Frost & Sullivan Looks at Upcoming Environmental Solutions Opportunities for Australian Companies in 'Post-Sanctions' Iran
SYDNEY, July 20, 2015 /PRNewswire/ -- The Joint Comprehensive Plan of Action signed in Vienna on 14 July 2015 between Iran and the P5+1 (the five permanent members of the United Nations Security Council comprising of the United States, Russia, China, France, United Kingdom, plus Germany and the European Union) is an agreement in which Iran has agreed to curb some of its nuclear activities in return for relief from sanctions put in place by the UN. Should the sanctions eventually be lifted, Iran would be able to re-join the global markets and gain access to funds previously tied up in overseas banks.
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While the process of unwinding the decade-long UN sanctions on Iran will by no means be an easy or quick task, it could nevertheless be lucrative for companies prepared to meet the pent up demand of many of the country's critical sectors. "One of the most critical areas of need for Iran at present is in relation to its water supply. Unfavourable climate conditions and specific policies of the previous government have put a heavy strain on the country's water supply and needs to be addressed urgently," noted Dev Dorasamy, Consultant, ANZ, Frost & Sullivan.
Of these sectors, Frost & Sullivan's ANZ team has assessed areas where environmental technologies could present significant opportunities for relevant Australian companies. Dev Dorasamy, Consultant, ANZ, Frost & Sullivan discusses some insights.
Desalination
The Iranian government has proposed a number of desalination projects aimed at producing over 1 million cubic meters of water per day to supply the industrial provinces of Yazd, Kerman and Hormozgan in Southern Iran as well as to mine sites in the country's North East.
Mr. Mohammad Sadegh Ansari, a council member of the Iran Banking and Credit Investment Consultant Center, remarks, "Iran is developing its water supply and sewerage industry through Build –Operate–Buy and Build–Operate–Transfer contracts. There are also significant opportunities for companies specialising in water treatment as the Iranian government tries to ensure supply of clean drinking water to villages and small cities across the country."
Irrigation
Demand is not confined to technologies that will help increase water supply, but is also for technologies that help with water conservation, particularly with regards to irrigation.
Iran has the fifth largest area of irrigated land in the world, which is primarily used for agricultural cultivation. However, while the agricultural segment accounts for over 90 percent of total water consumption in Iran, the sector's output only accounts for around 25 percent of its GDP.
At present, the government is pushing the industry to move towards mechanised irrigation systems from traditional flood irrigation methods, with the hope of increasing productivity. The sector's productivity efficiency per hectare is currently less than 37 percent, but by adopting mechanised irrigation systems it is expected that efficiency will increase to around 80 percent.
The 2015/16 government budget sees a 23 percent increase for the agricultural sector in which over $520 million has been allocated to develop mechanised irrigation systems for agricultural lands. These funds will be used to replace irrigation systems for over 200,000 hectares, with the aim to achieve at least 40 percent savings in water consumption per hectare.
Renewable Energy
Despite being a net exporter of crude oil, Iran is keen on diversifying its dependence on carbon based energy sources. At present, the Iranian energy sector is faced with huge fuel costs against low productivity in power generation due to ageing power plants that employ outdated technology.
While the renewable energy industry in Iran is at a nascent stage, the current Iranian government has voiced its intent to significantly develop the domestic renewable energy sector over the coming decade.
In an effort to encourage private investors to develop new projects in this sector, the government has initiated a range of incentive policies, such as providing necessary land for renewable energy projects free of charge for a period of 20 years, as well as long term guaranteed contracts for the purchase of electricity generated by renewable sources including prioritising energy purchase from private and cooperative sectors. The government will also guarantee the purchase price from renewal energy sources at $0.24 per KW against $0.04 for power from fossil fuels.
In 2015, the government assigned $ 5 billion dollars for power plant optimisation, as well as renewable energy generating projects. Furthermore the government has also assigned over $1.7 billion for the replacement of current power plants with steam cycle power plants over the coming year.
Mr Ansari suggests, "Overall, the number of investment projects to replace old power plants, establishing renewable energies projects, irrigation projects and water treatment projects will increase by 20 percent compared to the year before."
"Iran has long claimed that its nuclear program was peaceful and meant only as a measure of ensuring energy supply," states Dorasamy. "Hence helping Iran develop a strong renewable energy sector is in the interest of the western world as it would reduce need for the country to depend on nuclear generated energy."
Due to the UN sanctions, Chinese companies have made significant inroads into the Iranian market. However, Iranians generally have a preference for suppliers from "Western" countries, a category in which Australia is assumed to be part of. Should the sanctions be lifted, companies from these countries are likely to find strong demand for their products and solutions.
Dorasamy says, "While European countries such as Germany, France, Italy and The Netherlands have a long history of trade with Iran, Australian companies have a unique advantage that could be leveraged, particularly in the environmental solutions market. Having developed in a landscape with similar (if not harsher) conditions to Iran, Australian environmental technology companies have developed world-leading capabilities, which put them in a prime position to help Iran overcome its environmental challenges."
"For example, Australia's arid conditions have given rise to a number of innovative irrigation automation solution vendors with excellent water conservation solutions which Iran may be willing to pay for. The critical success factor for all solution providers will be early and proactive engagement with Iranian public and private sector stakeholders to ensure they are positioned effectively to maximise on this significant upcoming opportunity."
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