Wind Power in Iran: Technical, Policy, and Financial Aspects for Better Energy Resource Management

Abstract

Iran is situated in a wind belt. However, the installed wind capacity in Iran is around 300 MW, which is minuscule compared with the global 651 GW capacity as of 2021. Using novel data from wind trackers across Iran, the paper’s findings show immense potential for wind energy in Iran from a technical perspective. While attractive policies are already in place to incentivize wind energy development in Iran, the feed-in tariff (FiT) for wind energy has dropped to around 3 cents per kWh because of the sharp depreciation of the Iranian rial between 2018 and 2020. This paper shows that there is no economic justification for the development of wind farms in Iran at such low FiTs. A minimum FiT of 12 cents per kWh is required to reinvigorate Iran’s wind energy industry investments. Given the extremely tight fiscal space of the Iranian government due to the sanctions and consequently reduced oil exports, the paper argues that a mere 2.14% of Iran’s wasteful fossil fuel subsidies are sufficient to provide a FiT of 12 cents per kWh for wind energy to meet 5% of the country’s total electricity demand.