Iran: Promising solar market with attractive incentives, but financing and legal affairs challenging

12/12/2016 | Print view

Markus Elsässer, CEO of Solar Promotion sees promising solar opportunities in Iran. - © Solar Promotion — © Solar Promotion

Markus Elsässer, CEO of Solar Promotion sees promising solar opportunities in Iran.

Expert interview: With feed-in-tariffs up to 23 Cents/kWh and high conventional energy costs Iran is a very attractive solar market, Markus Elsässer, CEO of Solar Promotion says. But financing and permitting is challenging and affords suitable local partners, first Intersolar Summit Iran recently illustrated.

What were the highlights of the first Intersolar Summit in Iran?

With over 400 attendees – twice as much as expected - our first Intersolar Summit in Iran was a resounding success. We have seen a strong interest from both the international as well as local stakeholders. The main focus of the Summit was on the topics of financing, foreign investments and grid-integration solutions. We were especially delighted that so many attendees from local Distribution System Operators (DSO) came to the Intersolar Summit to discuss grid integration issues.

How do you assess the solar business opportunities in Iran? What is the expected market growth?

Iran is a very attractive market with a population of around 80 million and a highly educated workforce. The country has an enormous potential and a widely untapped solar market. With an excellent solar irradiation combined with a continuously growing electricity demand and relatively high generation costs of conventional energy Iran could become one of the world’s top emerging markets for solar energy. The Law on Energy Consumption sets the framework for a growing PV market and determines very attractive Feed in Tariffs.

Is there also a growing residential PV market?

The current Feed in Tariffs (FIT) in Iran are very attractive. The FIT´s depend on the size of the systems. Smaller PV systems up to 20 kWp receive at the moment a FIT of 23 €-cts/kWh and for installations up to 100 kWp the FIT is still 20 €-cts/kWh. Therefore, it is quite likely that the residential PV market will grow significantly.

What are still the main bottlenecks for the development of photovoltaics in Iran?

Financing stays challenging since in Iran is currently still subject to financial sanctions. Due to the high interest rates in Iran equity finance plays an important role. Iranian banks demand interest rates of up to 20%, but up to 20-30% IRR is possible trough equity financing. Other challenges remain grid integration issues and standardized and reliable approval processes for project developers.

What ware some key requirements for foreign companies to make successful business in Iran?

I think that the most important thing is to find a suitable local partner. In Iran the government regulates nearly all activities. It is important to find a local partner to overcome the often challenging administrative processes. I would also highly recommend to seek legal advice before entering the market due to the sanctions and the complex regulations.