“Opportunities for alternative energies depolyment in ” By Quentin Minier

Under the supervision of Professor Bassem Snaije Sciences Po Spring 2020

This paper has received the Kuwait Program at Sciences Po Student Paper Award

The copyright of this paper remains the property of its author. No part of the content may be reproduced, published, distributed, copied or stored for public or private use without written permission of the author. All authorisation requests should be sent to [email protected] Opportunities for alternative energies deployment in Iran

QUENTIN MINIER MAY 2020

Table of Contents Introduction ...... 5 I. Strengths. Potential and assets for low-carbon energies ...... 6 A. Geographical potential ...... 6 1. ...... 6 2. power ...... 8 3. Bioenergy ...... 9 4. ...... 10 5. Tidal energy ...... 11 6. ...... 12 7. ...... 13 B. Political commitment ...... 14 C. Sociological assets ...... 14 II. Opportunities. Why developing alternative energies? ...... 16 A. Environmental reasons ...... 16 1. Climate change mitigation ...... 16 2. Improving air quality ...... 17 B. Increasing & gas net exports ...... 18 C. Employment & economic growth ...... 19 D. Enhancing international integration ...... 19 E. Resilience towards future energy shocks ...... 20 III. Weaknesses and Threats. Barriers to low-carbon energies deployment ...... 21 A. Internal weaknesses ...... 21 1. Lack of know-how ...... 21 2. Lack of raw materials ...... 22 3. Lack of funding ...... 23 B. External threats ...... 24 1. Political priorities ...... 24 2. US sanctions against the regime ...... 25 3. COVID-19 crisis ...... 26 IV. Solutions. Enabling alternative energies deployment ...... 27 A. Finding the ideal partners ...... 27 1. Which countries can provide Iran’s needs? ...... 27 2. Which countries to import Iranian products? ...... 30 B. Remaining partners under sanctions ...... 31

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Conclusion ...... 32 Appendix I. Post-regime outlook ...... 33

Table of Illustrations Figure I.1. Total primary energy consumption in 2017 ...... 6 Figure I.2. Photovoltaic power potential in Iran ...... 7 Figure I.3. Mean wind speed map at 100m in Iran ...... 8 Figure I.4. Maximum potential (MW) from different types of power plants un the cities over 250,000 people in Iran ...... 9 Figure I.5. Technical potential of methane, energy, and electricity generation in different ...... 10 Figure I.6. Geothermal potential areas in Iran ...... 11 Figure I.7. Major Iranian basins ...... 12 Figure I.8. Map of countries with main Uranium reserves (% of world reserves) ...... 13 Figure I.9. Number of Iranian-born students in foreign countries (left axis) and share of graduate students among Iranian international students in the US (right axis) ...... 14 Figure I.10. Number of graduate students (left axis) and ratio of faculty members (assistant, associate, and full professors) to graduate students ...... 15 Figure II.1. Iran March-April 2019 flood damage on agriculture ...... 17 Figure II.2. Outdoor air pollution in cities in Iran – annual mean PM2.5 2010 ...... 17 Figure II.3. Oil & Gas production and trade...... 18 Figure II.4. Historical data and projected electricity consumption (1990-2040) ...... 18 Figure II.5. Iranian oil fields depletion levels ...... 20 Figure III.1. Evolution of global environment-related inventions shares in four MENA countries, 2000-2016...... 21 Figure III.2. World repartition of oil and mineral reserves needed for renewables deployment ...... 22 Figure III.3. Evolution of Iranian Government Budget (% of GDP) ...... 23 Figure III.4. Iranian Government Spending in 2018 ...... 24 Figure III.5. Real GDP growth of Iran (%)...... 25 Figure III.6. Central Government Budget Balance (% of GDP) ...... 26 Figure IV.1. Reactors under construction as of 15 March 2018 ...... 27 Figure IV.2. Costs of Global Nuclear Reactors ($2010) ...... 28 Figure IV.3. Evolution of the share of patents granted by the five main intellectual property offices ...... 29 Figure IV.4. Manufacturing Value Added for , PV module, LED package and Li-ion battery cell in 2014 ($billion) ...... 29 Figure IV.5. Iranian exports ...... 30 Figure IV.6. Crude oil importers ...... 30 Figure IV.7. importers ...... 30 Figure IV.8. Evolution of the five main oil importers ...... 31 Figure IV.9. Paths followed by Iranian tankers over May-July 2019 ...... 31 Figure A.1. Possible design of a 100% renewable MENA Super Grid ...... 33 Figure A.2. Major precipitating drivers of migration from Iran since 1979 ...... 34 Figure A.3. Trends in the stock of Iranian migrants (left axis) and the migrant-to- population ratio (right axis) ...... 34

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Introduction

In many respects, Iran is an , given the importance of these flows in its history, geopolitics, economy, and environment. Iran holds the second largest natural gas reserves in the world and captures 9% of the world's proven . Iran is also a major energy consumer and stands among the 10 largest GHG emitting countries.

As the pressures related to climate change intensify, the question arises as to whether a low-carbon transition should be made in this country, which is one of the sunniest in the world.

This paper thus conducts a study similar to a SWOT analysis1, to identify Iran's forces to carry out such a transition, the reasons behind it, and finally the barriers to it. The study concludes with an assessment of the partnerships that would enable Iran to overcome these barriers.

1 The classification in "weaknesses" or "threats" retained here distinguishes the present state of the country from the situation related to domestic politics and geopolitics, considered as external factors.

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I. Strengths. Potential and assets for low-carbon energies

A. Geographical potential

On top of its significant fossil reserves, Iran can count on many geographical privileges. Over its 1.6 billion square kilometres territory, the country may have the technical potential to reach 100 GW of renewable energy power capacities2, although the literature review conducted below can suggest higher numbers. This figure alone would represent about 120% of current power generation. By 2030, the US EIA estimates 26% of renewables should be reachable in total (from 1% in 2017)3. Nuclear power could further diversify the mix.

31% 1.1%

0.6% 0.52% natural gas hydropower 67% 0.04% nuclear non-hydro renewables

Figure I.1. Total primary energy consumption in 20174

1. Solar power

As part of the Global Sun Belt, Iran receives each year an average solar insulation of 2 MWh/m2 for 2,800 hours of sunshine5 (see Figure I.2). Thus, if Iranian deserts were fully used to produce , they may provide enough power to supply the wider region: 60 GW could be produced by 2,000 km2 of solar panels6. In practice, this technical potential may be lowered by excessive heat, sandstorms, and air pollution. Still, Southern and Central regions such as Southern Khorasan and Khuzestan provinces have been identified as suitable for solar power7, and Northern provinces should be resilient to heat-related yields losses.

2 Norhan Bayomi and John E. Fernandez, “Towards Sustainable Energy Trends in the Middle East: A Study of Four Major Emitters,” Energies 12, no. 9 (April 28, 2019): 1615, https://doi.org/10.3390/en12091615. 3 Omid Shokri Kalehsar, “Iran’s Transition to Renewable Energy: Challenges and Opportunities,” Middle East Policy 26, no. 2 (June 2019): 62–71, https://doi.org/10.1111/mepo.12421. 4 Data : EIA 5 F. Atabi, “Renewable : Challenges and Opportunities for Sustainable Development,” International Journal of Environmental Science & Technology 1, no. 1 (March 2004): 69–80, https://doi.org/10.1007/BF03325818. 6 Kalehsar, “Iran’s Transition to Renewable Energy.” 7 Pouria Alamdari, Omid Nematollahi, and Ali Akbar Alemrajabi, “Solar Energy Potentials in Iran: A Review,” Renewable and Sustainable Energy Reviews 21 (May 2013): 778–88, https://doi.org/10.1016/j.rser.2012.12.052.

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Figure I.2. Photovoltaic power potential in Iran8

Current state Under the 3rd and 4th plans of national development, 77,000 m2 of solar energy plants were built, especially in , , Semnan and Shiraz9. In total, photovoltaic installed capacity reached 367 MW in 2019 (i.e. 8.5x as compared to 2016)10 but only accounts for 0.05% of renewable energy production. Concentrated Solar Power is further strikingly underdeveloped.

8 “Global Solar Atlas,” accessed May 9, 2020, https://globalsolaratlas.info/map. 9 Danial Khojasteh et al., “Assessment of Renewable Energy Resources in Iran; with a Focus on Wave and Tidal Energy,” Renewable and Sustainable Energy Reviews 81 (January 2018): 2992–3005, https://doi.org/10.1016/j.rser.2017.06.110. 10 IRENA, “Irena Query Tool,” Irena Query Tool, accessed May 9, 2020, https://www.irena.org/Statistics/Download-Data.

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2.

Iran is traversed by several tropical wind streams and features an average wind energy density of 275 W/m2 which increases in Western provinces11 (see Figure I.3). It should be able to supply between 6.5, 15 to 100 GW according to various sources12 13 14.

Figure I.3. Mean wind speed map at 100m in Iran15

11 Ali.A. Tofigh and Maryam Abedian, “Analysis of Energy Status in Iran for Designing Sustainable Energy Roadmap,” Renewable and Sustainable Energy Reviews 57 (May 2016): 1296–1306, https://doi.org/10.1016/j.rser.2015.12.209. 12 Ibid. 13 Kalehsar, “Iran’s Transition to Renewable Energy.” 14 Atabi, “Renewable Energy in Iran.” 15 Global Wind Atlas online application website (v.3.0) owned by the Technical University of Denmark: https://globalwindatlas.info

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Current state Wind is the most developed source among non-hydro renewable energies in Iran. Reaching 302 MW in 2019, installed capacity has tripled in a decade but still accounts for only 1.2% of renewable energy production.

3. Bioenergy

Bioenergy can be produced from agricultural feedstock (19.5 Mt of residues) and sewage. Mapping the potential shows that East Azerbaidjan and Khorasan-e Razavi provinces are particularly suited for biomass energy production (see Figure I.4 and Figure I.5)16. Biomass energy estimated potential is around 200 TWh17.

Figure I.4. Maximum electricity generation potential (MW) from different types of biomass power plants un the cities over 250,000 people in Iran18

16 Khojasteh et al., “Assessment of Renewable Energy Resources in Iran; with a Focus on Wave and Tidal Energy.” 17 Tofigh and Abedian, “Analysis of Energy Status in Iran for Designing Sustainable Energy Roadmap.” 18 Khojasteh et al., “Assessment of Renewable Energy Resources in Iran; with a Focus on Wave and Tidal Energy.”

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Figure I.5. Technical potential of methane, energy, and electricity generation in different provinces of Iran19

Current state Biogas projects have started early since the 1970s20. Still, with 12 MW of installed capacities, biogas deployment is stalled (and even decreasing) since 2016. Its production accounts for 0.1% of renewable energy production.

4. Geothermal energy

Located in the seismic belt, Iran hosts suitable conditions for geothermal fields. Geothermal gradients range from 2°C/100m in the Zagros belt to 13°C/100m nearby the Damavand volcano, and 8.8% of the territory should be useable21. Best-suited regions are located in the North, especially around and Sahand22. Figure I.6 maps potential sites for geothermal energy, ranked by importance. Total potential is estimated around 17 TWh23.

19 Ibid. 20 Tofigh and Abedian, “Analysis of Energy Status in Iran for Designing Sustainable Energy Roadmap.” 21 Mohammad Vahedi Torshizi et al., “Generating Electricity Using Geothermal Energy in Iran,” Renewable Energy and Sustainable Development 4, no. 1 (June 30, 2018): 42–55, https://doi.org/10.21622/resd.2018.04.1.042. 22 Khojasteh et al., “Assessment of Renewable Energy Resources in Iran; with a Focus on Wave and Tidal Energy.” 23 Atabi, “Renewable Energy in Iran.”

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Figure I.6. Geothermal potential areas in Iran24

Current state Despite early researches in the 1970s, the geothermal potential remains untapped. There seems to be only two geothermal plants in Iran, for a total capacity of around 130 MW25. Other recent sources suggest that no geothermal plant is in service in Iran and mention 65 MW in the pipeline26.

5. Tidal energy

With three large coastlines on the , the Guld of Oman and the Caspian see, tidal energy may provide additional power. On the Persian Gulf, 6.2 GW of such energy can be provided27.

24 S. K. Chaharsooghi, M. Rezaei, and M. Alipour, “Iran’s Energy Scenarios on a 20-Year Vision,” International Journal of Environmental Science and Technology 12, no. 11 (November 2015): 3701–18, https://doi.org/10.1007/s13762-015-0829-7. 25 Torshizi et al., “Generating Electricity Using Geothermal Energy in Iran.” 26 Ambassade de France en Iran - Service Economique de Téhéran, “Le Secteur Des Énergies Renouvelables En Iran” (DG Trésor, January 2019), https://www.tresor.economie.gouv.fr/PagesInternationales/Pages/14e693a9-5dc6-45e4-8399- f9c48825cd3c/files/ab993707-9889-4321-bf0c-3c05d5428ca0. 27 Tofigh and Abedian, “Analysis of Energy Status in Iran for Designing Sustainable Energy Roadmap.”

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6. Hydropower

Iran has a significant hydropower potential through its extensive network of rivers and watersheds in the East, especially in the , around , with the , Dez, and Basins28 (Figure I.7). The overall potential is estimated as 42 GW29.

Figure I.7. Major Iranian basins Current state Hydropower represents 98.6% of renewable power production, with 13.2 GW of installed capacities in 2019. It is still actively developed and has progressed at a pace of 10% per year on average during the last decade.

We put hydropower at the end of this renewables list since it does not provide a real alternative to the status quo. Furthermore, its potential is hampered by climate change: in the Kharkeh River Basin, hydropower reduction is expected to reach 4% in 2020, 15% in 2050 and 23% in 208030.

28 Saeed Jamali, Ahmad Abrishamchi, and Kaveh Madani, “Climate Change and Hydropower Planning in the Middle East: Implications for Iran’s Karkheh Hydropower Systems,” Journal of Energy Engineering 139, no. 3 (September 2013): 153–60, https://doi.org/10.1061/(ASCE)EY.1943-7897.0000115. 29 Siamak Goudarzi, “Hydropower in Iran. by Dr Siamak Goudarzi, Open Iran,” https://www.slideshare.net/SiamakGoudarzi1/hydropower-in-iran-by-dr-siamak-goudarzi-open-iran. 30 Jamali, Abrishamchi, and Madani, “Climate Change and Hydropower Planning in the Middle East.”

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7. Nuclear power

Although Iran does not have much Uranium on its soil (1,407 tU of reasonably assured resources), it can benefit from the proximity of Kazakh, Russian, Chinese and Uzbek reserves. Despite seismic risks, Iran seems to be suitable to host nuclear power plants, as the initial plans of the Shah in 1973 targeted the construction of 22 nuclear reactors to produce 23 GW. On May 2019, the management of the Iranian nuclear program was also approved by the IAEA as complying to the Joint Comprehensive Plan of Action (JCPOA) agreement of 201531.

Figure I.8. Map of countries with main Uranium reserves (% of world reserves)

Current state Only one nuclear power is active in Iran: the Bushehr Nuclear Power Plant, with a capacity of 915 MW. Two other plants of 1,057 MW each are expected to be commissioned in 2025 and 202732.

We put nuclear power at the end of this low-carbon energies list since it is not a geographical strength of Iran, except for neighbouring reserves.

31 IAEA, “Verification and Monitoring in the Islamic Republic of Iran in Light of United Nations Security Council Resolution 2231 (2015),” May 31, 2019, https://www.iaea.org/sites/default/files/19/06/gov2019- 21.pdf. 32 “Iran, Islamic Republic of 2019,” accessed May 9, 2020, https://cnpp.iaea.org/countryprofiles/IranIslamicRepublicof/IranIslamicRepublicof.htm.

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B. Political commitment

Iranian authorities seem to be committed to increase low-carbon energies. As part of the Paris Agreement, Iran has pledged for a reduction of 4% of its by 203033. Current targets aim at 5 GW and 7.5 GW of renewable energy by 2020 and 2030, respectively under the “Vision 2025” plan (2005). 1 GW of capacity was to be added annually until 2022, of which a total of 4.5 GW of wind power and 500 MW of solar power34. Feed-in Tariffs mechanisms have further been put in place to help the development of new energies.

C. Sociological assets

Despite a significant brain drain, revealed by more than 120,000 Iranian students studying in foreign countries in 2019 (Figure I.9), Iran keeps a significant scientific expertise. It gathers 2.6% of global scientific output35 and 7.4% of Iranian publications reached the top 10% of most quoted articles between 2008 and 201236.

Figure I.9. Number of Iranian-born students in foreign countries (left axis) and share of graduate students among Iranian international students in the US (right axis)37

33 Bayomi and E. Fernandez, “Towards Sustainable Energy Trends in the Middle East.” 34 Kalehsar, “Iran’s Transition to Renewable Energy.” 35 Sadra Sadeh et al., “The Scientific Output of Iran,” n.d., 26. 36 Kioomars Ashtarian, “RAPPORT DE L’UNESCO SUR LA SCIENCE,” n.d., 20. 37 Pooya Azadi, Matin Mirramezani, and Mohsen B Mesgaran, “Migration and Brain Drain from Iran,” n.d., 31.

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The main area of expertise relates to engineering, which ranks 1st among Iranian papers (27,402 publications over 2008-2014). Chemistry ranks 2nd with 19,934 papers and physics ranks 5th with 12,322 references.

This effort of Iranian authorities to develop education, as part of the Vision 2025 plan, is bearing fruits, with a teacher-student ratio around 8% and a surge in the number of students.

Figure I.10. Number of graduate students (left axis) and ratio of faculty members (assistant, associate, and full professors) to graduate students38

As such, Iran may be particularly prepared to the development of new technologies to catch up with the world in the field of low-carbon energies and should even be able to further innovate.

38 Sadeh et al., “The Scientific Output of Iran.”

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II. Opportunities. Why developing alternative energies?

A. Environmental reasons

1. Climate change mitigation

In the 7th most GHG-emitter country, climate change mitigation is a straightforward reason for low-carbon energies deployment. This rationale may seem obvious but is not only a matter of philanthropic motives when looking at Iran’s particular situation.

Iran is, first, one of the biggest countries in terms of fossil reserves, holding the second and fourth biggest natural gas and oil reserves, respectively. As such, Iran also holds the singular power of allowing or not these reserves to be burnt. Knowing that 0.4319 tonnes of CO2 are emitted for each crude oil barrel that is sold, its 155.6 billion barrels of proven reserves represent a potential of 67.2 GtCO2 to be emitted. As for natural gas, which combustion emits 1.938 kgCO2/m3, 33,899 billion m3 of proven reserves represent 65.7 GtCO2. Put together, Iran has responsibility over 132.9 Gt of CO2 emissions. This accounts for one third of the remaining carbon budget to stay below 1.5°C of global warming. It also represents a global social cost of 2 to 35 trillion dollars depending on the methodology and the date of emission chosen39.

This may be seen as external factors with regards to the country, but Iran is among those that will pay the largest share of this cost. Under the IPCC RCP8.5 scenario, Iran temperatures would increase by 6.2°C, with heat waves covering 60% of the year, and the number of days with heavy precipitations days would double40.

Already, drought is estimated by the United Nation to have cost Iran 3.5 billion dollars in 200041. The recent flooding on March-April 2019 has killed 76 people and displaced more than 220,000 people into emergency shelters. This single event has costed between 2.5 and 3.6 billion dollars42 (Figure II.1), has damaged 14,000 kilometres of road and destroyed 700 bridges43.

As such, by switching to renewables and reducing its oil extraction, Iran may have the opportunity to avoid severe damages not only to other countries but most importantly to its own economy44.

39 IAWG (Interagency Working Group), “Technical Support Document: Technical Update on the Social Cost of Carbon for Regulatory Impact Analysis‐under Executive Order 12866.,” 2016. 40 World Health Organization and UNFCCC, “Climate and Health Country Profile - 2015 - Iran,” 2016. 41 Karim C. Abbaspour et al., “Assessing the Impact of Climate Change on Water Resources in Iran: IMPACT OF CLIMATE CHANGE IN IRAN,” Water Resources Research 45, no. 10 (October 2009), https://doi.org/10.1029/2008WR007615. 42 “Record Floods in Iran Kill 62, Cause Over $1 Billion in Damage,” accessed May 9, 2020, https://www.wunderground.com/cat6/Record-Floods-Iran-Kill-62-Cause-Over-1-Billion-Damage. 43 “Iran Says Recent Floods Caused up to $2.5 Billion in Damage,” Reuters, April 14, 2019, https://www.reuters.com/article/us-iran-floods-idUSKCN1RQ093. 44 By controlling large renewable power, Iran would be able to decide over its oil exports, especially in cases where those exports would be substituted to coal production, by looking at a social opportunity cost of selling oil over coal burning.

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Figure II.1. Iran March-April 2019 flood damage on agriculture45

2. Improving air quality

Four of the ten most polluted cities in the world are in Iran, resulting in 19,500 deaths in 2013 and a social cost of $13B per year (2.2% of GDP). A switch to low-carbon energies would decrease the air pollution, coming in large part from fossil-fuelled power plants46. A long-term transition towards less-polluting vehicles should further alleviate this issue. Additionally, the motives of Iranian people to improve environmental quality should be a breeding ground towards a wider low-carbon transition.

47 Figure II.2. Outdoor air pollution in cities in Iran – annual mean PM2.5 2010

45 Graphic by Steve Bowen, head of Catastrophe Insight at Aon plc. Source: Disaster Management Unit of the Ministry of Agriculture, April 2, 2019. ,DW | 12.02.2015,” DW.COM | تولید برق؛ یک عامل دیگر در آلودگی هوای ایران“ ,(Deutsche Welle (www.dw.com 46 .a-18248608/تولید-برق-یک-عامل-دیگر-در-آلودگی-هوای -ایران/accessed May 9, 2020, https://www.dw.com/fa-ir 47 World Health Organization and UNFCCC, “Climate and Health Country Profile - 2015 - Iran.”

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B. Increasing oil & gas net exports

Another issue calling for a development of alternative sources of energy is that Iran can barely sustain its own energy demand. Despite its high-ranked fossil reserves, Iran was several times a net importer of natural gas during the last decades(Figure II.3)48.

Figure II.3. Oil & Gas production and trade

Furthermore, under current trend, Iran will need 54 GW of additional gross power capacity between 2017 and 204049, not to mention desalination power needs that may be increased with temperature rise50. Ensuring net exports would then require additional energy sources for domestic consumption, as for the Masdar City motives51.

Figure II.4. Historical data and projected electricity consumption (1990-2040)52

48 H. Houri Jafari et al., “Energy Planning and Policy Making; The Case Study of Iran,” Energy Sources, Part B: Economics, Planning, and Policy 11, no. 8 (August 2, 2016): 682–89, https://doi.org/10.1080/15567249.2012.741186. 49 Pooya Azadi, “The Outlook for Natural Gas, Electricity, and Renewable Energy in Iran,” n.d., 28. 50 Golara Ghasemi et al., “Theoretical and Technical Potential Evaluation of Solar Power Generation in Iran,” Renewable Energy 138 (August 2019): 1250–61, https://doi.org/10.1016/j.renene.2019.02.068. 51 Most of all, energy savings would be required, through efficiency measures and subsidies reduction. Subsidies are responsible for a fivefold increase of energy consumption in 30 years. 52 Azadi, “The Outlook for Natural Gas, Electricity, and Renewable Energy in Iran.”

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C. Employment & economic growth

The renewable energy sector is more labour-intensive than the oil & gas industry. Employment in this sector has followed a twenty-fold increase in one year, to reach 40,000 jobs in March 201953. Overall, renewable is associated with increased economic growth and can unlock attractive funding under the Paris Agreement54. Low-carbon energies deployment is also part of the endeavour to diversify from a fossil-based economy – fossil rent represent more than 20% of Iran’s revenues – that is subjected to high volatility.

D. Enhancing international integration

Unlike fossil fuels extraction, renewable and nuclear energies can be a lever of regional integration, through know-how sharing, grid interconnection or other partnerships. Commitments in international climate negotiations would also reinforce the integration of Iran within the international community.

In a way, shifting away from fossil fuels could even reduce the strategic importance of Iran, since the main goal of sanctions is to cut fossil fuels exports to zero55. As Raja W. Sidawi, CEO of Energy Intelligence, puts it, “Iran is the missing pillar in an American policy of imperium in imperio toward China. One way or another – threat, surrender, regime change or war – Trump believes that Iran must be brought into line” Then, “assuming control of the energy sources of the Gulf, decisions on the Gross National Product of China will be made in Washington.”56

As such, by disengaging from the fossil fuels sphere, Iran interferences with US strategies could be reduced.

53 “‘Iran Can Meet Europe, ’s Renewable Energy Needs,’” Tehran Times, October 15, 2019, https://www.tehrantimes.com/news/441184/Iran-can-meet-Europe-India-s-renewable-energy-needs. 54 Nathalie Hilmi et al., “Energetic Transition in Iran” 19, no. 1 (2017): 20. 55 “US Ready to Drive Iranian Oil Exports to Zero, Says US National Security Adviser,” the Guardian, August 22, 2018, http://www.theguardian.com/us-news/2018/aug/22/us-ready-to-drive-iranian-oil- exports-to-zero-says-us-national-security-adviser. 56 “First Iran, Then China? The Anatomy of Trump Warmongering,” Informed Comment, May 13, 2019, https://www.juancole.com/2019/05/first-anatomy-warmongering.html.

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E. Resilience towards future energy shocks

Globally, the energy transition away from fossil fuels is expected to reduce the geopolitical influence of Iran57. If a sudden move towards worldwide sustainability were to happen, Iran revenues would be strongly depleted. More certainly, if, conversely, the long-term depletion of Iranian reserves is to progress, the country will have to adapt. It should then prepare this transition while it can invest fossil resources to build a new energy system.

Figure II.5. Iranian oil fields depletion levels58

57 “The GeGaLo Index_ Geopolitical Gains and Losses after Energy Transition | Elsevier Enhanced Reader,” accessed May 9, 2020, https://doi.org/10.1016/j.esr.2019.100406. 58 “Trends in the Iranian Economy | Hamid and Christina Moghadam Program in ,” accessed May 9, 2020, https://iranian-studies.stanford.edu/iran-2040-project/dashboards.

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III. Weaknesses and Threats. Barriers to low-carbon energies deployment

A. Internal weaknesses

1. Lack of know-how

Despite efforts to develop academic skills, the Iranian production of patents still lags behind other MENA countries such as Saudi Arabia. In 2016, Iran produced 0.05% of environment-related inventions, five times below Saudi Arabia. To compare, France, China and Germany produced 3.77%, 9.26% and 10.76% of these inventions, respectively.

0.3

0.25

0.2

0.15 Iran

Egypt relatedinventions worldwide

- Saudi Arabia 0.1

0.05

% % environment of 0

Year

Figure III.1. Evolution of global environment-related inventions shares in four MENA countries, 2000-2016.59

As for nuclear energy, Iran is similarly dependent on foreign technological know-how.

59 Data: Patent indicators in stats.oecd.org.

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2. Lack of raw materials

So-called “renewable” energies are not renewable in terms of raw materials needs. Iran would thus be dependent on importations to sustain its RES development.

Figure III.2. World repartition of oil and mineral reserves needed for renewables deployment60

As for nuclear power, Iranian Uranium stocks cover less than 15% of France's annual needs. Relative to current power generation, total recoverable reserves in Iran would supply just over a year of energy in a 10% nuclear mix. Again, Iran would then be dependent on Uranium imports.

60 Emmanuel Hache et al., “SOME GEOPOLITICAL ISSUES OF THE ENERGY TRANSITION,” 2019, 19.

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3. Lack of funding

The Iranian economy is rather fragile, with high dependency on oil revenues, high inflation and unemployment. Thus, with a budget deficit reaching 4.4% of GDP in 2019 (Figure III.3), Iran may experience difficulties to fund the $17.5 and $52.5 billion needed to achieve, respectively, the unconditional and conditional GHG mitigation pledged in its INDC. In particular, reaching 5 GW of renewable power capacity will require $13 billion of investments61. Foreign investments would then be needed.

Figure III.3. Evolution of Iranian Government Budget (% of GDP)

Yet, although efforts have been made to attract foreign investors, the regulatory environment remains challenging and Iran ranks 127th in the World Bank’s Ease of Doing Business 2020 ranking62.

61 Mohammad Hazrati and Zeynab Malakoutikhah, “An Unclear Future for Iranian Energy Transition in Light of the Re-Imposition of Sanctions,” n.d., 19. 62 Anonymous, “Charting Iran 1H 2020,” Country Report (Thailand, Pathum Thani: Chart Maker Company Limited, January 2020).

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B. External threats

1. Political priorities

Despite the commitment of Iranian authorities towards sustainability, environment remains one of the last priorities budget-wise (Figure III.4). Social welfare is the main priority, including fossil fuels subsidies that burden the GDP by 15.3%63. In order to sustain its regional influence in , Syria, Lebanon and Yemen, significant capital outflows are further needed: in particular, 2019 military spending reached $17.4 billion64.

Figure III.4. Iranian Government Spending in 2018

63 , “Iran: Largest Subsidizer in 2018,” Financial Tribune, July 16, 2019, https://financialtribune.com/articles/domestic-economy/98959/iran-largest-fuel-subsidizer-in-2018. 64 Hadi Ajili and Mahsa Rouhi, “Iran’s Military Strategy,” IISS, Survival: Global Politics and Strategy December 2019–January 2020, 61, no. 6 (November 2019): 139–52.

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2. US sanctions against the regime

Most importantly, US sanctions have put a toll to Iran’s transition towards low-carbon energies. Following the lifting of original sanctions in 2016, foreign investors – mainly from Europe – had announced $3.6 billion of investments for renewables energies, as Iran potential was considered a top opportunity. As a result of secondary sanctions, most firms left Iran and almost all projects were dropped. In particular, the construction of the 6th largest solar plant, with projected capacity of 600 MW, was halted by Quercus. A $2.9 billion deal with Norway Saga Energy was also cancelled. As a result, Iran’s needs in terms of foreign funding and technology transfer cannot further be met.

Moreover, US sanctions have significantly hampered the Iranian economy, as shown by the acceleration of budget deficit (Figure III.3) and the recent decrease in GDP growth (Figure III.5). Funding capacity to develop low-carbon projects is then further reduced.

Figure III.5. Real GDP growth of Iran (%)65

Additionally, the collapse of the following sanctions has caused renewable production costs to triple. The Feed-in Tariffs provided through Power Purchase Agreement then became negligible and untrustworthy in the recessionary context. As a result, investments in low-carbon energies are strongly deterred.

65 “Infographic: Iran’s Economic Woes,” Statista Infographics, accessed May 9, 2020, https://www.statista.com/chart/20454/real-gdp-growth-of-iran/.

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3. COVID-19 crisis

Although this event is still recent and requires more perspective before coming to conclusions, the COVID-19 crisis is likely to worsen the economic equation presented above. Decrease in oil revenues are likely to further intensify and the economic turmoil is to further aggravate the public budget deficit.

Figure III.6. Central Government Budget Balance (% of GDP)66

66 Fitch Solutions Risk Reports, “Iran Country Risk Report - Q3 2020,” 2020.

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IV. Solutions. Enabling alternative energies deployment

As seen above, Iran needs to develop international partnerships, first to overpass its internal weaknesses in terms of materials, technological know-how and funding, and second to overcome the external shocks – domestic policies, sanctions, Covid-19 crisis – that threaten further development of low-carbon energies.

A. Finding the ideal partners

Putting aside the barriers due to political choices, geopolitical conflicts such as US sanctions and such external shocks as the COVID-19 outbreak, the potential trade partners can be assessed by looking at the resources and needs that can be traded internationally. 1. Which countries can provide Iran’s needs?

Nuclear Energy Technological transfers can originate from historical nuclear developers such as the USA, France or . New players such as China, India and South Korea can also offer significant know-how sharing.

Figure IV.1. Reactors under construction as of 15 March 201867

67 “IAEA Releases Country Nuclear Power Profiles 2017,” Text (IAEA, March 15, 2018), https://www.iaea.org/newscenter/news/iaea-releases-country-nuclear-power-profiles-2017.

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In terms of cost-competitivity, most-recent reactors constructions show that South Korean and Indian technologies should be the most affordable alternatives (Figure IV.2).

Figure IV.2. Costs of Global Nuclear Reactors ($2010)68

As for uranium supply, the three main producers in 2018 are Kazakhstan, Canada and Australia (see Figure I.8 for the reserves).

68 Jessica R. Lovering, Arthur Yip, and Ted Nordhaus, “Historical Construction Costs of Global Nuclear Power Reactors,” Energy Policy 91 (April 2016): 371–82, https://doi.org/10.1016/j.enpol.2016.01.011.

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Renewables In terms of know-how, China and South Korea hold most of the patents granted for renewables innovations (2.5% as of 2014), followed by , the EU and the USA.

Figure IV.3. Evolution of the share of renewable energy patents granted by the five main intellectual property offices69

As for materials, China holds the large majority of the production of crucial technologies for renewable energy transition.

Figure IV.4. Manufacturing Value Added for wind turbine, PV module, LED package and Li- ion battery cell in 2014 ($billion)70

69 Hache et al., “SOME GEOPOLITICAL ISSUES OF THE ENERGY TRANSITION.” 70 Ibid.

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The global repartition of raw materials further shows a significant concentration (see Figure III.2). In particular, six countries, namely Australia, Chile, Congo, China, Brazil and Russia hold 66% of cobalt reserves, 33% of copper, 84% of lithium, 52% of nickel, 70% of rare earths and 33% of silver71.

2. Which countries to import Iranian products?

For now, Iran’s main exports are petroleum products, of which mainly crude oil and possibly natural gas if the country solves its domestic consumption issues.

Figure IV.5. Iranian exports72

Best-suited trade partners would then be importers such as China, USA, India, Japan and South Korea.

Figure IV.6. Crude oil importers73 Figure IV.7. Natural gas importers74

71 André Månberger and Bengt Johansson, “The Geopolitics of Metals and Metalloids Used for the Renewable Energy Transition,” Energy Strategy Reviews 26 (November 1, 2019): 100394, https://doi.org/10.1016/j.esr.2019.100394. 72 “OEC: The Observatory of Economic Complexity,” accessed May 9, 2020, https://oec.world/en/. 73 Ibid. 74 Ibid.

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From a more dynamic viewpoint, most promising markets should be China and India, as their oil imports are surging to sustain their economic growth.

Figure IV.8. Evolution of the five main oil importers75

B. Remaining partners under sanctions

Under sanctions, Iran can count on a few trade partners for its exports, mainly China, Iraq, Turkey, the United Arab Emirates and Venezuela.

Figure IV.9. Paths followed by Iranian tankers over May-July 201976

75 By Plazak - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=30283285 76 Anjali Singhvi, Edward Wong, and Denise Lu, “Defying U.S. Sanctions, China and Others Take Oil From 12 Iranian Tankers,” The New York Times, August 3, 2019, sec. World, https://www.nytimes.com/interactive/2019/08/03/world/middleeast/us-iran-sanctions-ships.html.

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Considering all constraints, it appears from the above that the most suitable partnership to grow in order to foster Iranian energy transition is China. China owns large portions of materials and intellectual property needed for low-carbon development, on one hand, and seeks to ensure fossil fuel supply to enable its considerable economic growth, on the other hand.

Conclusion

As we can see, Iran's renewable potential is immense and gives it the opportunity to be one of the major producers of low-carbon energy in each of the many technologies it can develop.

This potential could bring many benefits, whether in terms of climate change mitigation, improved air quality, balancing of trade and income, economic growth, multilateral integration or resilience to future shocks.

However, the country has inherent weaknesses, particularly with regard to mineral resources needed for transition, patents and its fragile economic health.

Moreover, the political and geopolitical system in which the country is locked leads Iran to neglect this low-carbon transition, especially since the restoration of sanctions, to which the Covid-19 crisis makes matters worse.

Thus, if Iran wishes to succeed in this transition, it can establish strong ties with China, which can exchange its know-how and resources for the precious Iranian oil reserves necessary to fuel its ambitions.

Finally, in a hypothetical future where Iran would undertake a smooth regime transition, the many political and geopolitical barriers that block its development could be lifted towards a more harmonious cooperation with the international community and its neighbours. A virtuous circle between low-carbon transition and multilateral integration could then emerge77.

77 See Appendix I.

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Appendix I. Post-regime outlook

Depending on the transition path towards a regime change in Iran, some of the above-mentioned barriers may be further lifted in the future. One can then wonder what the future of the Iranian energy transition in a post-regime era can be.

First, it should be noted that, unless China (or Iran itself) gains significant leverage in the international community, attempts towards energy transition in Iran are likely to be blocked by the USA and other Western countries78. As seen on Section II, significant renewable shares would participate in Tehran’s reinforcement of its regional influence.

As such, a regime change in Iran is likely to unleash low-carbon potential by first removing sanctions and further enabling international cooperation. As mentioned above and as revealed by the INSTEX program designed by the EU to circumvent US sanctions, many private actors are willing to invest in Iran, especially within the low- carbon sector.

At regional level, if relationships with Saudi Arabia and other neighbouring countries were to warm up, MENA countries could further build grid interconnection to pool their energy sources and tackle intermittency.

Figure A.1. Possible design of a 100% renewable MENA Super Grid79

78 We do not consider here the hypothesis of Raja Sidawi mentioned in Section II.D. 79 Arman Aghahosseini, Dmitrii Bogdanov, and Christian Breyer, “The MENA Super Grid towards 100% Renewable Energy Power Supply by 2030,” n.d., 43.

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Finally, large parts of the Iranian brain drain seem to be linked with the political situation of the authoritarian Iranian regime following the 1979 Islamic Revolution.

Figure A.2. Major precipitating drivers of migration from Iran since 197980

Figure A.3. Trends in the stock of Iranian migrants (left axis) and the migrant-to-population ratio (right axis)81

As such, a regime change is likely to further increase the scientific expertise of Iran, which is much needed to develop low-carbon sources and decrease reliance on other countries. Such a transition is also likely to inspire a civic rebound, as environmental activists are repressed for now82. Moreover, Iran's ancestral culture, stemming from , is often invoked for its links with nature and the environment83 and could serve as a breeding ground for the development of an ecologically sound national identity.

80 Azadi, Mirramezani, and Mesgaran, “Migration and Brain Drain from Iran.” 81 Ibid. 82 “2018 Will Go down in History as a Year of Shame for Iran,” accessed May 9, 2020, https://www.amnesty.org/en/latest/news/2019/01/irans-year-of-shame-more-than-7000-arrested-in- chilling-crackdown-on-dissent-during-2018/. 83 Richard Foltz and Manya Saadi nejad, “Is Zoroastrianism an Ecological Religion?,” Journal for The Study of Religion, Nature and Culture 1 (January 17, 2008), https://doi.org/10.1558/jsrnc.v1i4.413.

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