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Will Iran become an important player in the global ‘Energy Transition’?

July 15, 2022

One of the key characteristics of the Iranian regime for the past four decades has been its fondness for crisis management. The Islamic Republic seems to thrive on wrestling with crises rather than planning for the future. In fact, the Iranian Government’s planning department was shut down for many years during Ahmadinejad’s presidency, which shows the regime’s lack of respect for structured planning. This lack of planning for the future seems to suggest that Iran’s role as a player in the global ‘Energy Transition’ may be compromised. 

The world has accepted ‘Energy Transition’, which represents a decrease in our dependence on fossil fuels and the creation of a sustainable energy system. Considering that most of Iran’s hard currency earnings are from fossil fuel sources (oil, gas, and petrochemicals), its lack of investment in alternative energy sources by Tehran is worrying. In our previous article, we explained how energy investments could take decades to come to fruition. In a recent report by Bloomberg (Saudi Arabia To Use $110 Billion Gas Project for Blue Hydrogen (, Saudi Arabia announced its plans to invest billions of dollars in hydrogen production, which is considered by experts to be the key to moving away from fossil fuels. Experts believe that the global hydrogen business, which will be the main form of energy production, could be worth $700 Billion a year by 2050; however, Iran is currently not poised to play a part in this transition.

Hydrogen production is classified into three main types, which are illustrated below.

  • Gray Hydrogen is the production of hydrogen from natural gas. Carbon dioxide, which is a byproduct of this process, is vented to the atmosphere. All of Iran’s current hydrogen production is Gray Hydrogen, but this does not signify a major source of revenue as buyers are usually unwilling to go through the trouble of shipping Gray Hydrogen.
  • Blue Hydrogen is also formed from natural gas, but instead of releasing it into the atmosphere, the carbon dioxide and other harmful gasses are instead captured and stored in depleted underground gas reservoirs. Blue Hydrogen is more valuable than Gray Hydrogen and has a good potential for export. Iran has no Blue Hydrogen production at commercial levels at the moment and there are currently no plans for investments to build facilities to begin the manufacturing of Blue Hydrogen. Many of Iran’s neighbors, such as the United Arab Emirates, Oman, and Saudi Arabia, have started to invest in projects for capturing and injecting carbon dioxide, which puts them well ahead of Iran in the global ‘Energy Transition’.
  • Green Hydrogen is manufactured by the electrolysis of water through renewable sources of electricity. Green Hydrogen is highly valued and is sought by buyers around the world. However, the two key ingredients to produce Green Hydrogen, namely green electricity and freshwater, are in short supply in Iran. Iran’s regional competitors, such as the UAE and Saudi Arabia, are well ahead in terms of seawater desalination infrastructure, which means they are better placed to become involved in Green Hydrogen production.

In order to compete in the Hydrogen industry, Iran first needs to build its green electricity generation infrastructure. However, Iran is well behind its regional competitors in all sources of energy, as shown in Figure 1


Turkey has more than 30 times more solar energy power than Iran and almost 40 times more wind power. In terms of hydroelectric power generation, Turkey has almost 4 times Iran’s capacity. Figure 2 shows Iran, UAE & Saudi Arabia in terms of solar power generation. As can be seen, UAE has 17 times and Saudi Arabia has more than 3 times Iran’s solar power generation.


Figure 2