Iran’s energy crisis forces attempt to shift from oil to solar – Financial Times

Report on Iran’s Strategic Shift to Solar Energy and Alignment with Sustainable Development Goals

1.0 Executive Summary

The Islamic Republic of Iran is accelerating the development of solar energy projects as a strategic imperative to address severe electricity shortages and enhance national energy security. This initiative is a direct response to a deepening energy crisis caused by deteriorating infrastructure and prolonged economic sanctions. The government’s policy shift towards renewables represents a significant effort to align with global Sustainable Development Goals (SDGs), particularly SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation, and Infrastructure), and SDG 13 (Climate Action).

2.0 Analysis of Iran’s Energy Crisis

2.1 Root Causes of Electricity Shortages

The nation’s energy sector faces a critical deficit, leading to rolling blackouts that disrupt industrial production and daily life. The primary factors contributing to this crisis include:

• Chronic Under-investment: Years of insufficient funding have led to a crumbling and outdated energy infrastructure.
• Economic Sanctions: US-led sanctions have severely restricted access to international financing, technology, and investment, exacerbating infrastructure decay.
• Fossil Fuel Dependency: Approximately 80% of Iran’s electricity is generated from natural gas, making the grid vulnerable to fuel supply disruptions.
• Supply Deficit: During peak summer consumption, the national grid faced a shortfall of 15gW, necessitating power cuts.

These challenges directly impede progress on SDG 9 by undermining the development of resilient infrastructure and hinder the provision of reliable energy as mandated by SDG 7.

3.0 National Renewable Energy Strategy and SDG Alignment

3.1 Renewable Energy Targets

In response to the crisis, Iran has established ambitious targets for renewable energy capacity. The government aims to achieve 12gW of renewable capacity within three years. Recent progress includes doubling capacity to 2.5gW in the current year, which now constitutes 2.5% of total electricity generation. This remains significantly behind regional peers like Turkey, where solar and wind power accounted for 16.3% of the energy mix in 2023.

3.2 Contribution to Sustainable Development Goals

The push for solar power is intrinsically linked to several key SDGs:

1. SDG 7 (Affordable and Clean Energy): The primary goal is to increase the share of renewable energy in the national energy mix, ensuring more reliable and sustainable power for all.
2. SDG 13 (Climate Action): By diversifying away from fossil fuels, Iran aims to reduce its carbon footprint and contribute to global climate change mitigation efforts.
3. SDG 8 (Decent Work and Economic Growth): Stable electricity supply is crucial for industrial productivity, preventing economic losses estimated in the billions of dollars and supporting sustainable economic growth.
4. SDG 11 (Sustainable Cities and Communities): Reliable energy access is fundamental for the functioning of urban areas, preventing disruptions to essential services and improving quality of life.

4.0 Implementation Challenges and Barriers

4.1 Economic and Financial Hurdles

Despite strong governmental commitment, experts express skepticism regarding the feasibility of meeting the set targets due to significant obstacles:

• Financial Constraints: The national economy’s poor state, coupled with a lack of access to global financing, severely limits investment capacity.
• Currency Devaluation: A nosediving national currency has made the import of essential solar technology, primarily from China, prohibitively expensive.
• Sanctions Impact: Sanctions have not only blocked foreign investment, including a previously pledged $4bn, but also increased operational costs for domestic projects.
• Bureaucratic Delays: Lawmakers have cited the central bank’s slow provision of foreign currency as a key reason for delays in project implementation.

5.0 Strategic Initiatives and Policy Measures

5.1 Public-Private Partnerships and Investments

To overcome financial barriers, the government is pursuing several strategic initiatives:

• Sovereign Wealth Fund Investment: In July, the national sovereign wealth fund committed $2.3bn to develop 7gW of renewable energy in partnership with the private sector, which will contribute 20% of the investment.
• Private Sector Engagement: President Masoud Pezeshkian has affirmed his administration’s readiness to collaborate with private companies to expedite the construction of solar plants.
• Household Incentives: To decentralize generation and reduce grid pressure, citizens are encouraged to install rooftop solar panels through programs offering loans and the ability to sell surplus “green” electricity back to the grid. This aligns with SDG 17 (Partnerships for the Goals).

5.2 Energy Consumption and Efficiency

Alongside supply-side expansion, officials recognize the need to manage demand. Heavily subsidized energy prices have led to excessive consumption. It is estimated that a 10% reduction in energy use could save 800,000 barrels of oil and gas daily, highlighting the importance of improving energy efficiency in line with the targets of SDG 7 and SDG 12 (Responsible Consumption and Production).

6.0 Outlook

While Iran possesses significant potential for solar energy with approximately 300 sunny days per year, its ability to achieve its renewable energy targets remains uncertain. Success is contingent on overcoming formidable economic sanctions, securing adequate financing, and enhancing domestic contracting capacity. Experts suggest that expanding renewable generation must be complemented by aggressive measures to optimize consumption and improve energy efficiency to bridge the persistent gap between energy supply and demand and make meaningful progress towards the Sustainable Development Goals.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

SDG 7: Affordable and Clean Energy

• The entire article revolves around Iran’s efforts to address electricity shortages by developing solar energy. It discusses the need for clean, reliable energy to power homes and industries, directly aligning with the core principles of SDG 7. The text explicitly mentions moving from fossil fuels to renewables as a “strategic necessity.”

SDG 9: Industry, Innovation, and Infrastructure

• The article highlights that the energy crisis is due to “crumbling infrastructure and years of US sanctions.” The plan to build new solar farms and upgrade the energy grid is a direct effort to develop resilient and sustainable infrastructure, which is the focus of SDG 9. The impact of electricity cuts on industrial production is also a key theme.

SDG 8: Decent Work and Economic Growth

• The article states that “Electricity cuts have disrupted production, increased costs and caused billions of dollars in damage to industry.” By investing in reliable solar energy, Iran aims to stabilize its industrial sector, prevent economic losses, and support sustained economic growth, which are central to SDG 8.

SDG 13: Climate Action

• While the term “climate change” is not used, the article’s focus on “Expanding clean energy” and “reducing Iran’s reliance on fossil fuels” is a fundamental strategy for climate action. The shift from natural gas, which produces 80% of its electricity, to solar power is a direct measure to combat climate change.

SDG 17: Partnerships for the Goals

• The article repeatedly mentions the negative impact of US sanctions, which have cut the country off from “global financing” and “foreign investment.” It notes that foreign corporations had previously pledged “$4bn in renewable investment” before pulling out. This highlights the critical role of international partnerships, finance, and technology transfer in achieving sustainable development, a key aspect of SDG 17.

2. What specific targets under those SDGs can be identified based on the article’s content?

SDG 7: Affordable and Clean Energy

• Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services. The article’s discussion of “biting electricity shortages” and “rolling blackouts” directly relates to the lack of reliable energy services that this target aims to solve.
• Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix. The article is centered on this target, detailing Iran’s goal to fast-track solar projects and increase its renewable energy capacity to 12gW, raising its share from the current 2.5%.
• Target 7.a: By 2030, enhance international cooperation to facilitate access to clean energy research and technology. The article implies the challenge in meeting this target by mentioning that sanctions “deprive us of foreign investment” and force reliance on imports from specific countries like China.

SDG 9: Industry, Innovation, and Infrastructure

• Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure. The article’s description of “crumbling” and “outdated infrastructure” as a cause of the energy crisis shows the direct relevance of this target. The construction of new solar farms is an effort to build this new, sustainable infrastructure.
• Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies. The call to “optimise consumption and improve energy efficiency” alongside the development of solar power aligns with this target.

SDG 8: Decent Work and Economic Growth

• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation. The article explains how electricity shortages disrupt industrial production. Investing in a stable and diversified energy source like solar is essential to achieving the economic productivity mentioned in this target.

SDG 13: Climate Action

• Target 13.2: Integrate climate change measures into national policies, strategies and planning. The statement that “Renewable energy development has evolved from a supportive policy to a strategic necessity” demonstrates the integration of climate-friendly policies into Iran’s national energy strategy.

SDG 17: Partnerships for the Goals

• Target 17.3: Mobilize additional financial resources for developing countries from multiple sources. The article highlights the failure to meet this target due to sanctions, citing the lack of “global financing” and the withdrawal of a pledged “$4bn in renewable investment” from foreign corporations.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Indicators for SDG 7

• Indicator 7.2.1 (Renewable energy share in the total final energy consumption): The article provides a direct measure for this indicator, stating that renewables currently make up “2.5 per cent of electricity generated.” It also provides a benchmark by comparing it to “Turkey’s 16.3 per cent share from solar and wind power in 2023.”
• National Capacity Targets: The article mentions a specific national goal of reaching “12gW of capacity in renewable energy in three years’ time,” up from the current “2.5gW.” This serves as a clear, measurable indicator of progress.
• Energy Efficiency Savings: The statement that “a 10 per cent cut in energy use would save 800,000 barrels of oil and gas daily” provides a quantifiable indicator for progress on energy efficiency (Target 7.3).

Indicators for SDG 9

• Infrastructure Deficit: The grid’s “shortfall of 15gW during the consumption peak” is a quantifiable indicator of the current infrastructure’s inadequacy and the gap that needs to be closed.

Indicators for SDG 8

• Economic Loss: The mention of “billions of dollars in damage to industry” due to electricity cuts serves as an indicator of the economic impact of unreliable energy and, conversely, the potential economic benefit of fixing the problem.

Indicators for SDG 17

• Financial Investment Mobilized: The article provides specific financial figures that act as indicators. These include the “$2.3bn” committed by Iran’s sovereign wealth fund and the lost “$4bn in renewable investment” from foreign corporations, which measures the gap in international financial support.

4. Create a table with three columns titled ‘SDGs, Targets and Indicators” to present the findings from analyzing the article.

Source: ft.com