Iran’s invisible opportunity

Sufi legend holds (in paraphrase) that the venerable Mullah Nasruddin irked the king once too often with his trenchant wit and was condemned to die. “Sire,” he bargained, “if you spare my life for a year, I will teach your horse to fly.” Incredulous but intrigued, the king agreed. Next day, Nasruddin’s friends remonstrated, “You must be nuts—that old nag will never fly.” The sage replied: “A year is a long time. Many things could change. The king could die. I could escape. I could die. The horse could die. And maybe the damned horse will fly.”

The same may be true of what happens in the next 15 years with Iran, now that the agreement between Iran and the P5+1 (China, France, Russia, the United Kingdom, the United States, and Germany) appears to have survived the vagaries of the US Congress. At its root, Washington’s debate reflects divergent hopes, fears, and visions for what might change in and beyond Iran over the next decade or two. But we needn’t rely on a Pegasus-like miracle in Iran’s political transformation, or a magical calming of the world’s most volatile region. Rather, some pragmatic and principled actions now to use the time well (hopefully with some outside encouragement from diverse industrialized countries via equipment sales, supportive aid and trade policies, and the like) could greatly improve the odds of a good, just, and peaceful outcome.

And the areas that could do the most to keep Iran from drifting back towards the nuclear path? Energy efficiency and renewables.

Legendary possibilities. At the eye of the storm over the Iran agreement is a zone of silence—an almost unnoticed opportunity to raise the odds of success. On the Iranian side, wisely using the period of restrictions on potential military nuclear activities could help Iran shift its domestic el­ec­tricity priorities from a failed nuclear power program to a world-class, faster-to-implement, and vastly cheaper program that combines energy efficiency, modern renewables, and advances in the electrical grid. By weakening the domestic case for nuclear power, this approach could help remove uncertainty about Iran’s continuing domestic nuclear activities (however benign they may allegedly be, such as the creation of medical radioisotopes for radiation therapy). Importantly, that would clear some of the fog around Iran’s nuclear program. This in turn would isolate bomb-seekers and allow outside intelligence and monitoring efforts to focus on needles instead of haystacks. 

Modernizing Iran’s electricity investments could also reduce the risk of renewed sanc­tions, reward and reinforce political moderation, enhance Iran’s prosperity and energy independence, bolster national pride, and—since the same logic applies to neigh­boring coun­tries already making similar energy shifts for economic reasons—help stabilize the region by reversing an incipient Gulf nuclear arms race. More broadly, it could even help guard the global nonproliferation regime from dangerously permissive interpre­ta­tions by updating the purpose of the Non-Proliferation Treaty’s (NPT’s) Article IV, which enshrines signatories’ “inalienable right” to the exclusively peaceful use of nuclear energy. Thus, a speedy alignment of Iranian domestic electricity investments with new economic realities could advance the security and economic interests of Iran, Israel, the Arab Gulf states, America and its P5+1 partners, and the world. It could strengthen Iran’s global integration, political evolution, and national stature without compromising others’ similar goals.  

Key Iranian officials already publicly favor this approach to their nation’s energy needs, and the technologies are ready and the vendors eager. Indeed, the “United States Assistance to Developing Countries” portion of a 1978 US law called the Nuclear Non-Proliferation Act requires such assistance from the United States. And encouragingly, a similar shift already helped to defuse a nuclear arms race between Argentina and Brazil over the past quarter-century. As those two countries evolved from military dictatorships to democracies, their energy priorities allowed them to achieve leadership in renewables and leave their nuclear capabilities nakedly uneconomic, isolated, and obsolete—helping to suppress any lingering temptations.

Iran’s remarkable energy opportunities. Iran uses about three times the world average amount of energy per dollar of gross domestic product, due partly to huge and budget-busting energy subsidies now slated for phase-out. Technical studies have confirmed that Iran’s energy use is pervasively inefficient, offering vast scope for lucrative savings.

On the supply side, Iran enjoys Arizona-like sun, vast empty lands, high geothermal potential, and significant opportunities for small hydro projects and waste-to-energy facilities, among other renewable assets. Iran’s average windspeed is also equivalent to that of the so-called “wind belt” of the Midwestern United States, and Iran’s exceptional wind power sites can economically provide more than 30 gigawatts. Consequently, Iran’s New England-sized, 70-gigawatt grid could quickly shift from three-quarter gas- and one-quarter oil-fired generation (plus 10 gigawatts of less reliable hydropower) to modern renew­ables.

How quickly?

To give an idea, take a look at another dry, sunny country at a similar latitude. Portugal, with 22 percent of Iran’s 2014 economy, 13 percent of its population, and 6 percent of its area, doubled its use of renewables in seven years—from 32 percent of Portugal’s electricity in 2007 to 64 percent in 2014. And during Portugal’s significant 2005 drought, when hydropower faltered, the country still managed to get 15 percent of its electrical generation from non-hydro renewables. The logical implication is that Iran could similarly do a lot to boost its renewable energy sector without further reliance on its unreliable hydropower. Dry years tend to be great for power from the sun and, often, the wind.

Renewables are already a modest but vibrant and fast-growing part of Iran’s policy to free up gas and oil for export. Urban air pollution, growing civil-society and small-business pressures, energy security, price stability, climate pro­tec­­tion, and drought (favoring renewables over traditional power plants that need water) add urgency. As Iran’s Energy Minister Rostam Qasemisaid in 2012, “Gradual reduction of oil consumption on the one hand, and a revolution­ary and swift move toward using renewable energies on the other hand, are the only appropriate mechanisms which can help the country.”

Iran already has renewable energy promotion, loans, grants, European-style feed-in tariffs (which pay private renewables developers a predictable price so they can secure private financing), and guarantees to buy all renewable power at world market prices with hedges against fluctuating foreign exchange rates. Cutting grid losses and harnessing flared gas offer further major opportunities. Capturing such profitable opportunities should not be a problem; Iran’s nearly 80 million people have strong technical and entrepreneurial skills. Major vendors of renewable technologies from the European Union, such as Danish windpower leader Vestas and German wind-solar-and-grid giant Siemens, are deepening the relationships they were allowed under EU sanctions. US vendors could compete next year.

At the same time, Iran’s leadership is sensitive to the issues of climate change; in 2014, Iran’s Vice President and top environmental official Masoumeh Ebtekarin called climate change “a serious threat to life on Earth” with “devastating impacts and con­sequences” exemplified by deep drought in a dozen Iranian cities. So perhaps this oil-rich Gulf nation—the seventh-largest emitter of carbon in 2011—might even become a climate ally.

Making modern energy a platform for Iran’s renewed engagement with the region and the world might also encourage the emergence of more outward-looking elements and atti­tudes within Iranian society. While maintaining a clear-eyed view of the dark side in Iran’s byzantine internal politics, betting on a prosperous and rein­teg­rated Iran is less risky than on an impoverished and isolated Iran; such a wager offers uncertain odds but a big payoff with little downside.

Iran’s nuclear disappointment. In contrast, Iranian nuclear power has failed. Pre-Revolutionary internal critiques of the Shah’s nuclear power ambitions as a Western-inspired extravagance have proven correct. Iran spent a near-record $11 billion to build, in 36 years, one cobbled-together power reactor that supplied just 1.5 percent of its electricity last year. Iran’s homebrewed enrichment cost about an eighth of a billion dollars per year above the market price of enrichment from a dozen supplier countries (even before that price fell by half in the past five years). Sanctions triggered by the Iran nuclear program’s ambiguous nature—Is it for building weapons? For peaceful energy, medicine, and research? Both sets of uses?—cost Iran at least $100 billion, and maybe even $500 billion. By diverting capital, it left the hydrocarbon core of Iran’s economy in a shambles. Obsessive nuclear invest­ments thus hob­bled Iran’s quest for a more diverse, resilient, and independent energy system.

And Iran’s dubiously safe reactor sits at a tectonic-plate junction whose earthquakes could readily exceed the plant's magnitude 8 design basis. Rising Iranian safety concerns are shared by neighbors downwind, including many Arab capitals and Saudi Arabia’s eastern oil zone. These concerns are shared by the Gulf Cooperation Council; tellingly, Iran has not joined the international regime governing liability for accidents.

Across the Gulf, states that didn’t follow Kuwait, Oman, and Bahrain in dropping nuclear power plans after Fukushima are increasingly reluctant to emulate the purchase order by the United Arab Emirates (UAE) for four South Korean reactors. (That project’s safeguards against proliferation have been touted as the “gold standard,” but they’re flawed, and even more fundamentally, the whole project lacks a sound business case; the reactors were ordered before serious analysis of modern alternatives.) The original $20-billion cost estimate is now about $32 to $40 billion and rising—before it’s known whether Korea’s fake-safety-certificates scandal affects UAE reactors. Meanwhile Dubai, which man­dates photovoltaics, bought photovoltaic power for 5.84 cents per kilowatt-hour—about half the price of the wholesale electricity predicted to be generated by the UAE’s reactors. Saudi Arabia pushed its nuclear program back to 2040, when it targets 108 gigawatts of renewables (albeit with short-term delays). Nuclear plants tend to get costlier, while solar panels’ price has dropped 80 percent in the past five years, yielding power now often cheaper than fueling an efficient US gas-fired generator. Every data-watcher now realizes that efficiency and renewables have become the best investments for Gulf hydrocarbon displacement and electricity needs.

Modern renewables, which exclude big hydropower dams, dominate the global market for new power, annually adding more than 80 gigawatts and winning over $250 billion in investment. In 2014, the world added more than 20 times as much wind and solar power as net nuclear capacity; these and other modern re­new­ables will sur­pass nuclear power’s total output next year at far lower cost. Three of the world’s four largest economies and 45 percent of the world’s people got more electricity last year from non-hydro renewables than from nuclear power. In 2013 alone, renewables leader China added more photovoltaic capacity than the United States added since inventing the first practical modern photovoltaic cell 61 years ago.

Modernizing nonproliferation. This new energy reality—in which nuclear power is in slow-motion collapse while cheaper alterna­tives take over the world market—is shifting Gulf policies. Both Iran and the Arab Gulf states are having second thoughts about nuclear energy at the same time that all sides have floated deliberately fuzzy, unofficial statements about (and taken ambiguous actions regarding) their nuclear-weapons ambitions. On both sides of the Gulf, forces wanting bomb options oppose forces wanting a cost-effective energy strategy. Whatever outside powers do about regional electricity choices will strengthen one side of those arguments and weaken the other. With Iranian pride firmly engaged around nuclear matters, pragmatic electricity priorities are far easier to discuss than bombs. Strong Iranian emphasis on peaceful and competitive energy for national development would en­courage reciprocity and transparency, and thus discourage regional suspicion and hedging, helping to defuse the emerging Sunni/Shia nuclear arms race before it gains momentum.

Iran could better demonstrate its scientific prowess and feel pride in its undoubted technical capabilities by pursuing the suc­cessful technologies of tomorrow, rather than the fading technologies of yesteryear. And if foreign suppliers and partners reciprocated with ac­cess to the latest inherently peaceful energy technologies—those best able to deliver clean, reliable, prompt, and affordable energy—they could disprove the fiction of imperial­ists trying to keep Iran down by denying it access to advanced technologies.

Iran’s “inalienable right” under the NPT’s Article IV to pursue nuclear energy for peaceful purposes is now taken to include enrichment—complicating Arab Gulf ne­go­tiations, fanning suspicions, and ultimately making Iran and everyone else less secure. Yet in this broad­ening may lie the seeds of the treaty’s revitalization. When the NPT was drafted, nuclear power was widely expected to be cheap, easy, abundant, and indispensable. The reward for a state to forgo nuclear weapons was consequently framed as ac­cess to nuclear power—purely because of those unrealistic early hopes and the nuclear context and background of the negotiators. But now, informed by a half-century’s energy experience that has revealed better energy options, we can return to Article IV’s origin­al purpose: affordable and reliable energy services for develop­ment.

Rather than deny­ing or hedging that obliga­tion, exporting states should fulfill what recipients say their real interests are. Having forsworn nuclear bombs, recipients should insist on aid in meeting their declared central need: not nuclear power, but rather the secure, reliable, safe, clean, cost-effective energy for development that nuclear power was originally meant to deliver. This emphasis can isolate legitimate from illegitimate motives and help smoke out proliferators, advancing the treaty’s central goal. Let countries that want specifically nuclear energy, rather than far cheaper, faster, and more suitable options, explain why. Iran’s energy opportunities could help move the world a timely step toward that renewed vision of Article IV’s aim.

Editor’s note: A longer version of this article is available at http://www.rmi.org/Knowledge-Center/Library/IransInvisibleOpportunity

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