GTM - Lots of MOUs are getting signed. Will the projects materialize?
Solar firms rushing into Iran’s nascent renewable energy market may face challenges due to lingering trade restrictions.
In June, for example, the Financial Action Task Force (FATF), an international anti-money-laundering body, opted to keep Iran on a blacklist of high-risk territories, although counter-measures against the country have been lifted for a year.
“If Iran fails to improve its record on money laundering and financing terrorism as promised, the FATF's call for vigorous counter-measures will be reinstated,” Reuters reported. “If there is improvement, the task force will consider further positive steps.”
Although the U.S. has eased trade sanctions on Iran, the country does not yet have access to the U.S. financial system, which has made Western banks wary of dealing with the market.
Elsewhere, the Army of the Guardians of the Islamic Revolution, a branch of Iran’s armed forces, remains subject to international sanctions and is omnipresent in most Iranian economic sectors, including construction and energy.
These remaining trade restrictions “could be a problem, particularly for U.S. firms,” said Ali Izadi-Najafabadi, a renewables expert at Bloomberg New Energy Finance. “In particular, financing can be challenging unless backed by development banks or an institution with no or limited exposure to the U.S. banking system. Chinese firms are likely to have fewer problems.”
Nevertheless, the reinstatement of trade with Iran in December 2015 boosted foreign direct investment (FDI) -- placing Iran only behind the United Arab Emirates and Saudi Arabia. The country bagged 22 FDI projects in the first quarter of this year, compared to nine in the whole of 2015 and eight in 2014.
Solar firms have been eyeing the Iranian market after the Renewable Energy Organization of Iran, or "SUNA," launched a feed-in tariff (FIT) program for PV.
The FITs for solar power announced this year range from IRR 3,200 (USD $0.11) per kilowatt-hour for plants over 30 megawatts to IRR 4,900 (USD $0.16) for projects of less than 10 megawatts. Those in between will get a FIT of IRR 4,000 (USD $0.13) per kilowatt-hour.