Increasingly industrial societies depend on reliable and secure energy supplies for economic growth. Concerns around energy consumption, environment and climate change are growing as emissions from fossil fuel combustion and industrial processes contribute 80 percent of the total gas emitters. To ensure a future of economic prosperity and improved quality of living for all, fundamental changes to the current energy mix and a move to a sustainable energy system are paramount requirements.

Intergovernmental Panel on Climate Change (IPCC) reports that the unequivocal human impact on climate change driven predominantly by burning fossil fuel. To solve the problem and reduce the impact of carbon, most countries are turning into renewable energies.

According to the International Renewable Energy Agency (IRENA), global demand for electricity is expected to double by 2040 as a result of growth in developing and emerging economies. In recent years, the cost of renewables energies can often compete with fossil-fuelled generation on a commercial basis. The global share of variable renewable power generation (wind and solar energy) has increased notably between 2005 and 2012.

Iran’s energy combination is dominated by hydrocarbons including natural gas and petroleum around 98% and 2% a combination of hydropower, nuclear, biofuels and other renewable sources. To avoid overreliance on fossil fuel sources and environmental concerns in coming years, Iran has planned to develop renewables as an alternative.

The capacity of installed and connected renewable energy power plants are shown in the table below for the end of the year in Iran:

Iran Renewable Energy Power capacity – MW

Iran REP capacity

Iran has implemented some policies and incentives to increase the share of renewables energies in order to improve energy security and reduce environmental pollution and create new job opportunities.

The policies and measures can be categorized into 3 group: infrastructures and knowledge promotion, financial supports and fund, and power purchase agreement tariffs.

Establishment of infrastructures for renewables (target in 2020)

In order to establish infrastructures to manufacture solar and wind power plant equipment, deploy clean energy and increase the renewable share in the country energy mix, the government is authorized to support private and cooperative sectors by using managed funds and loan interest subsidies to pave the way for the installation of 5,000 MW wind and solar energy.

Promoting the knowledge level of renewable energies

Related policies:

  1. Section B of the Islamic Republic of Iran general policies on energy sector: efforts to acquire new and renewable energy technology and knowledge and build power plants in the country using sources like wind, solar, fuel cell and geothermal.
  2. Section 9-1 of the energy and electricity sector strategies of the ministry of energy’s strategic plan 1404: concentration on realization, research and technology localization in solar and wind electricity generation activities in the country.
  3. Section 9-2 of the energy and electricity sector strategies of the Ministry of Energy strategic plan 1404: allocate a definite and increasing percentage of research budget to localize technologies related to renewable energies.
  4. Section 9-3 of the energy and electricity sector strategies of the Ministry of energy’s strategic plan 1404: define and implement new and renewable energy pilot projects.

Financial supports

According to section B of article 8 of subsidy reform plan, the government is obliged to spend 30% of the net fund gained by implementing this law on grants, loan interest subsidies or managed funds for the following purposes:

  • Technology structure modification of manufacturing divisions to improve energy efficiency,
  • Water, and
  • Expansion of electricity generation from renewable resources.

Renewable energy development fund

Based on Act 69 of Annual Budget Law (2014) Ratified by Parliament, the Ministry of Energy is obliged to include in electricity bills an amount of 30 Rials per kilowatt-hour as electricity duties, in addition to the price of electricity sold, and to receive such amount from clients except rural households. The amount earned shall be deposited into the account of Tavanir with Sate Treasury, and the exact amount shall be expended merely for development and maintenance of rural electricity grids as well as for generation of renewable and clean electricity.

Feed-in tariff

According to Section B of Article 133 of the law for the 5th Development Plan of IRI, Tavanir and companies affiliated to the Ministry of Energy are permitted to sign guaranteed and long-term contracts for the purpose of purchasing electricity generated from renewable and clean energy sources, with a priority to purchase from private and co-operative sectors.

Tariff Renewable Energy Power Plants in 1394 (2015)

Item Type of Technology Guaranteed Purchase Price
(Rials per Kw/H)
1 Biomass  Landfill 2900
Biomass  Anaerobic Digestion 3150
Biomass Incineration 5870
2 Wind Farm with capacity of over 50 MW 4060
Wind Farm with capacity of less than 50 MW 4970
Wind generation up to 1 MW (Only for consumers and limited to their connection capacity) 5930
3 Solar Farms with capacities over 10 MW 5600
Solar Farms with capacity of 10 MW or less 6750
Solar energy with capacity of 100 KW or less (Only for consumers and limited to their connection capacity) 8730
Solar energy with capacity of 20 KW or less (Only for consumers and limited to their connection capacity) 9770
4 Geothermal ( Including drilling and equipment procurement) 5770
5 Expansion Turbines 1800
6 Loss recovery in industrial processes 3050
7 Small Hydropower  10 MW and less 3700
8 Other renewable sources excluding Hydropower plants 4873


Liquid fuel exchange purchase

Under article 19 of the budget law, in order to implement efficiency improvement plans in power plants with a priority in installation of steam unit in combined cycle plants, development of renewable energy use, reduction in losses, optimization of energy consumption,  saving in liquid fuel consumption and increasing the share of fuel exports, the Ministry of Energy is permitted up to sign contracts to a total value of 120,000 billion Rials (120,000,000,000,000) in buyback with investors in private and public sectors for plans of:

  • Efficiency and generation improvement in governmental and private sectors’ power plants,
  • Development of RE plants,
  • Reduction of losses and optimization of energy consumption, in preference of using domestic equipment.

According to Section 3 of Article 4 of executive directive for Article 19 of Budget law of 2013, the Ministry of Energy can through Tavanir assign contracts in buyback method with applicant investors for installation of replants. In such contracts, the amount of fuel saved in two years of plant operation shall be estimated, and within those two years the price of electricity purchased from investors shall exclude the cost of the amount of fuel saved (that is delivered to the investors).