LONDON (Dispatches) -- The UK deepened its economic relationship with Iran in a solar deal worth $720 million less than a day after U.S. President Donald Trump called the Persian Gulf nation a threat to global security.
Current and former Iranian and UK officials gathered in London to announce a 600-million euro plan to develop a giant solar park with cash from investors in Asia, Europe and the Middle East. The agreement underscores how difficult it will be for Trump to dismantle the 2015 nuclear accord, or JCPOA, between six world powers and Iran, Bloomberg said.
"The British government has made it absolutely clear that it sees the JCPOA as important, it thinks the JCPOA should continue,” Norman Lamont, a former chancellor of the exchequer who is also chairman of the British Iranian Chamber of Commerce, said at a press conference on Tuesday. "The British government is also backed by other governments in the UK and in Europe.’’
Bloomberg said the solar project by Quercus Investment Partners Ltd., a London-based renewables developer, shows international interest continues in Iran’s market, despite Trump’s rhetoric.
"The fact that the European partners are rushing to Iran, for different industries, auto industries energy industry, shows that they do not believe at all that the failure of JCPOA is an option,’’ Hamid Baeidinejad, ambassador of Iran in the UK, said at the press conference.
The UK’s trade with Iran rose 42% from January to October in 2016 and 57% in the same period in 2017, according to Lamont. Global trade with Iran rose 13% last year to $113 billion, according to data compiled by Bloomberg.
"The opportunities are tremendous, they really are tremendous,” said Richard Bacon, a current member of Parliament from the ruling Conservative Party. "I sense that we’re on the cusp of something very special, the scale of the opportunities is really quite extraordinary.’’
The UK investment follows separate announcements by China, the European Union, France, Japan and Russia that they’ll continue to support the accord. Europeans are also positioning themselves against a unilateral withdrawal from the JCPOA.
"This would damage not only U.S. interests but U.S. international standing and credibility,” 76 European leaders wrote in an open letter urging Trump to stick with the agreement.
Should the U.S. abandon the accord, the other countries "would work to see the nuclear deal continued with Iran, even in the absence of U.S. participation, and that could include defending European companies and individuals from any re-introduced U.S. sanctions and supporting legal action to do so.”
A U.S. bid to toughen the Iranian accord has inspired unified UN opposition.
The planned 600-megawatt (MW) plant, located in central Iran, will be the sixth largest globally, behind projects of up to 1.5 gigawatts (GW) in China and India.
Diego Biasi, chief executive of Quercus, which has a track record of investing in renewable energy in Europe, told Reuters the firm had decided to go for such a big project to get an endorsement from Iran’s Ministry of Energy.
"This is a project of national interest, so we got special support. We had enough investors interested so instead of splitting that across smaller projects which wouldn’t have given us the same relationship with the Ministry, we decided to go for one,” he said in a phone interview on Tuesday. The hope was this would lead to more solar projects.
Established in 2010, independently-owned Quercus has a portfolio of around 40 renewable energy plants across Europe. The Iran project is its first investment outside Europe, and came in response to client demand, Biasi said.
Under the terms of the agreement signed by Quercus and Iran’s Ministry of Energy, the firm will be responsible for the construction, development and operation of the plant.
Construction is expected to take three years, with each 100 MW standalone lot becoming operational and connecting to the grid every six months, to mitigate the risk for investors.
Rather than investing via a fund structure, Quercus will set up a project company and investors will hold shares via a private placement. It has already attracted interest from private and institutional investors, including sovereign funds.
Iran is heavily reliant on natural gas and oil to generate power, but air pollution is driving interest in renewables and Iran has made a commitment to develop 5 GW of new renewable energy capacity by 2020.
Iran’s installed solar energy capacity is currently 53 MW, according to Iranian energy ministry data, but 76 firms have signed deals to study building an extra 932 MW of capacity. Interest has grown since the lifting of international sanctions on Iran in 2016.
"The market is becoming more active on the permit side but on the construction side it hasn’t opened up yet. After this project we think there will be increasing interest from foreign investors,” Biasi said, adding interest was already quite strong.
The project will benefit from bilateral investment treaties that ensure foreign investors are treated the same as local ones. Biasi said there was also a guarantee in the contract with the Ministry of Energy that the electricity would be paid for.
As Quercus has appointed a local partner, Sunir, to help build the plant in conjunction with Spanish firm Bester, it may also benefit from a 15% uplift in the feed-in tariff, Biasi said. Under Iran’s renewables regime, the feed-in tariff may be increased by up to 30% if local equipment and components are used.