Iran is looking to renewables to solve its annual energy shortages, which have become a growing concern for industries and households, who face power cuts and shortages of both power and gas.

Iran has the world’s second-largest natural gas deposits (nearly 34 trillion cubic metres) and is ranked third globally in crude oil reserves (over 206bn barrels). Nevertheless, subsidised energy prices (causing over-consumption), over-reliance on gas and oil,  and a lack of investment (partly due to international sanctions) have led to worsening shortages.

The country’s energy deficit deepens during peak seasons, with electricity use breaking records every summer because of air conditioners, and heavy gas consumption in northern cold regions causing a pressure drop in the national distribution network every winter.

Successive governments have taken various measures and initiatives to deal with the pressing issue.

For the gas shortage, agreements between Turkmenistan and Azerbaijan have been in operation over the winter and summer months, in which Iran’s northern Khorasan Razavi region and Mazandaran by the Caspian Sea receive gas from Iran’s northern neighbours, while its western region feeds gas to Azerbaijan in exchange.

The Islamic Republic is also trying to maximise extraction from its gas fields in the south, especially from the colossal South Pars (SP), the world’s largest gas field, which is shared with Qatar. Despite ongoing disputes over the boundary of the reserves with Kuwait and Saudi Arabia, the two biggest portions of South Pars belong to Iran and Qatar, which are on good terms.

Iran’s two energy behemoths, South Pars Gas (SPGC) and the South Zagros Oil and Gas Production (SZOGPC), which account for 95% of the country’s gas output, have ramped up output and extraction ahead of the coming winter.

In August, the SPGC, Iran’s number one gas producer, added up to 15mn cubic metres (mcm) of gas to its daily production of 760 mcm after bringing on stream the only underdeveloped phase of the SP’s 24 phases. The SZOGPC announced earlier in October that it would extract 7mn more cubic metres of natural gas per day by the winter.

Iran plans to boost daily gas output by 55% to over 1.2bn cubic metres in five years.

Aiming for a green revolution

To produce additional electricity, the country is pinning its hopes on renewables, especially solar power, given Iran’s ample solar hours throughout the four seasons.

The biggest hurdle up to now has been that the cost of renewable energy production often exceeded that of the country’s massively subsidised oil and gas sectors. However, with the price point now at a more competitive level internationally, many are predicting a green revolution.

Iran has drawn up a comprehensive plan to produce 20,000 megawatts (MW) of renewable electricity by 2027 and 50,000 MW by 2031. Deputy Energy Minister Mahmoud Kamani told state news agency IRNA on October 7 that solar farms with a combined annual electricity output of 4,500 MW would join the national grid by the summer of 2024.

According to Iran’s renewable energy and energy efficiency organisation, known as SATBA, one region, Ardabil, has tremendous potential for solar energy generation. SATBA has designated 21 locations across the province suitable for building solar parks to create some 1,000 MW of clean power annually. The short-term objective is to make some 280 MW of electricity out of solar farms.

To make the dream come true, the government has recently allocated about $5bn out of the National Development Fund to finance renewable energy projects, including solar and wind farms, to produce a total of 10,000 MW per year in the next two years.

The sector has come on leaps and bounds to date with the government even announcing a “solar park” for the North Khorasan region. The term “solar park or town” is defined in Iran as a new area situated outside a city that is then populated with solar panels.

To add to this, Tehran is also offering incentives to various industrial sectors – particularly the steel and petrochemical industries that have been bearing the brunt of seasonal outages – to invest in green power production by building solar or wind parks in their vicinities to both meet their electricity demand and contribute to the national grid’s capacity.

In mid-October, Iran broke ground on two solar farms in south-eastern Kerman and Yazd provinces with a combined capacity of 500 MW to supply local industries with green electricity. Once operational, the solar power plant in Kerman in the heart of the Lut Desert will generate 400 MW of electricity per year to become Iran’s biggest solar park.

The country also seeks to close a deal with China's Qinghai province, a solar powerhouse, to help implement renewable electricity generation projects in the north-western Ardabil province where local authorities have plans to generate 1,000 MW of clean power annually. Qinghai in north-western China is home to the world's second-largest solar power plant, with a capacity of 2.2 gigawatts.

Long road ahead

However, the country is still decades behind its peers in solar power. An over-reliance on oil and gas extraction, along with heavily subsidised domestic prices, have impeded the country’s transition towards green power.

Government data show that there is a long road ahead. According to the latest energy ministry figures, renewable power plants, including wind, solar, biomass and hydroelectric facilities with capacities of less than 10 MW, contribute only 1,101 MW, or 1.2%, of Iran's yearly electricity generation.

A report by local media on October 28 said Iran’s renewable capacity had grown only 21% over the past two years (less than 200 MW), indicating a slow pace of clean energy projects coming online.

President Ebrahim Raisi said on October 23 that the country was facing what he called a “severe energy imbalance,” and he demanded more be done.

“I urge the relevant authorities to minimise the impact [of the energy shortage] on other sectors, including industry, agriculture, and household consumption, by redoubling their efforts to address this issue promptly,” Raisi said.

A day later, Iranian lawmaker Ebrahim Najafi said the country had failed “in practice” to tackle the energy deficit despite efforts to boost gas production among others.

“We need more infrastructure investments in the gas sector,” Najafi said, adding that Iran needed at least $25bn in investments to further develop its gas industry.

The MP also implied that Iran had fallen behind other nations in effectively harnessing its shared gas fields.

The next five years will be crucial for Iran, a country whose energy infrastructure has remained underdeveloped for years due to Western sanctions, which have depressed revenues and scared away foreign investment.