RENEWABLE ENERGY OPPORTUNITIESIN IRAN

Prepared By for

A SNAPSHOT

2

The market .............................................................................................................................. 3

The report ............................................................................................................................... 3

Country overview ................................................................................................................. 4

Sanctions relief ...................................................................................................................... 4

The energy market ............................................................................................................... 5

The renewable energy market ......................................................................................... 6

Feed-in tariff .......................................................................................................................... 7

Wind market potential ....................................................................................................... 8

Solar PV potential ................................................................................................................ 9

Geothermal potential ......................................................................................................... 9

Key drivers of renewable energy development ......................................................... 10

Key topics and challenges ................................................................................................. 11

About us .................................................................................................................................. 12

Appendix I - List of completed and pending renewable energy projects ........ 13

CONTENTS

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Iran’s potential for renewable energy is vast, possessing some of the best combined wind and solar resources in the region and the technical and engineering capabilities to realise it. The country’s reintroduction to the international community following the relieving of sanctions makes this a particularly exciting time for Iran’s renewable energy space.

With domestic power demand sapping the valuable export realisation of hydrocarbons, fuel subsidies decreasing and a need for greater energy security, the Iranian government and policy makers are showing a significant interest in the renewables space. To highlight their commitment they have set an ambitious target of 5GW of installed capacity from renewables by 2020 and SUNA, the country’s renewable energy organisation, have established an attractive feed-in tariff which guarantees power purchase payments for 20 years.

THE MARKET

THE REPORTIn preparation for the launch of the inaugural Iran Renewable Energy Congress, Green Power Global has put together this snapshot report* to highlight the opportunities and challenges in this exciting new market.

5GWof installed capacity from renewables

BY 2020

* Report compiled April 2016

Iran is the second largest economy of the MENA region (after Saudi Arabia) with an estimated GDP of US$ 406.3 billion. Iran is also the second most populous country in the region (after Egypt) with a population of 79.8 million. 46% percent of the country’s population fall into the 25-54 age bracket with a median age of just over 30 and an urban population of 74%. The main language of Iran is Farsi (Persian) and the country as a whole has an excellent literacy and numeracy rate, well above the regional average.The population of Iran is highly educated and skilled. Universities in Iran collectively produce over 750,000 skilled graduates annually. 31% of these graduates come from fields related to engineering and construction putting them 3rd in the world after USA and Russia.

Iran is a global hydrocarbons giant, possessing the fourth largest oil reserves and second largest natural gas reserves in the world and economic activities in the country are heavily reliant on this. State ownership and involvement has been a key characteristic of the Iranian economy since the revolution in 1979. Although there have been steps to privatise since 2004, the state continues to play a significant role in the economy through banks, public companies and part-privatised commercial and manufacturing entities.

In response to Iran’s nuclear activity the UN, EU and USA introduced a broad range of sanctions from 2006. In January 2016 nuclear-related sanctions on Iran, as set out in the Joint Comprehensive Plan of Action (JCPOA), were lifted.

The sanctions relief will benefit Iran in the following ways:

z Iran to access billions of dollars of frozen assets in foreign banks z Delisting of many banks and financial institutions from “blacklists” allowing

Iranian and some international banks more freedom in doing business z The removal of sanctions against the exports of Iranian oil z Allow foreign companies to invest in Iran

COUNTRY OVERVIEW

SANCTIONS RELIEF

79.8 Million People

PERSIAN Language

750,000 Graduates per year

US$ 406.3 Billion GDP

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The current total installed power capacity of Iran is 73GW, the government plans to increase this to over 100GW in the next few years. Currently power generated from renewable sources makes up less than 0.2% of this, with gas fired combined cycle and steam plants making up the largest proportion of the energy mix.

Electricity consumption has grown steadily in Iran over the last decade with an average year-on-year percentage increase of over 7%. The industrial sector is the largest electricity consumer with 34.6% share, followed by residential (31.7%), agricultural (16.3%), public services (8.8%) and the commercial sector (6.6%).

THE ENERGY MARKET

34.6% INDUSTRIAL SECTOR

31.7% RESIDENTIAL SECTOR

16.3% AGRICULTURAL SECTOR

8.8% PUBLIC SERVICES

6.6% COMMERCIAL SECTOR

ENERGY CONSUMPTION

Some sources are predicting that, with a return to the international markets and an increase in manufacturing and construction, overall consumption could reach 444000 GWh by 2030.

500k

400k

300k

200k

100k

02010 2015 2020 2025 20302005

GWh

Prior to a move toward part-privatisation in 2004, the electricity market was a complete state monopoly with “The Electric Holding Company of Generation, Transmission & Distribution Company “(TAVANIR) having full responsibility for generation, transmission and distribution.

Since 2004 the government has attempted to introduce steps to increase private participation in the market and in 2013 sold a number of power plants to increase the share of private electricity generation to 41%. All transmission in the country is still fully monopolised under TAVANIR through regional electric companies. Currently 60% of distribution companies are privatised with TAVANIR controlling the remainder.

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Iran was the world’s highest provider of fuel subsidies in 2009 and it is estimated that as much as 10% of GDP (equal to over $40bn) was spent on subsidies for oil and gas products and electricity. The government have been implementing a reform plan for subsidies since 2010 and the second phase of it was initiated by President Rouhani in 2015. Subsidy curtailment is one of the key drivers for renewable energy development in Iran. 10% of GDP

(equal to over $40bn) was spent on subsidies for

OIL and GAS PRODUCTS and ELECTRICITY.

THE RENEWABLE ENERGY MARKETRenewable energy is still in its infancy in Iran with less than 70MW operational. The current operational levels and pipeline for each resource can be seen below. Further details of the current and completed projects can be found in the appendix.

959

5662.96

6670

13897.34

*OPERATIONAL

PPA CONCLUDED

ART. 133

CONSTRUCTION PERMIT OR PRELIMINARY FS PERMIT ISSUED

CANCELLED PERMITS

TOTAL CAPACITY OF FILED CASES

5

1615.02

1281

2911.83

3

194.29

103.9

308.75

WIND (MW)

PROGRESS STAGE SOLAR (MW)

BIOMASS (MW)

23.5

35.31

63.02

0.17

3.6

0.15

967.6

7495.92

8090.21

17181.09

SMALL HYDRO (MW)

MARINE(WAVES)

(MW)TOTAL

ART. 19

53.88

551.5

0.514

10.3

10.56 65.39

561.97

0.44

0.15

*source - http://www.suna.org.ir/en/opportunitiestoconstruction/tableofcontractsconcluded

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In 2006 in order to promote, encourage and facilitate the development of renewable energy in Iran, TAVANIR combined the Bureau of Electricity and the Deputy Office of New Energies to form SUNA (The Renewable Energy Organization of Iran). SUNA is now responsible for all planning, policy, promotion, legislation and financial agreements for renewable energy in Iran. In July 2015 SUNA began to act as an off-taker and purchase all electricity generated from renewable sources in Iran under guaranteed 20 year power purchase agreements (PPA) and a new feed-in tariff.

FEED IN TARIFF

* Only for consumers and limited to their connection capacity

TECHNOLOGY TYPE

capacity of less than 50 MW 4200 $0.16 €0.14

generation up to 1 MW * 5700 $0.20 €0.17

capacities over 10 MW 5600 $0.18 €0.16

capacity of 10 MW or less 6750 $0.22 €0.20

capacity of 100 KW or less * 7000 $0.29 €0.25

capacity of 20 KW or less * 8000 $0.32 €0.28

GEOTHERMAL ( INCLUDING DRILLING AND EQUIPMENT PROCUREMENT) 4900 $0.19 € 0.17

Capacity of over 50 MW 3400 $0.13 €0.12

TARIFF (RIALS PER KW/H)

$ €

WINDFARMS

SOLARFARMS

The current feed-in tariff and its USD and Euro equivalents can be seen below. It is a sign of the country’s gathering support for renewable energy that the tariff is significantly longer and at higher prices than previous years.

100,000MW of potential capacityLocated on several major wind corridorsConsistent, high winds year round in the North East & North West15 FARMS already operational

Total area 1600,000 km2300 CLEAR SUNNY DAYS a year Solar irradiation 4.5-5.5kwh/m2

15 POTENTIAL SITES identifiedMESHKINSHAHR – first plant under construction

WIND

SOLAR

GEOTHERMAL

IRAN RENEWABLEENERGY POTENTIAL

WIND POTENTIALIran has over 100,000MW of potential installed capacity of wind power to tap

into. With electricity demand rising and Iran possessing excellent topography and geography for wind power the Iranian government have made it their top

priority over other renewable energy sources. Roughly 4,500 MW of the proposed 5,000 MW increase in capacity

of renewable is expected to come from utility-scale wind farms throughout the country.

Due to its strategic location along several major wind corridors, Iran’s northwest and northeast regions experience high winds all year. The consistency of these wind currents allows for sustainable access to wind energy.

Iran is well-positioned to rapidly scale up its wind power sector. The country already operates 15 wind farms and the vast majority of the components used to develop those farms were produced locally. Iran has made use of its abundant human capital to develop technological capabilities in turbine, generator, and inverter production.

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Iran has begun development of their first geothermal power

plant in Meshkinshahr. This pilot project is expected to

have an initial 50MW capacity with a further potential of 250MW. A further 14 sites of potential for geothermal power have been identified and agreements are reportedly being signed with international energy companies to accelerate their development.

SOLAR PV POTENTIAL

GEOTHERMAL POTENTIAL

Iran has huge solar PV potential with an average solar radiation of 4.5-5.5 kWh/m2 and up to 300 sunny days a year over 2/3 of its total area . The regions of highest concentration of irradiation are the central and southern areas.

Iran’s Sixth Development Plan expects the installation of between 500 and 1,000 MW of new solar capacity by 2020. The Iranian government has prioritized the central region in particular due to its climate and proximity to the national power grid

While policies for wind power are more aggressive in the short-term, plans for solar capacity are ambitious in the long-term. Foreign partners in solar projects are essential as a lack of access to key solar technologies has presented a challenge to domestic companies.

With the recent removal of sanctions, Iranian companies will have greater access to a wider range of increasingly sophisticated solar technologies and financing to purchase and develop them.

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z 5000MW target for renewable energy by 2020 z Over 100,000MW of potential installed capacity of wind power z Up to 300 sunny days a year over 2/3 of its total area z Excellent geographical, topographical and meteorological conditions for wind, solar and

geothermal electricity production z An attractive feed-in tariff with a guaranteed 20 year PPA z Subsidy reform plan implemented to reduce fuel subsidies for fossil fuels z $60 million budget for SUNA z €500 from the National Development Fund allocated for renewable energy z Robust grid infrastructure with high electrification rate (98.9%) across the country z Highly educated and skilled workforce and an excellent engineering and construction

sector z Support for renewables through legislation and the establishment of SUNA z Commitment to COP 21 z Opening up to the international market following sanctions relief z Protection of foreign direct investments under the Foreign Investment Promotion and

Protection Act (FIPPA)

KEY DRIVERSOF RENEWABLE ENERGY DEVELOPMENT

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z The main barrier to projects moving forward is financing z What are the strategies of banks, development finance institutions, multilateral agencies

and export credit agencies for Iran? z Huge wind potential, how can Iranian and International developers help reach this? z Is the 2020 target for renewable energy attainable? z International vs. Local content/manufacturing: Can localisation become a reality? z What is the actual treatment of the sanctions, what can and can’t you do? z How to attract investors into the Iranian renewable energy market: What is the investment

landscape actually like? What are the conditions? z The role of SUNA, TAVANIR and the Ministry of Energy z Understanding the cultural, business and legal differences in working in Iran z How reliable and sustainable are the FiT and PPA? Are they set high just to attract people

initially? z Reliability of FIPPA and central bank guarantees z Who is in a best position to supply and service the Iranian renewable energy market?

China? Europe? z Can Iran become a hub for renewable energy manufacturing in the MENA region? z Identifying the best business model for Iranian renewable energy projects

KEY TOPICS AND CHALLENGESFollowing over 50 interviews with key domestic and international industry players we have identified this initial list of challenges and topics of interest:

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Contact us

Alex SteinDirector – New MarketsDirect Dial: +44 (0)203 355 4230Email: Alex.Stein@greenpowerglobal.com Web: www.greenpowerglobal.com

ABOUT US

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PROJECT NAME / SPV

REGION / LOCATION

DEVELOPER/ OWNER

/ OPERATORINDUSTRY STATUSSIZE

MW

WIND

WIND

WIND

WIND

WIND

SOLAR

BIOMASS

BIOMASS

BIOMASS

BIOMASS

BIOMASS

SMALL HYDRO

WIND

WIND

WIND

WIND

WIND

APPENDIX I

Power Plant Projects Management Co.

(MAPNA)

Qazvin- Takestan Kahak1 5 Completed Qazvin- Takestan

Qazvin- Takestan Kahak2 15 Completed Qazvin- Takestan

Behin Ertebat Mehr 1.5 CompletedKhorasan Razavi -

Khaaf

Power Plant Projects Management Co.

(MAPNA)

Binalood Green Wind Farm 30 Completed Khorasan Razavi -

Nishabour

Atrin Iranian 4 Completed Khorasan Razavi - Nishabour NIBA Wind Farms Co

Atrin Parsian 0.5 Completed Bidgeneh - Malard Atrin Parsian

Mashhad Municipality Waste Management Organization 0.6 Completed Khorasan Razavi -

MashhadMashhad Municipality Waste Management

Organization

Niroo Sabin Arya Industrial Group

1 Completed Fars - Shiraz Niroo Sabin Arya Industrial Group

Team Kian Co. 2 PPA Agreed Abali - Tehran Tehran Waste Management Org.

Tehran Water & Wastewater Co. 4 Completed Rey - Tehran Tehran Water &

Wastewater Co.

Tadbir Tose Salamat 3 Completed Kahrizak - Tehran Tadbir Tose Salamat

0.5 Completed Khorasan Razavi - Mashhad

Mashhad Tose Energy Management

Tose Tavan Payedar 20 PPA Agreed Siahpoosh - Qazvin

Tose Tavan Paydar Company

Tavanbad Wind Farm 100 PPA Agreed Khorasan Razavi - Khaaf Tavan Baad

Arya Pars Sistan 100 PPA Agreed Mil Nader Aria pars systan

Behin Ertebat Mehr 100 PPA Agreed Khorasan Razavi - Khaaf Beheeen

Tizbad Niroo 100 PPA Agreed Khorasan Razavi - Khaaf

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SOLAR

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WIND

SOLAR

SOLAR

WIND

WIND

WIND

Movalled-e Nirooye Nasim-e Sina Tizbad Niroo100 PPA Agreed Damghan –

Semnan

Ariyan Mahbad (Mahtab Gostar) 31.5 PPA Agreed Siahpoosh -

Qazvin

Toorbin-e Moharrek-e Bargh-e Hamoon 20

ConstructionPermit Issued Sistan & Baluch-

estan - Ramshar

MAPNA20ConstructionPermit Issued Kahak

MAPNA80ConstructionPermit Issued Sarab

Az Alternative Co50ConstructionPermit Issued Khaaf

Ariyan Mahbad Mahtaab Group30ConstructionPermit Issued

Siahpoosh - Qazvin

Atrin Iranian NIBA Wind Farms Co5ConstructionPermit Issued Khaaf

Atrin Iranian 97.5ConstructionPermit Issued Khaaf - Nashtifan

Atrin Iranian 100ConstructionPermit Issued Mil Nader

Kankash Negah Novin Swiss Mistral/ Kankash Negah Novin100

ConstructionPermit Issued Ahar

Iranian Atrin Wind Power Plants Company30

ConstructionPermit Issued

Koohin - Qazvin

Asia SazanModern Tarh

Asia Sazan Modern Tarh75

ConstructionPermit Issued Khaaf

Tose Ofogh-e Energy-haye No-e Asia

TAVANA Renewables100ConstructionPermit Issued

Mil Nader – Sis-tan-o-Baluchestan

(Phase 6)

Khaaf (Phase3) Mehr100ConstructionPermit Issued Khaaf

Khaaf (Phase2) Mehr100ConstructionPermit Issued Khaaf

Aban Energy Sabalan 50ConstructionPermit Issued Qazvin

Sanaye-e Electronic Sazan-e Semnan

10 PPA Agreed Semnan

Arianir Arianir Engineering Company

0.3 PPA Agreed Fars

Atrin Parsian 5ConstructionPermit Issued Imam Khomeini

TEHRAN - NOVEMBER 2016

A EVENT

THE FIRST AND ONLY INTERNATIONAL EVENT AIMED AT REALISING IRAN’S

RENEWABLE ENERGY POTENTIAL

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