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Iran (2012)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Total installed electricity capacity (2008): 53,000 MW

Share of energy resources in electric power generation:
Thermal: 32.4%
Gas: 25.6%
Combined Cycle: 24.2%
Hydro: 16.7%
Others: 1.1%

In 2009, Iran produced 203,187 GWh of electricity from gas (142,999 GWh), oil (52,352 GWh), hydro (7,233 GWh), coal and peat (376 GWh) and wind (227 GWh).

Total Primary Energy Supply (2009): 215,850 ktoe
Natural gas: 53.3%
Oil: 45.6%
Coal and peat: 0.6%
Hydro: 0.3%
Biofuels & waste: 0.2%

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), was, in 2011, the third largest exporter of crude oil after Saudi Arabia and Russia. Iran’s natural gas reserves rank first in Middle East and second in the world. The production of natural gas rose from 312.23 million cubic meters per day in 2001 to 551.89 million cubic meters per day in 2008; and domestic natural gas consumption increased with an annual rate of 9.4% to 124,256 million cubic meters in 2008. The total production of coal in Iran was estimated to be 2.73 million tons in 2008; but consumption of coal decreased from 1.58 million tons in 2001 to 1.03 million tons in 2008. Coal is only used in cement and iron plants in Iran – it has not been utilized for electric power generation yet.

The contribution of crude oil to energy supply in Iran decreased from 54% in 2001 to 44 % in 2008. On the other hand, the contribution of natural gas in energy supply rose from 44.6% in 2001 to 54.9% in 2008. The contribution of the other energy resources such as coal, biomass, hydropower, wind and solar energy is only 1%.

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Reliance

In 2007, the energy imports balance for the country was as follows;

Total imports: 18,943 ktoe
Coal and Peat: 240 ktoe
Crude oil: 5,323 ktoe
Petroleum products: 8,004 ktoe
Gas: 5,217 ktoe
Electricity: 158 ktoe

Iran is a net exporter of energy, mainly in the form of crude oil and petroleum products.

Iran is a net exporter of electricity and currently exports to neighboring states including Armenia, Pakistan, Turkey, Iraq, and Afghanistan. Azerbaijan and Armenia supply electricity to Iran. Armenia and Iran will increase the volume of electricity that they deliver to each other, according to a November 2011 agreement. The total volume of power swapped between the two countries will rise from 350MW at present to 1,200MW following the completion of construction of a third, 400-kV transmission line connecting Iran and Armenia, expected  by end of 2012.

Energies obtained from animal wastes, forest wood, bushes and other motes and stalks cover more than 40% of domestic requirements (heating & cooking) of the rural population in Iran which equals 0.5% of total national domestic requirements.

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Extend network

Nearly 100% of urban dwellings and 92% of rural dwellings have access to electricity, thanks to an intensive mass electrification plan in the 1980s. Excluding some 5000 villages in rural areas, more than 99% of Iranian homes have electricity.

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Capacity concerns

It is expected that in 2019 energy production from fossil resources will have decreased as part of the decline in fossil fuel resources in Iran. At present, during the peak demand times (winter), the Iran Gas Company is unable to meet the demand. Iran is expected to increase natural gas production from its offshore South Pars natural gas field in the Persian Gulf to meet demand.

International sanctions enacted in the summer of 2010 have slowed progress across the energy sector, affecting upstream investment in oil and natural gas projects. These have prompted a number of international energy companies to pull out of upstream projects. Sanctions have also impeded the import of refined products, prompting efforts to boost domestic production and curb rising demand in Iran.

The refinery capacity is not sufficient for domestic demand and Iran has become an importer of petroleum. In order to solve this problem, Iran has recently invested in constructing new refineries.

In 2007, annual energy losses were 13% by refineries, 8% by transportation and 15% by power plants and transmission/distribution. Some power plants are running as low as 10% of their capacity as much of Iran's electricity infrastructure is in a state of dilapidation - rolling blackouts become endemic in summer months.

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Renewable energy

Wind energy
According to a recent wind energy survey in 45 suitable Iranian sites, the wind energy potential is estimated to be 6500 MW. Presently, the capacity of installed wind farms in Iran is approaching 75 MW, mainly at two northern sites, Manjil and Roodbar wind farms, where the energy is fed to the local grid. These wind farms are planned to be enhanced up to 90 MW and installation of another 60MW wind farm is under consideration. A wind atlas is being developed as a step towards exploiting its wind-power resources. Iran is currently the only producer of wind turbines in the Middle East.

Solar energy
Iran has high potential for using solar energy due to geographical position. The solar energy in the country varies from 2.8 kWh/m2 in day in the north to 5.4 kWh/m2 in day in the south. The average sunshine hours are estimated 2800 h per year nationally and 3200 h in the central part of Iran due to the hot and dry climate.

Presently, besides thousands of small direct current individual photovoltaic units which are used in roads, highways, parks and communications, there are only a few photovoltaic electric power generating units with a total installed capacity of around 150 kW. There is also a 250 kW solar thermal power generating system installed in Shiraz. There are plans to develop a 17MW solar thermal power plant. By some estimates solar generating capacity could reach about 260 MW in 2030.

Biomass energy
Production of a biomass atlas by the New Energies Organization is ongoing. The only common type of biomass energy in Iran is wood. The total amount of forest products used as energy generation was around 937,730 m3 in 2008. The country also plans to install three biomass power stations in Shiraz, Mashhad and Saveh with capacity of 1060 kW, 650 kW and 600 kW respectively.

Biofuels
There are approximately 3.67 million ton of oil seeds crops in Iran that could potentially produce 721 million litres of biodiesel every year and potentially replace about 2% of total diesel fuel consumption in Iran, but at present such oils are mainly used in  food production.. Canola, cotton and soybean are the most likely biodiesel sources. Hybrid oil (2% biodiesel and 98% diesel) could be an alternative fuel requiring no engine modification. Use of biodiesel and ethanol has been proposed for transportation. However, the present production capacity of ethanol in Iran is 0.7 million litres per day and it is only at the level of academic research.

Biogas
There could be potential to produce 10 MW power from garbage/waste - mainly in  major towns/cities with population of above 250,000 in Iran. At present, a pilot prototype project is operative in Saveh, south west of Tehran.

Hydropower
There are 42 active hydro power stations with total capacity of about 7672 MW in Iran; and hydropower stations with a total capacity of 6650 MW are still being constructed. Iran has planned to increase capacity of hydropower to 30,000 MW in the near future. As there are numerous water streams from mountains that cover the country, thousands of small and Mini/Macro hydro systems could be installed to provide locally needed electricity or to be fed to local grids. Presently, there are only 12 small hydro power systems with a total installed capacity of 46.5 MW and 12 Mini/Macro hydro systems with a total capacity around 2.9 MW. The available hydro potential from Mini/Macro systems is not yet accurately estimated. New projects are expected to bring Iran’s hydropower capacity to 11 GW by 2030.

Ocean energy
The Gulf of Oman is connected to the Indian Ocean and there is a maximum potential of 12.6kW/m power in its waves. But in the Persian Gulf’s coasts, due to their distance from the ocean, the wave power potential is at most 6.1 kW/m. However, in the Persian
Gulf islands, the potential is a maximum of19kW/m and average 16.6 kW/m. These isolated islands may be the best places to exploit wave energy.

For tidal energy, owing to strong tides in the southern coastal region of Iran, there are many suitable sites. Among 36 sites which have been studied, Mahshahr port with 3.9m tidal range and 170km2 basin area is the best one.

As far as thermal energy is concerned, although the Persian Gulf is one of the hottest seas in the Middle East and its surface temperature is about 30 ◦C in August, the required cold water to be obtained from the depths is not available. The Caspian Sea is suitable to harness sea thermal energy. In this sea, the temperature difference between surface and deep water is about 20 ◦C during 7–8 months of the year.

Geothermal energy
Geothermal potential site selection using Geographic Information System (GIS) carried out in 2007 indicated 8.8% of Iran as prospected geothermal areas in 18 fields. The main geothermal power station in Iran is located in Meshkin Shahr with capacity of 55 MW. 2 wells have been excavated in the Sabalan geothermal field, and results are promising.

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Energy efficiency

The current five-year plan gives priority to increasing energy efficiency in buildings, to improving vehicle efficiency and to expanding the use of vehicles fuelled with compressed natural gas (CNG).

Petrol is heavily subsidised in Iran. This has led both to very high consumption levels and petrol is transported out of Iran's border areas for re-sale in neighbouring countries, where petrol prices are much higher. Sanctions imposed on Iran have made it difficult for the country to import needed volumes of gasoline. The government has attempted to control consumption by implementing accelerated subsidy reform, resulting in a sharp increase in the price of gasoline in December 2010.  Consumption of gasoline in 2010 was about 4% less than consumed in 2009.

Iran's energy consumption per capita is relatively low, although residential sector use is relatively high. Due to industrialization, final energy consumption rose in the past decade in Iran from 636 Mboe in 1998 to 1187 Mboe in 2008. In 2009, total final energy consumption was 162,670 ktoe. The residential sector consumed the largest amount of energy at 47,832 ktoe, followed by the transport sector at 39,184 ktoe, industry at 37,517 ktoe, the commercial and public services at 10,268 ktoe, and agriculture and forestry at 6,146 ktoe. By source, oil and oil products contributed the largest at 77,195 ktoe, followed by natural gas at 70,099 ktoe, electricity 14,738 ktoe, biofuel and waste at 402 ktoe, coal and peat at 213 ktoe and geothermal, solar etc at 23 ktoe.

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Ownership

Electricity market
State companies are responsible for electricity generation, transmission and distribution in Iran. Tavanir (http://www.tavanir.org.ir/), under the control of the Ministry of Energy, is in overall charge of the entire sector, with 16 regional electricity companies, 42 distribution companies, 27 generating companies and five other companies dealing with, power plant management, and maintenance, new energy sources and energy efficiency. Tavanir produces 98% of the country’s electricity.

Oil and gas market
The oil and gas sector is controlled by state-owned National Iranian Oil Company (NIOC, www.nioc.ir/). In 1997, the Ministry of Petroleum reorganised the oil sector. There are now four main state-owned companies: NIOC, with responsibility for hydrocarbon exploration and production, the National Iranian Gas Company, the National Petrochemical Company and the National Iranian Oil Refining and Distribution Company. The production of crude oil is performed by four national companies; and there are nine active oil refineries in Iran. There are six LNG processing plants in Iran.

The state-owned National Iranian Oil Company (NIOC), under the supervision of the Ministry of Petroleum, is responsible for all upstream oil projects, encompassing both production and export infrastructure. The National Iranian South Oil Company (NISOC), a subsidiary of NIOC, accounts for 80% of oil production covering the provinces of Khuzestan, Bushehr, Fars, and Kohkiluyeh and Boyer Ahmad. Nominally, NIOC also controls the refining and domestic distribution networks, by way of its subsidiary, the National Iranian Oil Refining and Distribution Company (NIORDC), although functionally there is a separation between the upstream and downstream sectors.

The National Iranian Gas Company (NIGC) is responsible for natural gas infrastructure, transportation, and distribution. The National Iranian Gas Exports Company (NIGEC) was created in 2003 to manage and to supervise all gas pipeline and LNG projects. Until May 2010, NIGEC was under the control of the NIOC, but the Petroleum Ministry transferred NIGEC, incorporating it under NIGC in an attempt to broaden responsibility for new natural gas projects.

Due to the poor investment climate and international political pressure, some international oil companies including Repsol, Shell, and Total have divested from Iran's natural gas sector. In response, Iran has looked toward eastern firms, like state-owned Indian Oil Corp., China's Sinopec, and Russia's Gazprom to take an increased role in Iranian natural gas upstream development. Activity from these sources has also been on the decline due to logistical difficulties experienced as a result of sanctions on technology and financial transactions. Pars Oil & Gas Company (POGC, http://www.pogc.ir/tabid/112/Default.aspx), a subsidiary of the NIOC, is responsible for LNG development, although various companies including the NIGEC are also involved.

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Competition

Power-plant construction is handled by the Iran Power Development Company, a wholly-owned subsidiary of Tavanir. In addition to power generation, Tavanir is solely responsible for transmission and distribution in Iran. The government has announced that it has opened the sector to foreign investment, but sales of existing state-owned facilities as well as new independent power projects has been almost non-existent.

Foreign firms have recently been allowed access to the oil and gas sector, but only through Iranian affiliates. Major oilfields in Iran are in decline and investments are needed. Exploiting the massive gas reserves will also require large inflows of foreign capital and technology. Under Iran's buy-back scheme, foreign firms hand over operations of fields to the NIOC, and after development they receive payment from natural gas production to cover their investment. NISOC, a subsidiary of NIOC, is responsible for much of the southern natural gas production.

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Energy framework

Article 44 of the Iranian constitution prohibits ownership of hydrocarbon resources by foreign companies. However, “buy-back” contracts, introduced in the late 1990s, allow foreign companies, operating through an Iranian affiliate, to enter into exploration and development contracts with NIOC.

Due to decreasing fossil fuel resources, the government has decided to control and reduce energy consumption especially by residential and commercial sectors. The usage of other types of energy, renewable energy in particular, has received great attention from the Iran government in recent years; and the government emphasizes large utilization of alternative energy resources in its each five yearly development plan.

While Iran is trying hard to increase the contribution of renewable energy supply, it has also developed nuclear technology and will be using nuclear as an energy source in the near future.

In the fourth five-year national development plan (2005-2009), Iran’s renewable energy policies were stated as follows:
- Supporting private sector for dissemination of RE applications that are approaching economical viability, such as wind, geothermal and biomass energy.
- Supporting manufacturers for transferring and localization of RE technologies which are expected to become competitive in medium terms, such as PV systems and solar thermal power plants.
- Supporting the research centers to expand their research programs for RE technologies that are becoming competitive in longer than 10 years period.
- Providing sustainable and accessible energy to the poor and isolated areas.

In this context, the government purchases the electricity produced by the private sector from renewable energy power plants at a price three times higher than the amount paid by consumers.

Following Iranian policy makers’ attention towards alternative energy resources to   fossil fuels, the Renewable Energy Organization of Iran (SUNA) with the help of World Bank is developing a strategic plan for Iran’s renewable energies. This project is supervised by the Renewable Energy Initiative Council of Iran (REIC).

Iran aims to produce 10% of its required electricity from renewable sources by 2025.

Fiscal incentives for renewable energy include investment/production tax credits and energy production payment.

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Energy debates

The Iranian nuclear program aims for 20,000 MW of nuclear energy by 2025. So far there is a single power plant, Bushehr (1,000 MW peak capacity), which was connected to the power grid in early September 2011.

Last year, Iran expressed its interest in ratifying the Kyoto Protocol. It was suggested that its accession to the United Nations Framework Convention on Climate Change (UNFCCC) would follow Russia's ratification. The Majlis approved the ratification, but it was rejected by the Council of Guardians.

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Energy studies

Other than the compilation of resource atlases for the country, no major studies into the state of Iranian energy have been conducted.

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Role of government

The Energy Department is responsible for:

  • Developing a strategic energy policy
  • Planning and implementation of renewable energy projects
  • Research renewable energy use
  • Enquiry and implementation of energy efficiency plans
  • Education programs for sustainable energy

Diminishing oil production levels have led to buy-back contracts for foreign investors. The government accepts that foreign investment is needed to maintain oil production levels and to achieve the ambitious gas-development program, which would allow Iran to become a major net exporter. The government also plans to diversify away from upstream oil and gas, through LNG and petrochemical projects.

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Government agencies

Renewable Energy Organisation of Iran (SUNA, www.suna.org.ir) and Iran Renewable Energy Initiative Council (REIC) are the two main administrative and policy making organisations involved in RE.

SUNA was established in 1995. In addition to participating in the country’s renewable energy strategies, this organization determines research priorities, implements projects such as providing renewable energy map and installing off-grid PV systems in rural areas.

REIC was formed in Research Institute of Petroleum Industry (RIPI) in July 2008, under the Presidential Department of Science – Technology as a national-level hub to coordinate efforts to deploy renewable energies by the involved organisations in Iran. Ministries and organizations involved in REIC include: Department of Environment; Ministry of Science, Research and Technology; Ministry of Industries and Mines; and Ministry of Energy; Ministry of Petroleum. REIC also reviews budget allocation, evaluates scientific-technical companies and organizations, and compiles a national renewable energy document and road map.

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Energy procedure

The Oil Stabilisation Fund was established in December 2000 to cushion the government budget from oil-price fluctuations. The third five-year development plan for 2000-2004 established a ceiling, based on the expected oil price, on the oil export revenues that could be transferred to the budget. Oil revenues in excess of the ceiling are transferred to the fund. If the oil revenues are lower than the ceiling the central bank uses the fund to compensate for the shortfall. The fund may also be used to cover other budget deficits or to finance public-sector projects and to import oil products.

Plans were made in 2008 to connect the electricity grids of Azerbaijan, Turkey, Iran, Georgia and Russia to bolster electricity trade. Development of the plan is ongoing.

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Energy regulator

The Energy Department (http://www.moe.org.ir/) directly regulates the energy sector.

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Regulatory framework

The Act establishing the Energy Department was approved on the 28/11/1353 (Persian Date). As yet no dedicated policy exists for the promotion of sustainable energy, although projects in the field are ongoing.

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Energy regulation role

The Ministry of Petroleum controls the activities of all state-owned oil and gas companies from upstream to petrochemicals. The state-owned National Iranian Oil Company (NIOC) has 18 subsidiaries that cover the entire oil and gas chain.

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Regulatory barriers

Iran has good potential for renewable energy but there has been limited activity to exploit this to date. Fossil fuel subsides are a barrier to the development of renewable energy systems though their gradual elimination has started in Iran.

Other factors include lack of required funds to conduct projects, limited consultants and contractors, and the slow process of contracting. There are also problems in the field of guidance, management, planning and implementing the programs.

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References

EIA (2011) ‘Country Analysis Brief: Iran’, Last updated March 2013, available from: http://www.eia.gov/countries/cab.cfm?fips=IR [Accessed 28 July 2013].

Fadai, D., Esfandabadi, Z. S., and Abbasi, A. (2011) ‘Analyzing the causes of non-development of renewable energy-related industries in Iran’, Renewable and Sustainable Energy Reviews, 15: 2690-2695.

Ghorashi, A. H. and Rahimi, A. (2011) ‘Renewable and non-renewable energy status in Iran: Art of know-how and technology-gaps’, Renewable and Sustainable Energy Reviews, 15: 729-736.

Mohammadnejad, M. et al. (2011) ‘A review on energy scenario and sustainable energy in Iran’, Renewable and Sustainable Energy Reviews, 15: 4652-4658.

Noorollahi, Y. et al. (2009) ‘Geothermal energy resources and development in Iran’, Renewable and Sustainable Energy Reviews, 13: 1127-1132.

Zabihian, F. and Fung, A. S. (2011) ‘Review of marine renewable energies: case study of Iran’, Renewable and Sustainable Energy Reviews, 15: 2461-2474.

Bakhoda, H. et al. (2012) ‘Energy production trend in Iran and its effect on sustainable development’, Renewable and Sustainable Energy Reviews, 16: 1335-1339.

IEA (2012) Country Information. Available at: http://www.iea.org/stats/countryresults.asp?COUNTRY_CODE=IR&Submit=Submit [Accessed 28 July 2013]

REN21 (2011) Renewable 2011 Global Status Report, Paris: REN21 Secretariat. Available at http://www.ren21.net/ [Accessed 28 July 2013]

BBC Monitoring Central Asia: "Azeri, Iranian ministers make public plans to create unified power grid along with Turkey, Georgia and Russia", 1st July 2008. http://www.terrawatts.com/azeri.html [Accessed 30 July 2013]

Payvand Iran News: "Iran, sole producer of wind turbines in Middle East", 3rd March 2009. http://www.payvand.com/news/09/mar/1032.html [Accessed 30 July 2013]
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