 with the objective of elevating the cost of energy to about 90% of regional fuel costs, increasing energy efficiency and making Iranian industry more competitive on the international stage.

Phenomena such as fast-pace urbanization, higher energy costs and the desire to become a developed nation have paved the way for increased attention to modern environmental solutions such as renewable energy, energy efficiency, waste management and recycling.

This article will briefly discuss trends and developments in the field of renewable energy that will play a growing role in the country’s future energy balance, though its role in the overall energy basket is still negligible.

Significant trends

Though the Iranian economy has experienced economic decline in the past two years due to sanctions, subsidy reforms and mismanagement, overall energy demand has not subsided. However, growing domestic energy consumption clashes with the government’s desire to use hydrocarbon resources for export — in the form of oil, gas and electricity. Therefore, there is increasing attention to the potential of renewable energies to fill the gap.

As the following graph indicates, Iran’s energy mix has mainly been focused on fossil fuels, and renewable energy has not yet played a major role in this large economy. Nonetheless, there is a conscious effort to increase the share of renewable resources in the country. It should be noted that Iran recently connected its first nuclear power plant to the power grid, but the contribution from nuclear power is still negligible.

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