Almost 200 private companies producing renewable energy will have to either send some workers home or pull down shutters if the guaranteed purchase price paid by the government for renewable power is not doubled, chairman of the board of directors of the Iran Renewable Energy Association said.
“Yes, the purchase rates did increase 40% last May. But volatility in currency market has made it impossible to invest in this loss-making sector,” Hamidreza Salehi was quoted as saying by ISNA.
A photovoltaic panel with the capacity to produce 1-kilowatt of power cost 2 cents in March. The same should now be bought for 5 cents, and oddly enough prices of other parts like inverters have shot up exponentially, he complained.
“Installed solar power capacity in Iran increased less than 20 megawatts in the past 12 months thanks to very low guaranteed purchasing tariffs. So long as the government does not rethink, the current installed capacity of 980 MW will simply not see noticeable increase.”
As per a directive issued by the Energy Ministry in February, Iran Power Generation, Distribution and Transmission Company (Tavanir) and the Renewable Energy and Energy Efficiency Organization (Satba) are no longer allowed to sign agreements to buy green power from private firms based on previous tariffs that guaranteed electricity purchase for nearly 20 years.
A new model of contracts was supposed to be announced to encourage the private sector to invest in renewables, but nothing has happened, he noted.
According to the ministry, the new model (yet to be revealed) would help encourage private producers to play a more effective role in the renewable sector.
“Private companies have invested $1 billion in the renewables over the last 2 decades, mainly solar and wind, but they need to be encouraged to be able to play sustainable role,” Salehi said, noting that the existing policies at best are disappointing.
Abrupt Changes
Independent energy experts, including Ahmad Firouzi, believe that changing rules suddenly and not offering replacement models are a serious setback for the private sector as fluctuations in the forex market and the Energy Ministry's refusal to allow reasonable tariffs for electricity produced by private firms have forced private producers to pull back from investing in the otherwise nascent industry.
“Change can deliver provided that they are premised on informed decisions, logic and reality, otherwise new regulations will be a recipe for disaster,” he said, noting that both Tavanir and Satba were alarmed when the new announcement was made unexpectedly.
Nobody knows the details of the new model, but whatever it may be, the green sector will not expand unless private investors are convinced that renewables has a future and is not a waste of money.
Reza Ardakanian, a former energy minister, increased the guaranteed purchase price paid by the government for renewable power generated by private companies by 40% in May.
The new price for generating electricity from biomass (compared to 2019) rose by 50% per kilowatt, reaching 3.6 cents/kilowatt hour.
Tariffs for different types of power stations including wind, solar and hydroelectric reached 4.4 cents, 4 cents and 17 cents per kWh for photovoltaic, wind and hydroelectric power plants, respectively.
“By offering higher prices, the government intends to encourage private enterprise to invest in renewables because these firms played an important role in the development of green energy in the recent past,” the former minister said.
Iran’s energy mix remains dominated by hydrocarbons. Natural gas and petroleum derivatives such as gasoline fuel traditional thermal power plants that supply 98% of the total energy need. The remaining 2% comes from a combination of hydropower, nuclear, biofuel and other renewable sources.
Established by the Iran Chamber of Commerce, Iran Renewable Energy Association has 150 companies in different areas of renewable energy.
Its mandate includes providing financial support, promoting equipment installation, consulting and technical assistance and disseminating research and information on the production and distribution of renewables.
