Supporting Iran's Energy Efficiency Market Integration: IREEMA Policy Paper.pdf

Supporting Iran's Energy Efficiency Market

Problem:

Iran, a top global greenhouse gas emitter and highly energy-intensive economy, faces declining energy productivity and artificially low domestic energy prices. This leads to overconsumption and discourages investment in energy efficiency projects due to lack of financial viability.

Solution:

The IREEMA project aims to establish an integrated energy efficiency market in Iran by:

1. Developing an Efficient Implementation Mechanism: Working with Iranian stakeholders, the project will create a mechanism to lower transaction costs for investors and streamline implementation of energy efficiency projects.

2. Testing the Approach: The project will pilot this mechanism in two key areas:
- Gas sector, focusing on South Pars Special Economic Energy Zone (PSEEZ) in Assaluyeh
- Sustainable energy supply in selected rural areas
3. Adapting and Strengthening: Based on initial findings, adjustments to the implementation mechanism will be made to ensure optimal performance.

Key Insights from International Experience:

The paper analyzes successful international examples of public energy efficiency funds, highlighting:

- Diverse Approaches: Funds differ in target groups, eligibility criteria, instruments (e.g., risk sharing, guarantees), objectives, and funding sources.
- Common Goal: All aim to overcome "investment inefficiencies" that prevent profitable private investments in energy efficiency.
- Complementary Role: In Iran, an Energy Efficiency Fund could complement the existing Market for Energy Efficiency and Environment (M3E) by overcoming significant obstacles to its operation.

Key Learnings & Recommendations:

- Avoid Short-Term Focus: Funds should promote sustainable markets in the long term, even without additional funding.
- Based on Market Analysis: Design of funds must consider specific investment decisions and challenges faced by different stakeholders (e.g., farmers, industries).