The Caspian Sea is the largest enclosed body of water by area and the resources to be found around, in and under the Caspian Sea have been disputed for millennia. The issues under dispute were magnified by the discovery of Caspian energy resources and made many times more complex by the collapse of the Soviet Union and the emergence of new independent littoral Caspian states.
The Need for Caspian Cooperation
Experts and diplomats gathered last week in the Kazakh capital, Astana to continue work aimed at agreeing a convention in respect of the Caspian Sea’s legal status. The difficulties begin with the subject as to whether or not the Caspian Sea is actually the world's largest lake or a full-fledged sea subject to maritime law.
On Wednesday, July 13, during the ministerial meeting, Iran's Minister of Foreign Affairs, Mohammad Javad Zarif observed: “Sustainable peace and security in the Caspian Sea [region] is of fundamental significance to regional governments and nations.”
According to news media, he went on to say that the Iranian view is that "transparency, peaceful use of the sea and avoiding an arms race" will ensure peace and stability in the region.
UK/Iranian Energy Cooperation
In parallel to this diplomatic Caspian initiative, and a year on from the successful Joint Comprehensive Plan of Action agreement, Iran’s Energy Minister Hamid Chitchian was leading a delegation on a three day visit to a London in turmoil as UK political leadership experienced a rapid and fundamental change after the UK population voted to leave the European Union.
The delegation was focused on energy cooperation with a particular focus on renewable energy and water, since the subject of inefficiencies in water use is closely linked to inefficiencies and wastage of increasingly valuable carbon fuels such as oil and gas.
On the very same day, July 14, that Theresa May replaced David Cameron as UK Prime Minister, the delegation was hosted in a launch event by a group of Scottish (UK) academic and industry representatives organised by Petro Scotland. This event followed the initial launch of the Caspian Energy Grid initiative on June 20 in Tehran in cooperation with Iran Chamber of Commerce, Industries, Mines & Agriculture (ICCIMA - private sector) Education & Research Institute and the Research Institute for Energy Management and Planning (RIEMP – public and academic sector).
Having already signed an MOU with Iran’s northern neighbours, aimed at establishing a North-South Energy Corridor for exporting electricity from the Caspian region via Iran, the energy minister welcomed the Caspian Energy Grid initiative. Indeed, earlier in his visit he had outlined Iran’s plan to tender its first utility-scale renewable-energy projects by end 2016.
This marks the commencement of a green power build out requiring up to $12 billion of investment to complete and it is further reported that Iran aims to install 5 gigawatts of renewable energy capacity in the next five years and an additional 2.5 gigawatts by 2030. Chitchian was reported as saying, “We’re not going to use the money from oil in that sector at all, and all the investment will be done by the private sector, including local and foreign companies.”
Mohammad Hassan Habibollahzadeh, Iran’s UK charge d’affaires, also participated at the Petro Scotland seminar and was reported by Bloomberg as saying: “Foreign direct investment dried up during the sanctions but it is already starting to flow. Many companies have signed agreements during the last few months. Electricity is considered to be one of the most important sectors.”
What is the Caspian Energy Grid?
According to news media reports, most of Iran’s power plants are over 40 years old and need to be renovated and re-powered. The government therefore plans to invest around $50 billion in its electricity system in the next seven years. The Caspian Energy Grid is best seen as a 'start-up' public/private enterprise, the aim of which is “to develop networked physical and financial energy infrastructure throughout and connected to the Caspian region.”
Initial research and development now underway commenced with the planning and design phase, which will lead to the implementation phase.
Initial research work in Iran will be carried out by the Research Institute for Energy Management & Planning (RIEMP) with partner academic institutions, while initial development work will be led by Petro Scotland and partners in collaboration with the Education & Research Institute of ICCIMA.
Planning & Design Phase
RIEMP will establish, lead and coordinate a research network – the domestic Iranian hub of international Institute for Resource Resilience - of all Iranian research institutions working towards an overall organising principle of “least resource cost” through eco innovation.
The first preparatory phase of research comprises comprehensive spatial analyses of Iran's capacity and use of natural resources. This will provide initial benchmarks against which progress towards resource resilience may be assessed.
The second element will be to identify and classify completed, ongoing and proposed research which is relevant to resource resilience. Classification of energy and resource use will be into themes and research methods, processes and innovations, which will enable energy and resource use to be minimised.
Dr Colin Cunningham – the founder of the Scottish Environmental Technology Network (SETN), comprising all Scottish universities with an interest in Zero Waste and the Circular Economy, brought to the seminar his proposal to establish an international Institute for Resource Resilience (IRR).
Petro Scotland is working with Dr Cunningham – who recently outlined IRR Eco Innovation in Moscow – to begin IRR via bilateral Iranian/UK academic links. Initial IRR research themes include carbon-fuelled electricity generation and use; renewable energy and water use; resource efficient transport use; resource efficient building designs and materials; bio-chemicals to replace petrochemicals; Circular Economy/Zero Waste; spatial planning and architecture; research into behaviour; and low carbon energy network system design.
Initial preparatory review and reports will be expected within six months: so for instance it is planned to present initial research reports under the Water/Power theme to a Caspian Energy Grid Summit in December 2016 in Tehran.
In parallel to the initial research phase, Petro Scotland will implement a development program of pilot concepts. In view of the expertise and focus of the delegate’s on renewable energy and water, a presentation was made by Charlie Paton, the inventor of the simple but radical Seawater Greenhouse concept. This has been prototyped in Tenerife (Spain), Oman and Australia, and will soon commence the Somalian pilot scheme for which he won an Energy Globe award, which was presented in Tehran by Chitchian in January 2016.
Petro Scotland will identify and procure international partners willing and able to provide any necessary financing and funding which cannot be originated domestically within Iran or in the Caspian region, and will develop the necessary market architecture and design; legal structures/protocols and instruments. Public/Private workshops will be organized with the specific purpose of mobilizing projects as an outcome of the event.
Energy Minister Chitchian noted that early stage investment necessary for any Public/Private initiative will by definition come from the public sector. However, subsequent implementation will principally be financed and funded by the Iranian and international private sectors, while early stage Eco Innovation research funding will be directed to the membership of the proposed IRR.
The Caspian Energy Grid initiative can commence at the earliest by funding through the public sector – to mobilize what is in effect a 'start-up' public/private enterprise, which will be a physical and financial energy network and hub for regional energy (electricity) trade. The physical energy network and hub concerns energy flow across many categories; gas to electricity; water to renewable and so on.
The financial energy network will direct financial flows necessary to finance and fund the Caspian Energy Grid infrastructure, which will enable regional transition to a low carbon economy.
Where is the Caspian Energy Grid?
· To the North via the Caspian Sea region (North/South Energy Corridor);
· To the South via the Persian Gulf;
· To the West via the Black and Mediterranean Seas, to Europe and Africa;
· To the East via Energy Silk Roads to China and India.
The key organizing principle of the Caspian Energy Grid concept is to achieve energy efficiency and energy economy resilience through the Least Carbon Fuel Cost Principle - that is to say that for any given use of electricity, heat/cooling and power the use of oil and gas will be minimized. The Caspian Energy Grid will be financed and funded by energy swaps and prepay energy credits which are complementary to existing finance capital and which align the interests of market participants through sharing risk and reward.
There will be two key outcomes from the Caspian Energy Grid: empowerment, as renewable energy generation distributed throughout Iran reduces carbon fuel use, and efficiency, which is ever more profitable as fuel prices increase.
The Caspian Energy Grid will pool the expertise, talent and innovation of the academic/ public and private sectors through the creation of the networked international Institute for Resource Resilience (IRR) initially linking the UK and Iran.
Mahmood Khaghani, now retired, has over 33 years of work experience at senior international positions of Iran's petroleum industry, including the head of the Oil Ministry's Caspian Sea and Central Asia Department, as well as business development and joint ventures advisor of Iran's North Drilling Company. He was also the director for energy, minerals and environment at the ECO Secretariat in 1996-2000.