Persian Gulf Solar Plant Amir Kabir Solar Plant Surface Area 1745150 km2 Population 80 Million GDP 2016 US$425.3 billions GDP per Capita US$5936.54 GDP projected Growth 4.5 Country Information 76,000MW Installed Capacity 340 MW Installed RE Capacity 289 Billion kWh Consumption 5 GW RE 2020 Target World’s 4th largest Oil Reserves World’s largest Gas Reserves The 3x7MW plants under construction by Solar Silk Road in Qahavand, Kabudarahang, and Famenin, to be launched in August 2018. Hamadan 14 MW Solar Project • 2x7MW solar plants, each with 22,000 panels 1x2 meters of 315 Watts • Developed within a PPA framework, at a base rate of 16.1 US Cents • €10 Millions cost of development of each plant, in total €20 Millions • 80% German technology, 20% local content, including 23- km of transmission cables, 15-km light fibre and MV and LV equipment • Simultaneous construction of both plants completed within 6 months Energy Pioneers A Publication of Iran’s Power & Renewable Energy Market Monitor Power Sector Snapshot 27 February 2017 Solar Irradiation Map of Iran Hamedan solar project: A ground-breaking juncture in Iran’s renewable energy market In an exclusive interview with the Director of Planning and Development of SUNA The successful launch of the 14MW solar plant in Hamedan has set in motion a number of significant implications for the future of Iran’s fledging renewable energy market. Largest of its kind in Iran to date, the Hamedan solar plant, among many other things, has put an end to years of frustration among developers and investors over impediments of bringing on stream projects under the Iranian Power Purchase Agreement (PPA) framework. Marking a major milestone in the expansion of renewables in Iran, Hamedan project demonstrates that years of seamless efforts and coordination by and between investors, authorities and stakeholders for overcoming challenges and obstacles, is eventually paying off. This development will not only result in significantly reviving the optimism of international investors in counting on the numerous opportunities of this market, it also boosts the international confidence in reengaging and speeding up the implementation of newer projects, albeit in a more competitive environment. This newly revived confidence is interestingly created despite the earlier judgments over the negative ramifications of Trump presidency over long-term development of the market. The recent developments in Iran’s renewable energy market have been achieved in vacuum of historical precedence. In fact, it has been the many years of planning, designing attractive development framework and offering supportive policies endorsed by both the Iranian government and the parliament, which have played a major role in the success of projects like Hamedan. The Hamedan project comes online after nearly three years since Iran embarked on an ambitious campaign to scale up its renewable energy capacity, with the support of international investment. However, the lack of implementation of projects during these years, despite the introduction of attractive Feed-in-Tariffs (FiTs) and multiple policy mechanisms, was steadily jeopardising the hopes of developers over the plausibility of these mechanisms. In the resulting environment, challenges and uncertainties were garnering more attention than the successes. Nevertheless, the successful launch of the 14MW Hamedan project puts an end to this gloomy outlook. Instead, it has highlighted that the policies and favourable regulatory mechanisms are ultimately paying off as expected, facilitating a competitive environment for moving it from the margins to the mainstream. In an exclusive interview with Energy Pioneers, Dr. Jafar Mohammadnejad, the Director of Planning and Development of SUNA, outlines the path ahead. 1 February 2017
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Persian Gulf Solar PlantAmir Kabir Solar Plant
Surface Area 1745150 km2
Population 80 Million
GDP 2016 US$425.3 billions
GDP per Capita US$5936.54
GDP projected Growth
4.5
Country Information
76,000MWInstalled Capacity
340 MWInstalled RE Capacity
289 Billion kWhConsumption
5 GWRE 2020 Target
World’s 4th largest Oil Reserves
World’s largest Gas Reserves
The 3x7MW plants under construction by Solar Silk Road in Qahavand, Kabudarahang, and Famenin, to be launched in August 2018.
Hamadan 14 MW Solar Project
• 2x7MW solar plants, each with 22,000 panels 1x2 meters of 315 Watts
• Developed within a PPA framework, at a base rate of 16.1 US Cents
• €10 Millions cost of development of each plant, in total €20 Millions
• 80% German technology, 20% local content, including 23-km of transmission cables, 15-km light fibre and MV and LV equipment
• Simultaneous construction of both plants completed within 6 months
Energy PioneersA Publication of
Iran’s Power & Renewable Energy Market Monitor
Power Sector Snapshot
27 February 2017
Solar Irradiation Map of Iran
Hamedan solar project: A ground-breaking juncture in Iran’s renewable energy market In an exclusive interview with the Director of Planning and Development of SUNA
The successful launch of the 14MW solar plant in Hamedan has set in motion a number of significant implications for the future of Iran’s fledging renewable energy market. Largest of its kind in Iran to date, the Hamedan solar plant, among many other things, has put an end to years of frustration among developers and investors over impediments of bringing on stream projects under the Iranian Power Purchase Agreement (PPA) framework.
Marking a major milestone in the expansion of renewables in Iran, Hamedan project demonstrates that years of seamless efforts and coordination by and between investors, authorities and stakeholders for overcoming challenges and obstacles, is eventually paying off. This development will not only result in significantly reviving the optimism of international investors in counting on the numerous opportunities of this market, it also boosts the international confidence in reengaging and speeding up the implementation of newer projects, albeit in a more competitive environment. This newly revived confidence is interestingly created despite the earlier judgments over the negative ramifications of Trump presidency over long-term development of the market. The recent developments in Iran’s renewable energy market have been achieved in vacuum of
historical precedence. In fact, it has been the many years of planning, designing attractive development framework and offering supportive policies endorsed by both the Iranian government and the parliament, which have played a major role in the success of projects like Hamedan. The Hamedan project comes online after nearly three years since Iran embarked on an ambitious campaign to scale up its renewable energy capacity, with the support of international investment. However, the lack of implementation of projects during these years, despite the introduction of attractive Feed-in-Tariffs (FiTs) and multiple policy mechanisms, was steadily jeopardising the hopes of developers over the plausibility of these mechanisms. In the resulting environment, challenges and uncertainties were garnering more attention than the successes. Nevertheless, the successful launch of the 14MW Hamedan project puts an end to this gloomy outlook. Instead, it has highlighted that the policies and favourable regulatory mechanisms are ultimately paying off as expected, facilitating a competitive environment for moving it from the margins to the mainstream. In an exclusive interview with Energy Pioneers, Dr. Jafar Mohammadnejad, the Director of Planning and Development of SUNA, outlines the path ahead.
1February 2017
Iran’s Power & Renewable Energy Market MonitorA Publication of
Energy Pioneers
Specification of the Hamedan ProjectHamedan solar project consists of two high performing 7MW solar parks dubbed as the Persian Gulf and Amir Kabir plants, constructed over a period of six months at a cost of around €20 millions. Both projects were initiated by two business partners, the Iranian ‘Aftab Maad Rah Abrisham’ (Silk Road Solar Co.) and the British SST Ltd, which developed the rights to the projects and sold them to the newly founded joint holding, acquired by the German Athos Solar. The construction of two photovoltaic systems were completely financed using Athos’ own equity of about €20 million, according to Christian Linder, the CEO of Athos Solar. The Hamedan project has been developed under the framework of a Power Purchase Agreement (PPA) signed between SUNA and the private sector at a base rate of 16.1 US Cents per kW; and as with the other projects contracted under the Iranian PPAs, it benefits from the six-month revolving advanced Letter of Credit (LCs) from a designated Iranian Bank as a means and guarantee of payment.
The two solar parks utilise 80% international technology and 20% local content. Each plant was installed using 22,000 Canadian Solar photovoltaic modules of 1x2 meters of 315 Watts, with an average efficiency levels of 23%. Given that renewable projects in Iran are developed within a Build-Operate-Own (BOO) framework stipulated under a 20-year PPA, it naturally compels the investors to select and utilise the technically competent technologies and system configurations in their projects so to maximise the sustainability and the profitability of their projects.
In terms of local content, each of the plants utilises 4 transformers with the capacity of 1.6MW, produced by IranTransfo, enabling connection to a 20-kV electricity grid. Other locally produced equipment and technologies used in these plants includes 23-km of transmission cables, 15-km light fibre cable as well as MV and LV equipment. Considering that the government has been putting major emphasis on the use of local technology and expertise, a further incentive is introduced under the PPAs whereby any use of the Iranian content could significantly increase the FiTs, i.e. up to 30%. Hence, in Hamedan project, following utilisation of up to 20% of local content, further increase in the FiTs were envisaged, creating further financial incentives and a higher rate of return to the project’s investors. According to Dr. Mohammadnejad “more and more developers are now seeking to maximise integration of domestically produced technologies in their projects, or even produce some of the products in Iran so to maximise the benefit from these incentives.”
In addition to attractive fiscal policies in Iran’s renewable sector, Dr. Mohammadnejad also enumerates other investment incentives, including customs duties and tax exemptions in renewable projects in Iran. To benefit from these incentives, the renewable projects have to
be developed in either one of the 63 Free Trade Zones or in one of the 130 under-developed or developing regions of the country. The construction of renewable projects in Free Trade Zones might, however, increase the project’s capex as the investor is required to purchase the land for the project and the cheap public land lease option in the mainland- at around €250.00 per hectare per year - is not available in the Free Trade Zones.
Complexities of Hamadan ProjectThe construction of 14MW Hamdan solar project was not indeed without its own complex logistical challenges, considering that the majority of the components of the project, which is the first of its kind on this scale in the country, had to be imported from abroad. Christian Linder, the CEO of Athos Solar, has stated that, despite considerable logistical challenges, the project “was not on uncharted territory in terms of the basic conditions,” thanks to the available guidelines and standards used for project development in Iran. He has also put emphasis on “a great deal of openness and enthusiasm” between different authorities and stakeholders for this type of energy project, “making huge difference in resolving the encountered issues.”
According to Dr. Mohammadnejad, as a reward for the successful construction of Hamedan project, SUNA has issued the developers of the project with construction licenses for 3 more 7MW projects situated in Qahavand, Kabudarahang, and Famenin of Hamedan Province, which are to be developed and operational by August 2018. These projects, concentrating in Hamedan Province only, could potentially help to elevate this province to become one of the solar centres of Iran.
Prior to the launch of Hamedan project, the 1MW pilot project of Niroo Research Institute stood as the largest solar plant in Iran. Constructed with public funds over a period of 12 months, it was launched in March 2016. The launch of Hamedan project, not only represents a major improvement in terms of capacity and time of construction, it also contributes to 14% of the country’s target of launching 100MW renewable projects by end of current Iranian year (i.e. March 21st, 2017), of which 50MW has already been achieved, increasing Iran’s renewable capacity to 340MW. The remainder of 50MW projects are all to be commissioned during March 2017, which includes a 10MW solar project in Isfahan developed by Ghadir Electricity and Energy Co., along with 30MW Kahak 3 wind farms, developed by Iran’s giant Mapna Group. This is while dozens of other solar projects on megawatt scales are currently either under study or in process of construction in Yazd, Semnan and Isfahan - all to be launched in 2018.
2February 2017
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Success FactorsThe success of Hamedan project is partly result of internal cooperation and coordination between authorities for introduction of a comprehensive and systematic investment plan over the last three years. The initiative has been complimented with a strong political willpower shown by both the government and the parliament to engage with international investors for the development of renewable energy industry in the country. According to Dr. Mohammadnejad, given that renewable energy industry is a new business domain in Iran, SUNA has had to seamlessly work to overcome great deal of difficulties, while simultaneously incentivising and creating awareness and a coherent coordination between various organisations, including Land Affairs and Environment Organisations and regional electricity companies. Such endless support and coordination was central to assisting these organisations to recognise their roles in these new industry and to empowering them to contribute to their relevant functions and resources to enable renewable projects in Iran.
Hamedan solar project, along with those under study and/or development, are also the result of promoting policies deployed by the government, including the FiTs system, and the specially designated renewable development fund which as of today holds around €200 million to be exclusively allocated to renewable energy project. The mature and fairly well regulated electricity market, which although by no means could be called perfect, is on the path of reform and substantial improvement, aiming to become compatible with current international market norms and standards.
In addition to all available incentive currently at offer, in order to address the PPAs’ bankability concerns of the investors, SUNA has been hard at work in systematically revising the current PPAs to
resolve any pending impediments to create a favourable environment for investors. According to Dr. Mohammadnejad, feedbacks from many investors, international law firms and consultancies have been collected, following which SUNA is planning reasonable reforms to the PPAs. Mr. Mohammadnejad emphasised that a major part of the concerns is triggered by the lack of a comprehensive guideline elaborating on the exact fiscal and commercial objectives of the PPAs provisions, legal and technical implications of including certain provisions in the PPAs and the possibility of using external support, including from the Foreign Investment Organisation of Iran, to minimise the risks of investors. Attempts have also been under way by SUNA and the Foreign Investment Organisation of Iran to obtain required licenses from the Economic Council to introduce a sovereign guarantee solution for the payments under the renewable PPAs, replacing the revolving LCs as mean of payment guarantee. The other concern of the investors, i.e. FiTs based on the Iranian currency, is also well addressed by the Ministry of Economic and Central Bank of Iran where prices adjustments will be made, taking into account both inflation and currency fluctuations. This adjustment mechanism, which is subject to Clause (B) of Article 133 of Fifth Development Plan, also applicable to the renewable PPAs, together with the 20-year fixed rate tariffs under the PPAs, should realistically - at least from commercial point of view - neutralise concerns raised by investors over the currency issue of the Iranian PPAs.
Future OutlookIran is expecting “an explosive growth” in its renewable energy industry in the next couple of years, according to Dr. Mohammadnejad. The next Iranian fiscal year (i.e. March 2017-2018) will be a booming juncture in Iran’s renewable energies, given that all of the envisaged mechanisms for project development are facilitated and the successful launch and operation of Hamadan project has offered a great deal of confidence among developers and investors. According to Dr. Mohammadnejad, immediately after the launch of Hamedan project, SUNA has been experiencing “a surge of interest from developers and investors to sign PPAs - a process which was being intentionally delayed by investors due to lack of confidence in the actual emergence of the market.” Dr. Mohammadnejad has, however, alerted the investors that this “window of opportunity,” like anywhere else in the world, will steadily close as SUNA and government succeed in meeting their renewable energy development objectives.
Energy Pioneers Publication would like to express its greatest gratitude to SUNA’s authorities, specially Dr. Mohammadnejad, for this exclusive interview.
Iran’s Power & Renewable Energy Market MonitorA Publication of
