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Renewables + Utilities E1:R1

Renewables + Utilities E1:R1

Key Developments

◢ Iran has ambitious plans to boost solar and wind power generation, but improving efficiency in energy consumption will be equally important to bringing new capacity online

◢ A looming water crisis is making investments in new water management technologies an absolute priority for the government


 

Underutilized Renewables

As a country with world-leading hydrocarbon reserves, it is perhaps expected that Iran’s consumption of oil, gas, and their derivative products is above global per capita averages. But a new drive to adopt renewable energy, in order to both reduce pollution and increase the proportion of hydrocarbon resources available for export, should see Iran move to a more efficient and cost-effective pattern of energy consumption. While the global average for household electricity consumption stands at 900 kilowatt hours (kWh), the figure in Iran is three times higher. By March 2016 (end of the Iranian calendar year of 1394), the average of household electricity consumption reached 2,479 kWh which reflected a 126 kWh increase over the previous year. 

Iran’s diverse geography gives the country a wide range of renewable energy capacity. The country sees 300 days of sunshine on average. Cities in the northern province of Gilan and the Eastern province of Sistan-and-Baluchestan are in wind corridors. Locations such as Meshkinshahr in Ardebil Province have geothermal activity. Yet, most of this capacity is unused and solar, wind, and geothermal renewables contribute just 2% of the country’s overall energy production.

Iran has historically built hydroelectric dams in an early example of renewable adoption. These dams account for 14.5% of the country’s electricity generation. But widespread drought and water usage issues are threatening the operability of these dams as reservoirs are depleted.

Iran is a nuclear capable country, and despite the highly politicized nature of the country’s civilian nuclear program, the country does boast an operating nuclear power plant in Bushehr. Iran has long planned investments in further nuclear power plants, but these projects were subject to intense international scrutiny during the nuclear negotiations with the P5+1 and remain unlikely in the near-term.

 

Post-sanctions development plans are focused not only on installing new renewable generation capacity, but also on adopting new technologies that can help create more efficient patterns of consumption and avoid the wasteful use of energy enabled by subsidized prices.

Wind Energy On the Agenda

Estimates suggest that Iran could generate up to one third of its electricity needs using wind power, with 60,000 MWe, of which 18,000 MWe is economically feasible to produce. The development of this capacity will rely largely on the efforts of the private sector. The Renewable Energy Organization of Iran (SUNA), which is a subsidiary of the Ministry of Energy, helps encourage development of such resources. But it ultimately lacks the financial means or political influence to drive development.

Therefore, most planned projects are built around public-private partnerships (PPPs) in which the government provides key incentives and support in order to facilitate development. In the sixth Five-Year Development Plan, which spans from March 20, 2016, to March 20, 2021, the Ministry of Energy is required to construct 4,500 MWe of renewable energy by 2018, tracking to Ministry investment goals of USD 10 billion by 2018 and USD 60 billion by 2025.

Efforts in Solar Energy

The sixth Five-Year Development Plan also stipulates that the Ministry of Energy should oversee the construction of 500 MWe of solar capacity. Encouragingly, Iranian Energy Minister Hamid Chitchian recently signed an agreement in which the British Photovoltaic Association, an industry body, would help coordinate the construction of a 1,000 MWe solar plant in Iran.

In addition, the Ministers of Economy and Energy of three German states—Mecklenburg-Vorpommern, Saxon and Sachsen-Anhalt—visited Iran’s Esfahan last month in order to evaluate solar opportunities near the major Iranian city. Esfahan is an industrial center which generates 15% of Iran’s GDP. It is known for its major steel works, its defense industry, its petrochemical facilities, and its manufacturing centers. These industries are energy intensive and generate ample pollution, hence the local push towards cleaner options.

A Looming Water Crisis

While water is taken for granted in many countries around the world, its status as a cheap and plentiful utility in Iran is at risk. According to official warnings, the available volume of drinking water per capita has decreased 75% in recent decades. Chronic drought, population growth, and inefficient usage of water resources have led to a looming crisis. Iranians use 170 litres of water a day on average, which is double the global average.

While cities serviced by major reservoirs have seen a drop in water pressure, it is in rural areas that the low volume of water is felt most acutely. Several villages have seen unrest as local populations sought to claim their rights to local aquifers. In the previous Iranian year of 1394, villagers in Esfahan province forces government officials to take action over rights to the water of the Zayanderood River.

The largest consumer of water is Iran’s agricultural sector, accounting for as much as 90% of the consumption of controlled water resources. Outdated cultivation methods lead to immense waste. Based on reports from the Food and Agriculture Organization of the United Nations, the agriculture sector in Iran consumes 22 times more water than the global average. Iran’s yields are also lower, with just 1 kilogram of agricultural products produced for every 1 cubic meter of water consumed. The global average ratio is 2.5:1. In economic terms, Iran generates USD 0.2 to USD 0.4 per cubic meter of water consumed, whereas the global average ranges from USD 1 to USD 2.

Water management also falls short after the primary use of the resource. For example, just 70% of residents in Tehran are covered by the sewage system and of the sewage collected just 60% is properly treated. There are plans to open as many as six new wastewater treatment plants in Iran in the next six months in an attempt to bring rapid improvement.

Overall, there have been attempts by municipal governments and NGOs to raise public awareness about limiting water usage.  There is also an attempt to push business leaders to adopt “water morals” within their industrial practices. These initiatives involve everything from increasing irrigation efficiency, cultivating less water-intensive crops, reuse of treated urban wastewater, reducing water usage in urban parks and gardens with drought resistant plants, improved rainwater harvesting, tougher regulation and enforcement of wastage, and better pricing that reflects the trust cost of the water resource. 

Transportation + Logistics E1:R1

Transportation + Logistics E1:R1

Petrochemicals E1:R1

Petrochemicals E1:R1