A Publication of Iran’s Power & Renewable Energy Market Monitor Energy Pioneers 27 February 2017 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 historical precedence. In fact, it has been the many years of in motion a number of significant implications for the future of Iran’s planning, designing attractive development framework and offering fledging renewable energy market. Largest of its kind in Iran to date, supportive policies endorsed by both the Iranian government and the Hamedan solar plant, among many other things, has put an end the parliament, which have played a major role in the success of to years of frustration among developers and investors over projects like Hamedan. The Hamedan project comes online after impediments of bringing on stream projects under the Iranian Power nearly three years since Iran embarked on an ambitious campaign Purchase Agreement (PPA) framework. to scale up its renewable energy capacity, with the support of international investment. However, the lack of implementation of Marking a major milestone in the expansion of renewables in Iran, projects during these years, despite the introduction of attractive Hamedan project demonstrates that years of seamless efforts and Feed-in-Tariffs (FiTs) and multiple policy mechanisms, was steadily coordination by and between investors, authorities and stakeholders jeopardising the hopes of developers over the plausibility of these for overcoming challenges and obstacles, is eventually paying off. mechanisms. In the resulting environment, challenges and This development will not only result in significantly reviving the uncertainties were garnering more attention than the successes. optimism of international investors in counting on the numerous Nevertheless, the successful launch of the 14MW Hamedan project opportunities of this market, it also boosts the international puts an end to this gloomy outlook. Instead, it has highlighted that confidence in reengaging and speeding up the implementation of the policies and favourable regulatory mechanisms are ultimately newer projects, albeit in a more competitive environment. This newly paying off as expected, facilitating a competitive environment for revived confidence is interestingly created despite the earlier moving it from the margins to the mainstream. In an exclusive judgments over the negative ramifications of Trump presidency over interview with Energy Pioneers, Dr. Jafar Mohammadnejad, the long-term development of the market. The recent developments in Director of Planning and Development of SUNA, outlines the path Iran’s renewable energy market have been achieved in vacuum of ahead. Amir Kabir Solar Plant Persian Gulf Solar Plant 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 Solar Irradiation Map of Iran Country Information Power Sector Snapshot Surface Area 1745150 km2 76,000MW 340 MW Installed Capacity Installed RE Population 80 Million Capacity GDP 2016 US$425.3 billions 289 Billion kWh 5 GW Consumption RE 2020 Target GDP per Capita US$5936.54 GDP projected 4.5 World’s 4th World’s largest Growth largest Gas Reserves Oil Reserves The 3x7MW plants under construction by Solar Silk Road in Qahavand, Kabudarahang, and Famenin, to be launched in August 2018. February 2017 1 A Publication of Iran’s Power & Renewable Energy Market Monitor Energy Pioneers Specification of the Hamedan Project be developed in either one of the 63 Free Trade Zones or in one of Hamedan solar project consists of two high performing 7MW solar the 130 under-developed or developing regions of the country. The parks dubbed as the Persian Gulf and Amir Kabir plants, constructed construction of renewable projects in Free Trade Zones might, over a period of six months at a cost of around €20 millions. Both however, increase the project’s capex as the investor is required to projects were initiated by two business partners, the Iranian ‘Aftab purchase the land for the project and the cheap public land lease Maad Rah Abrisham’ (Silk Road Solar Co.) and the British SST Ltd, option in the mainland- at around €250.00 per hectare per year - is which developed the rights to the projects and sold them to the newly not available in the Free Trade Zones. 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 Complexities of Hamadan Project utilise the technically competent technologies and system The construction of 14MW Hamdan solar project was not indeed configurations in their projects so to maximise the sustainability and without its own complex logistical challenges, considering that the the profitability of their projects. 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 In terms of local content, each of the plants utilises 4 transformers Province, which are to be developed and operational by August 2018. with the capacity of 1.6MW, produced by IranTransfo, enabling These projects, concentrating in Hamedan Province only, could connection to a 20-kV electricity grid. Other locally produced potentially help to elevate this province to become one of the solar equipment and technologies used in these plants includes 23-km of centres of Iran. transmission cables, 15-km light fibre cable as well as MV and LV equipment. Considering that the government has been putting major Prior to the launch of Hamedan project, the 1MW pilot project of Niroo emphasis on the use of local technology and expertise, a further Research Institute stood as the largest solar plant in Iran. incentive is introduced under the PPAs whereby any use of the Constructed with public funds over a period of 12 months, it was Iranian content could significantly increase the FiTs, i.e. up to 30%. launched in March 2016. The launch of Hamedan project, not only Hence, in Hamedan project, following utilisation of up to 20% of local represents a major improvement in terms of capacity and time of content, further increase in the FiTs were envisaged, creating further construction, it also contributes to 14% of the country’s target of financial incentives and a higher rate of return to the project’s launching 100MW renewable projects by end of current Iranian year st investors. According to Dr. Mohammadnejad “more and more (i.e. March 21 , 2017), of which 50MW has already been achieved, developers are now seeking to maximise integration of domestically increasing Iran’s renewable capacity to 340MW. The remainder of produced technologies in their projects, or even produce some of the 50MW projects are all to be commissioned during March 2017, which products in Iran so to maximise the benefit from these incentives.” includes a 10MW solar project in Isfahan developed by Ghadir Electricity and Energy Co., along with 30MW Kahak 3 wind farms, In addition to attractive fiscal policies in Iran’s renewable sector, Dr. developed by Iran’s giant Mapna Group. This is while dozens of other Mohammadnejad also enumerates other investment incentives, solar projects on megawatt scales are currently either under study or including customs duties and tax exemptions in renewable projects in in process of construction in Yazd, Semnan and Isfahan - all to be Iran. To benefit from these incentives, the renewable projects have to launched in 2018. February 2017 2 A Publication of Iran’s Power & Renewable Energy Market Monitor Energy Pioneers Success Factors resolve any pending impediments to create a favourable The success of Hamedan project is partly result of internal environment for investors. According to Dr. Mohammadnejad, cooperation and coordination between authorities for introduction of feedbacks from many investors, international law firms and a comprehensive and systematic investment plan over the last consultancies have been collected, following which SUNA is three years.