Industry Spotlight: Renewable Energy

By Andrew Lumsden, Research Fellow


Rarely would the terms “Iran” and “renewable energy” be considered as having any positive correlation. The Islamic Republic has some of the world’s largest reserves of fossil fuels and relies on their export for about half of its national revenue. It also is the seventh largest carbon emitter in the world, with its population consuming energy at a rate more than four times the global average. Only about 0.8% of the electricity Iran produces each year comes from renewable sources.

However, Iran’s leaders, particularly over the past five years, have been making considerable efforts to challenge the dominance of fossil fuels in the country’s energy mix. As part of the 2015 Paris Climate Accords, Iran pledged to reduce its greenhouse emissions by 4% by 2030 through expansion of renewable energy production and utilization. Though substantive progress has been made, particularly with regard to policy reforms and construction of green energy infrastructure, serious challenges to Iran’s renewable energy ambitions remain.   

Policy Reforms

Debate about the future of energy production in Iran among the country’s political leaders has raged since at least 2004, and over the past eight years, the Iranian government has enacted several progressive reforms which if adhered to and enforced, will be instrumental in the country’s efforts to boost renewable energy production. Some of these are detailed below.

  • 2011: As part of a Subsidy Reform Plan, grants, loans and other subsidies were offered to companies investing in “expansion of electricity generation from renewable resources.”

  • 2013: A Renewable Energy Development Fund was established to finance renewable energy initiatives. Money for the Fund would come from a portion of the revenue collected by power companies from urban customers.

  • 2016: Ministries and other government organizations were required to ensure that at least 20% of the energy consumed by their buildings comes from renewable sources.

  • 2016: As part of the 6th Five-Year Development Plan, Iran’s Ministry of Energy is required to increase renewables’ share of the country’s  energy production mix to at least 5% by 2021.


These policy initiatives, coupled with a surge in foreign investment following the relaxation of U.S. and international sanctions between 2015 and 2018, resulted in tangible and substantive improvements in Iran’s capacity to harness renewable energy sources.

Solar Power

Iran’s utilization of solar energy has generally been poor. Despite receiving about 300 days of unobstructed sunlight annually, Iran produced only about 250MW of solar electricity in 2018. Neighboring Pakistan, by comparison, which has similar climate conditions, produced more than 1GW (1,000MW) of solar power that year. However, since 2014, Tehran has more than doubled its investments in solar energy production, and now has installed more than 2,000 small rooftop photovoltaic power stations atop homes, schools, mosques and government buildings across the country. At least 2,000 more are on track to come online by 2020. Also, through investments from Spanish, Greek, Norwegian, British, Austrian, Italian and Chinese companies, Iran is in the process of constructing new solar farms which are expected to raise the country’s solar production capacity beyond 1GW by mid-2019.


Hydropower has been described as the ‘exception’ to Iran’s historical under-utilization of renewable energy. About 7% of Iran’s territory is water, and over the past 30 years, it has built about 600 dams which irrigate farms and generate electricity. Iran’s operational hydroelectric dams are capable of producing about 11.2GW of power each year, making it the 19th largest generator of hydropower in the world (6th in Asia). The country is currently in the process of constructing an additional 14 hydropower dams, which would increase generative capacity by an additional 5.8GW. The most notable of these projects is the Bakhtiari Dam, which would generate as much as 1.5GW of electricity and, at 325 meters (~1,066 ft.) would be the tallest of its kind on Earth.

Iran has, moreover, assumed a position of regional leadership in hydroelectric production, exporting hydroelectricity to neighboring Afghanistan, Pakistan, Turkmenistan, Tajikistan, Azerbaijan and Turkey. Tehran is also in talks with Kyrgyzstan to aid in the development of hydroelectric dams in the small Central Asian republic.


There are about 17 active wind energy power plants(a total of over 200 turbines) currently active in Iran, giving the country a production capacity of about 282MW. Although this represents a 165MW increase over its 2016 capacity, it is estimated to be only about 1/100th of the wind power Iran has the potential to produce based on wind patterns the country experiences.

This potential however, is not lost either on Iranian leaders or foreign investors. In 2017, investors from Denmark and Germany, among others, pledged more than $US1 billion towards the construction of wind and solar energy plants across Iran. At least 11 wind farms, capable of producing a total of 750 additional megawatts of energy are currently under construction across Iran, with three of these (80 turbines) to be placed in the notoriously underdeveloped province of Sistan-Balochistan. In August 2018, Iran formally opened its largest wind farm, the 18-turbine Sihapoush wind farm in Qazvin Province. It is expected to contribute some 61.2MW of power to the national grid.


Though advances have been substantial, renewable energy faces a very uncertain future in Iran.

  • Economic Contraction: The International Monetary Fund projects that because of the U.S.’ decision to re-impose economic sanctions on Iran, the Islamic Republic may not experience any economic growth until at least 2020. Given that Tehran has already stated that expanding renewable energy is not one of the “main priorities of the national development agenda,” a tightening economy will likely mean reduced domestic investment.

  • Foreign Investment Flight: Washington has vowed to punish actors who continue doing business with Iran in violation of its sanctions. Many foreign investors have already been scared away from renewable energy projects in Iran. So far, the British firm Quercus, and Norway’s Saga Energy have already backed away from plans to construct 2.2GW solar and wind energy plants in Iran. Furthermore, car manufacturers including Toyota, Mazda and Hyundai have scrapped plans to supply Iran with renewable energy fuel cells for vehicles. It should be noted however, that the European Union is currently exploring ways to bypass U.S. sanctions and continue renewable energy cooperation with Iran.

  • Climate Change: Changing weather patterns are slowly but steadily impacting Iran’s ability to benefit from renewable energy sources, particularly wind and hydro power.

    • Annual precipitation in Iran is on the decline, having fallen 56% between 2017 and 2018, and at risk of plunging by as much as 80% by 2100. Performance of hydroelectric plants across the country has already been adversely impacted, with generation some 36% lower than in 2017. Furthermore, water shortages have prompted Tehran to cancel construction of 50 planned dams.

    • A 2015 study conducted in Iran found that rising temperatures and decreasing air moisture, both being processes occurring across the country as a result of global warming, are likely to decrease the productive capacity of most wind energy stations over the next two to three decades.

More information on Iran’s future plans for renewable energy development can be found through the Islamic Republic of Iran Ministry of Energy, which will be hosting the following exhibition:



International Renewable Energy & Energy Saving Exhibition



Tehran Permanent Fairground



February 21-24, 2019


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