The challenges facing Iran's quest for clean and renewable energy

By Rose Johnson

17 February 2022

The latest in our series on clean energy in the Middle East and Africa takes a closer look at the progress being made in Iran in pursuit of reducing carbon emissions.

Iran’s quest for clean and renewable energy is complicated by unique circumstances and difficulties. Iran is said to possess roughly 12% of the world’s oil resources¹, however Iran’s wealth of oil is counter-balanced by its poverty of vital environmental resources – namely water, fertile soil, and cool, clean air. These already-scarce resources are being depleted further by climate change and pollution, and have tangible effects on the population’s quality of life.

Although Iran’s economy is more diversified than some of its neighbours, it is still significantly tied to its oil exports, and so at a time when countries and companies are increasingly seeking cleaner forms of energy, Iran’s oil resources may prove less of a blessing in the medium- to long-term. Furthermore, the widespread use of petroleum-based products (for example in power generation) that results from such abundance and subsidisation only further exacerbates the environmental issues plaguing Iran’s population (see ‘The environmental issues motivating action towards renewable energy in Iran’ below).

The historical sensitivities involving Iran’s oil
It is not solely Iran’s economic reliance upon oil that makes the thought of turning away from it unimaginable, but also the role oil has played as a nationalistic lifeblood of the country since its discovery at the turn of the twentieth century. The former Prime Minister Mohammad Mosaddeq’s campaign in the 1950s to gain control of Iran’s oil resources from the majority British-owned Anglo-Iranian Oil Company (renamed in 1954 to British Petroleum Company (BP)) through oil nationalisation was one of the most significant events in Iran’s modern history, and the oil workers strike in Abadan played a pivotal role in the 1979 Revolution. Control over its own oil resources has long been a key symbol of Iranian self-determination, and so attempts by the international community to curb Iranian usage of their resources hits an historical raw nerve.

Some members of the Iranian government are more enlightened regarding clean energy than others. This past October – just one month before COP26 – the Iranian Oil Minister, Javad Oji, offered a desperately out of touch solution to the energy crisis: “The Islamic Republic has repeatedly announced with good intentions that it is ready to supply the world’s energy – even for developed countries – by increasing the production of oil and stabilising the oil market, and by supplying this fuel, it will solve the majority of the challenges that are facing the people.”²

The Oil Minister’s bravado appeared not only out of touch with the international community’s crusade for cleaner energy, but also with the current energy crisis in Iran. Last summer, significant electricity shortages resulted in blackouts across the country which caused protests so significant that then-President Hassan Rouhani apologised on behalf of the government, as the production and distribution of electricity in Iran is controlled by government-owned Iran Power Generation and Transmission Company (TAVANIR). It is an irony not lost on the general population that a country so rich with oil should suffer such a severe energy crisis.

Iran's progress towards renewable energy sources so far
In Iran, government responsibility for climate change initiatives is held by the Renewable Energy and Energy Efficiency Organisation (SATBA), part of the Ministry of Energy. A spokesperson from SATBA announced in December 2021 that the amount of energy being supplied to Iran’s power grid from renewable sources is 900MW (1% of the country’s overall consumption), and that this consists of 390MW from solar, 310MW from wind, and the rest from a combination of small hydropower plants, biomass and turbo expanders. SATBA’s research suggests that Iran could ultimately supply 140,000MW of electricity from renewables, of which 100,000MW would be solar and 400,000MW would be wind.³ The Deputy Minister of Energy has said that the present government intends to create plants for 10,000MW of renewables, and a record budget of over 30 trillion rials has been allocated to the pursuit of this ambitious goal.⁴

Looking ahead: Iran’s roadblocks to investing in clean energy
Iran’s ability to invest in and develop its climate initiatives is to an extent dependent on the performance of its economy. There are certainly many in the government who are endeavouring to create change, and indeed, an Iranian delegation did attend COP26. The head of the Environmental Organisation of Iran, Ali Salajaqeh, argued in his official speech at COP26 that despite Iran’s desire to act in accordance with Paris Agreement, due to the sanctions and resulting financial stress the economy is under, the State is unable to make or attract the necessary investment in renewable energy. He pointed to the commitments that Iran had made for the Paris Agreement – reducing carbon emissions by 4% – which he said would cost US$17bn, and argued that this is outside of their capabilities in the current economic climate.⁵ Whilst Iran was clearly trying to use the platform of climate negotiations as a bargaining chip in its broader sanctions agenda, it is certainly true that sanctions are a genuine barrier against the development of clean energy initiatives and the amelioration of environmental issues. Iran will need significantly more investment in the sector, as well as an ability to trade with foreign companies in order to attain the relevant technology to enable development.

Iran’s clean energy potential as a solar belt country
One of Iran’s most promising routes to achieving renewable energy is its utilisation of solar power. Located on the solar belt, Iran has a huge capacity for solar energy, and yet it is very far from reaching its potential. After the JCPOA was initially signed, Iranian company Mokran Solar Energy Company started working with German company ADORE GmbH Company (as the program manager) and Swiss DURION AG Company (as the key investor) to create a significant solar farm in Kerman. This farm consists of 76,912 solar panels – each panel producing 260 watts of power – and according to Mokran it is the largest solar farm in Iran. This success shows both Iran’s potential in the global clean energy sphere, but also by contrast, the role sanctions play in the frustration of such potential.

The environmental issues motivating action towards renewable energy in Iran

Air pollution and water scarcity are two of the highest priority environmental problems in Iran. These environmental crises have triggered protests throughout the country, putting the government under increasing pressure to tackle these issues.

Air pollution in Iran
According to the World Health Organisation, four of the ten worst cities for air pollution in the world are in Iran. The air quality in Tehran, according to the Air Quality Index, regularly scores above 200, deeming it “heavily polluted” – the consequences of which are evident in the fact that in 2018, the World Bank attributed 12,000 deaths a year in the country to air pollution. Iran’s air pollution has a huge impact on the health and quality of life of the population, and in Tehran, on many days during winter vulnerable members of the population are advised to stay indoors.⁶

The cause of this staggering air pollution is largely attributed to wind-blown dust, carbon emissions from cars, and the use of fuels such as mazut (an unrefined and highly polluting form of industrial oil) and diesel in factories. While some of these issues are longstanding, sanctions are exacerbating the situation: the use of mazut and diesel in factories is caused by the difficulty in producing and obtaining higher grade fuels , and the inability to export mazut creates excess supply that is deemed necessary to use.⁷ Additionally, sanctions and the difficulty in obtaining foreign currency make the purchase of foreign automotive technology inaccessible for all but the wealthy⁸, which leaves many Iranians at the mercy of old, dangerous and inefficient cars such as the “Pride” – which is now owned by Saipa (Saipa Automobile Manufacturing Iranian Company) which has had a decades-long relationship with Citroen. The situation is arguably even worse for the aviation sector, as even the airlines seen as premium in Iran rely on fleets of aircraft built in the 1970s and 1980s.

Despite the resentment of the toxic atmosphere these outdated vehicles create, there is little alternative, and public opinion generally seems firmly opposed to placing restrictions on accessibility to cars and fuel – evidenced by the protests of November 2019, when an increase in fuel prices led to some of the largest and most fervent anti-government protests since the 1979 Revolution.⁹

Iran’s water shortages
Another emotive and existential threat in Iran is water scarcity. Most of Iran – particularly central and southern Iran – is classed as arid or semi-arid, and for thousands of years, the development of cities and agriculture has been reliant on innovative irrigation systems, such as the system of aquifers and underground irrigation channels known as qanat. The agricultural sector in Iran is said to use 92% of available water¹⁰, but mismanagement has led to it being squandered, and evaporation only increases the salinisation of the soil. The poor planning of dams has caused the evaporation of lakes and wetlands – such as Lake Urmia which is nearly dry – and has forced people to migrate, as the land around them dries up into desert. In 2016, the Iranian Minister of Energy stated that in recent years Iran’s available water reserves have decreased from 130 billion to 80.5 billion cubic metres¹¹.

The country experienced severe droughts in the summer of 2021. These were most crippling in Khuzestan, and prompted large-scale protests after the populace of this region – which already suffers dust storms, intense heat, and drought in the summer season – experienced even more severe conditions. Situated on the Iraq border, Khuzestan once enjoyed some of the most bountiful natural resources in Iran with rivers and expansive marshland, however years of exploitation and conflict has resulted in a near-intolerable environmental situation. These recent large-scale protests have demonstrated further to the government the urgency of reforming the inefficient water distribution infrastructure in cities and in the agriculture industry, as well as demonstrating the importance of investing further in water desalinisation projects. Water desalinisation is big business in Iran, and increasingly, projects are being pursued through the efforts of both the private sector and the government, coordinated partly by the government body, the Iran Water Resources Management Company.¹²

As outlined , there are many challenges facing Iran’s clean energy goals, however, there are also motivating factors which may push the country to action. Water shortages and air pollution may require Iran to move past its reliance on oil resources and seek investment opportunities in its solar potential. However, time will tell whether the country can overcome the financial and historical roadblocks and move towards renewable energy sources in the future.

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