After one decade of economic isolation and sanctions, Iran is allowed to re-open its economy for worldwide trade and foreign direct investments. Its significant market size provides new interesting opportunities for foreign investors. Especially the solar market seems to be very attractive. Recently, feed-in tariffs for PV-plants have been generously increased to 17 – 30 €-ct /kWh.
The foreign solar industry is starting to invest in photovoltaic systems
In order to take advantage of the dropped economic sanction against Iran, the German solar industry starts moving. There are several opportunities for the solar industry not least the huge potential for solar energy utilization. Iran ranges top with respect to its solar potential producing the double energy output than in some European countries. On average, its solar irradiation is between 1640 to 1970 kWh/m² per year.
Increasing the renewable energy share seems to be a strong political will of the Iranian government. Reasons are for example its increasing energy demand, the outdated energy system and its commitments at the UN Framework on Climate Change – COP 21. Hence, Iran has stated its objective to install 5 GW of renewable energy by 2020.
The boom of investments in photovoltaic systems by the German solar industry may have already started. According to information reported by the Iranian news agency, Mehr, a German developer has signed a deal to build several solar projects with a combined capacity of 1.25 GW near to Tehran. The completion and connection date of the first solar plant is envisaged for May 2016. Another 50 MW of PV-systems will be built in the cities of Karaj, Kahrizak. Additionally, 1 GW of solar and wind PPA contracts should be authorized in March 2016.
In order to explore further PV-system investment opportunities in Iran, Economy and Energy Minister Sigmar Gabriel will travel to Iran on 2 May 2016 accompanied by an economic delegation. Of particular interest is the recent increase and extension of the feed-in tariffs for photvoltaic systems.
Increased Feed-in tariffs make photovoltaic systems highly profitable
In Iran, all PV-plants are eligible to feed the electricity into the grid and to receive a guaranteed and technology-specific feed-in tariff. Previously, tariffs have not been sufficient to cover the costs for photovoltaic plants. Thus, recently the tariffs have been increased considerably. For PV-systems there are four different tariffs based on the size of the power plant. Tariffs are categorized in two smaller sizes of less than 100 kWp and two larger sizes of more than 100 kWp. Solar plants with a capacity exceeding 10 MWp are eligible to receive a tariff of 5600 Rials/kWh translating in 17 €-ct/kWh at today’s exchange rate. Solar plants with a capacity between 100 KWp and 10 MWp obtain 6750 Rials/kWh or 20 €-ct/kWh respectively.
Moreover, the payment period is extended to 20 years. The announced rates will be valid for the first 10 years of the guaranteed power purchase contract. In the second 10-year-period, the rate will be decreased to 0.7. Furthermore, in order to adjust the feed-in-tariffs to inflation and exchange rate changes over the life time of a PV-project, a so called adjustment factor is included. In addition, a 35 percent bonus is offered to companies that use Iranian manufactured equipment. For large-scale PV-plants upwards of 100 kWp, the development process in Iran is fairly standardized.The Renewable Energy Organization of Iran (SUNA) is responsible for signing the Purchase Power Agreement and for issuing the permission.
Critical success factors for entering the Iran PV market
An extensive report “Enabling PV Iran” sponsored by the German Foreign Office and completed by BSW-Solar in collaboration with Tehran-based Iran-Wind Group concludes that after the sanctions have been lifted, the financial situation in Iran has improved significantly. The report also offers practical guidance on the PV-project development process in Iran.
It identifies four critical success factors for PV-project development. First, securing the land as soon as possible as one limiting factor is the land acquirement. Secondly, choosing a location where there is no need for new substation or extra grid lines as costs have to be borne by the developer. Thirdly, signing the PPA sooner. Early movers will be awarded since the Ministry of Energy will decrease tariffs over time. Fourthly, finding an Iranian partner in order to ease the understanding the complex governmental procedures, get the necessary permissions (such as land acquirement) and to overcome language barriers.
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