its focus on the development hydrocarbon sector, Iranian lawmakers have prioritized
the reduction of CO2 emissions and the development of renewable
energy resources as key goals within the framework of the fifth five-year
development plan - with a target of 5000 MW of installed capacity from
renewable power plants in the short term. In the long term, the Iranian
Government (the "Government") hopes to increase the nominal capacity
of all power plants from 74 GW to over 120 GW by the end of 2025, in which a
portion is determined to be derived from renewable resources.
order to drive the country's growth in this sector, the Renewable Energy
Organization of Iran (SUNA) was established in 1996 to evaluate the county's
renewable energy potential, to implement renewable energy projects, and to
guarantee the purchase of any electricity generated in order to attract private
sectors' participation in this field. Today, SUNA is a company affiliated to
the Ministry of Energy and tasked with all matters related to renewable energy.
Government is now seeking to capitalize on its vast potential by bringing in
further private investment and is therefore offering substantial incentives for
such private investors. SUNA provides power purchase agreement (PPA) model to
be entered into with the private investor which guarantees electricity purchase
for 20 years. The investor has the option to sell the electricity within the
country to third parties, on the energy exchange market or any other method acceptable
to the Ministry of Energy.
though the model PPA needs certain improvements to ensure its bankability and
in particular the incorporation of robust change in law provisions, arbitration
as the dispute resolution mechanism, and indemnification in case of early
termination, it still constitutes an important step towards understanding the
international market. SUNA recently adjusted the guaranteed electricity
purchase tariffs as follows:
of the renewable energy project in Iran
SUNA is making impressive efforts to facilitate and standardize the development
of renewable energy projects, there are currently limited precedents available.
According to the officials and based on the few projects that do exist, the
development of a renewable energy project is undertaken as follows:
of foreign investments:
to the satisfaction of the conditions set therein, the foreign investor
developing a renewable energy project may enjoy certain protections provided
under the Foreign Investment Promotion and Protection Act ("FIPPA")
which is the main legislation for the protection of foreign investments. In
accordance with FIPPA, foreign investors are defined as non-Iranian natural
and/or legal persons or Iranians using capital with foreign origin, who have
obtained the FIPPA investment license.
of the investment license is subject to fulfillment of the requirement that the
foreign investment should contribute to economic growth, upgrade technology,
enhance the quality of products, and contribute to an increase in employment,
opportunities and exports.
investments fulfilling the criteria set out in the FIPPA are guaranteed the
same rights, protections and facilities as those available to local
investments. Protection against expropriation or nationalization is guaranteed,
unless in the "public interest", by means of a due legal process, in
a non-discriminatory manner and in exchange for payment of appropriate
compensation on the basis of real value of the investment immediately before
the expropriation decision is taken.
profit derived from the foreign investment can be transferred abroad after
deduction of taxes, dues and statutory reserves and upon the approval of the
Foreign Investment Board and confirmation of the Minister of Economic Affairs
and Finance. Furthermore, the issue of entry visas, residence and work permits
for foreign personnel is facilitated by the FIPPA.
disputes arising between the Government and foreign investors in relation to
their mutual obligations under FIPPA are subject to the jurisdiction of Iranian
courts, unless another dispute resolution mechanism is available through a
bilateral investment treaty with the relevant government of the home
jurisdiction of the foreign investor.