M. Noorollahi et al. /Future Sustainability November 2025| Volume 03 | Issue 04 | Pages 12-20 12 Review Evaluating the impact of economic policies on solar energy growth in Iran Mahshid Noorollahi1, Shahab Eslami2, Hossein Yousefi2*, Arash Shahee3, Mahmood Abdoos2 1Faculty of Economics, University of Tehran, Tehran, Iran 2Energy Modelling and Sustainable Energy System (METSAP) Research Lab, School of Energy and Sustainable Energy Resources, College of Interdisciplinary Science and Technologies, University of Tehran, Tehran, Iran 3School of Energy and Sustainable Energy Resources, College of Interdisciplinary Science and Technologies, University of Tehran, Tehran, Iran A R T I C L E I N F O Article history: Received 15 April 2025 Received in revised form 19 May 2025 Accepted 03 June 2025 Keywords: Photovoltaic, Renewable energy, Policy instruments, Techno-economic assessment, Sustainable development *Corresponding author Email address: hosseinyousefi@ut.ac.ir DOI: 10.55670/fpll.fusus.3.4.2 A B S T R A C T This paper explores the techno-economic implications of Iranian policy instruments designed to promote large-scale photovoltaic (PV) power plants. As global energy demands rise and environmental concerns intensify, transitioning from conventional fossil fuels to renewable energy sources has become imperative. This study investigates the current state of Iran's electricity market and the effectiveness of its power purchase policies in facilitating PV development. Despite possessing substantial solar energy potential, Iran faces significant challenges, including financial constraints and inconsistent energy policies, which hinder the swift adoption of renewable technologies. The research utilizes a comprehensive approach to assess these barriers and proposes strategic financial solutions to enhance investor confidence and participation in the solar energy sector. Notably, this study contributes to the existing literature by providing a detailed analysis of Iran's unique socio- economic context and its impact on the implementation of renewable energy policy. The findings underscore the necessity for cohesive governmental support and innovative financing mechanisms to unlock Iran's vast solar resources, ultimately paving the way for sustainable energy solutions that align with global carbon neutrality goals. 1. Introduction As energy consumption has risen, humanity has encountered a progressive decline in fossil fuel reserves in recent years. This has prompted the adoption of alternative and sustainable energy sources, such as wind, water, and solar power. Simultaneously, the escalating human need for energy has resulted in the excessive utilization of fossil fuel resources. Consequently, this has led to environmental degradation and damaging pollution, imposing substantial financial burdens on governments to combat ecological contamination. The depletion of fossil fuel reserves served as the primary impetus for governments to transition towards clean and renewable energy, progressively shifting their focus towards natural sources such as wind and solar power. Undoubtedly, the sun is universally recognized as the primary energy source for humans. Throughout history, humans have harnessed their heat and light for various purposes. Even in modern times, with cutting-edge technology, it is feasible to construct cost-effective solar power plants. Furthermore, it is imperative to ensure energy provision without incurring exorbitant expenses associated with the extraction and utilization of fossil fuels and the emission of detrimental gases. In the sun belt, Iran has significant potential for solar energy generation. Among these, Qazvin is a prominent province in developing and constructing solar power plants. Qazvin's favorable conditions for building a power plant and installing solar panels stem from its geographical location and high elevation, which result in a fall in air temperature at higher altitudes. The efficiency of the panels increases. However, solar radiation may be a contributing factor. In certain regions, the elevated temperature diminishes the panels' effectiveness. The expansion of trade and energy use, emerging from technological growth and changing lifestyles, are the most significant factors in global warming and Future Sustainability Open Access Journal https://doi.org/10.55670/fpll.fusus.3.4.2 November 2025| Volume 03 | Issue 04 | Pages 12-20 Journal homepage: https://fupubco.com/fusus ISSN 2995-0473 mailto:hosseinyousefi@ut.ac.ir https://doi.org/10.55670/fpll.fusus.3.4.2 https://fupubco.com/fusus M. Noorollahi et al. /Future Sustainability November 2025| Volume 03 | Issue 04 | Pages 12-20 13 environmental changes seen and reported by the researchers [1]. New investigations have revealed a higher trend in electricity demand due to industrial improvement in developing nations. This increasing trend proposes that energy consumption in developed nations will be surpassed by use in developing countries due to the enhancement of socio-economic factors [2,3]. Different methods have been developed to harness solar energy, with thermal and photovoltaic systems being the predominant ones. Both options offer several benefits, including providing pure and inexhaustible energy, which is also cost-free. Despite the vast potential, this energy usage is significantly limited [4]. The Iranian economy relies heavily on petroleum due to its abundant fossil fuel sources. The sluggish transition towards renewable energy, a key challenge, can be attributed to governmental policy and Iran's prevailing social conditions. Understanding the role of governmental policy in this transition is crucial for informed decision-making. At this point, acquiring solar energy is difficult without government support and encouragement. The feed-in tariff scheme is the most broadly approved policy instrument to promote PV [5]. The Iranian government has opted for this strategy to enhance the development of renewable energy power facilities. Extensive research has identified the optimal hybrid systems for residential applications [6]. Numerous studies have also examined the impact of government initiatives on the cost and effectiveness of solar energy supply systems and power plants. Notably, a recent study outlined a practical and straightforward method for effectively controlling the ideal scale of renewable energy systems for residential use during the conceptual phase, providing reassurance and confidence in its application [7]. Public policy substantially influences the progress of technologies in the renewable energy industry, mainly through tax incentives, production quotas, and tradable certificates [8]. Several studies have been conducted in developing countries, such as India, to evaluate policy instruments and long-term planning for photovoltaic (PV) development. The most effective instruments include various state policies, such as different Tariff fits [9, 10]. Additionally, similar research has been conducted in the US to identify the most effective policy solution for rapidly developing renewable energy [11]. Due to the different parameters in this article, the approach proposed for this optimization was based on the RET Screen software. In this paper, this policy instrument has been investigated to determine the techno- economic impact of this policy on a large-scale photovoltaic power plant. For a better understanding, the market and situation of the electricity market in Iran have been analyzed [12]. Despite the significant potential of renewable energy sources, Iran continues to rely on fossil fuel resources to meet its energy needs. The country has faced significant financial difficulties and has generated substantial greenhouse gas emissions [13-14]. Moreover, the nation has faced numerous challenges in establishing alternative renewable energy sources and formulating consistent energy policies in recent years. To examine the source of these barriers, this study initially provides a comprehensive analysis of previous energy policy initiatives in Iran. It demonstrates that sufficient commitment to long-term energy planning may have significantly mitigated these challenges. Nevertheless, past studies have shortcomings in applying individual planning tools through technical assessment. 2. The Islamic Republic of Iran's electricity context Despite possessing the world's second-largest oil and gas reserves, Iran uses renewable energy resources in its energy mix. This decision is based on the following justifications: • To conform to global initiatives aimed at mitigating climate change and reducing the use of fossil fuels. • The objective is to enhance energy availability in remote and isolated areas of the country by implementing decentralized energy generation. • To facilitate the management and mitigation of the escalating levels of urban air pollution. • To increase the energy security of Iran's energy supply through a mix of technologies. To sustain and guarantee the current amount of non- renewable energy exports, as of 2008, approximately 84.5% of Iran's electricity was generated by thermal power plants that utilized natural gas and heavy fuel oil as their primary fuel sources. These power plants had a combined capacity of around 53 GW. During the UN Climate Change Conference in Paris, Iran committed to reducing its greenhouse gas (GHG) emissions by twelve percent by 2030. Iran has experienced a recent upswing in its economic growth, expanding by 3% in 2015. Growth is forecast to increase to 5.8% and 6.7%, respectively, in 2016 and 2017. The share of different sources of an electric power plant and their situation should be specified to investigate the energy policy. In the next part, the electricity generation in Iran is briefly discussed [15-17]. 3. Electricity generation in Iran Electricity in Iran is generated by a combination of state- owned power plants, such as those managed by TAVANIR and affiliated Regional Electric companies, hydroelectric power plants under the control of the Deputy of Water and Sewage of the Ministry of Energy (Moe), privately-owned power plants, and the nuclear power plant managed by the Atomic Energy Organization. Privatization began with the implementation of Energy Conversion Agreements (ECAs). It progressed through the establishment of Build-Operate- Transfer (BOT) and Build Own Operate (BOO) projects in collaboration with private investors [18]. In 2013, TAVANIR conducted a competitive bidding process and sold a portion of its power plants, resulting in a 41% rise in the electricity generated from remote locations compared to the total installed capacity. This information is supported by the studies conducted by Zandi et al. [5], Aryanpur et al. [19], and Tabasi et al. [20]. Within every Regional Electric business exists a department known as the "Deputy of Power Transmission" or "Deputy for Operation." This department is responsible for maintaining, operating, and enhancing transmission lines and substations. Because TAVANIR owns and manages all 16 Regional Electric firms, the transmission industry is still regarded as a regulated monopoly [21]. Why a large-scale PV power plant in Iran? In 2012, Iran initiated its feed-in tariff scheme to promote the creation of renewable energy. However, according to Bloomberg New Energy Finance, by the end of 2015, the country had only installed 35 MW of solar photovoltaic (PV) and 195 MW of wind energy. In collaboration with the Renewable Energy Organization of M. Noorollahi et al. /Future Sustainability November 2025| Volume 03 | Issue 04 | Pages 12-20 14 Iran (SATBA), the government has recently introduced guaranteed twenty-year power purchase contracts. These contracts provide developers with a fixed and appealing price for electricity generated from renewable sources [22]. The study "Enabling PV Iran," commissioned by the German government and conducted by the German Solar Industry Association, emphasizes Iran's favorable solar irradiation and significant electricity demand as essential factors indicating the considerable growth potential of Iran's solar energy sector. This is despite Iran's abundant reserves of hydrocarbons [23]. The survey stated that Iran has the potential to be one of the most suitable areas for solar energy. The country benefits from three hundred sunny days annually, covering two-thirds of its area. Given these circumstances, the paper proposes that photovoltaic electricity generation (solar power) in Iran has the potential to increase by double compared to certain established European nations [24, 25]. At the beginning of 2016, the Iranian Ministry of Energy announced its intention to authorize contracts for 1 GW of wind and solar energy projects. A key feature of this initiative is the feed-in tariff program, which offers substantial benefits to projects incorporating domestic content. These projects can potentially enjoy a tariff rise of up to 30% under the FIT program, a significant boost. Notably, the advantageous tax rates associated with this program will remain in effect until 21 March 2017, providing a clear timeline for stakeholders to plan their investments [26]. The PPA proposed under this FIT regime will be a 20-year agreement supported by a Government Agreement to secure the PPA payment regime. The PPA further reduces the Tariffs for all power plants under this FIT regime by 30% after the first ten years until the conclusion of the contract. The Tariff is also linked to fluctuations in the Euro exchange rate against the Rails in Table 1. FFT of the solar PV plant is presented [27]. Table 1. FiT of solar PV plant in Iran Technology Capacity Price (IRR per kWh) Solar PV >30 MW 3200 10 MW