In 2011, the World Bank estimated Iraqis endured, on average, 40 power outages every month – placing Iraq in the unenviable position of sixth globally in terms of frequency of outages after Bangladesh, Pakistan, Yemen, Lebanon, and Papua New Guinea.
Over the past 12 years, the situation in Iraq has deteriorated further with widespread and extended power outages across most provinces. However, Iraq’s power supply instability presents a conundrum given Iraq is the world’s fifth largest oil producer – ahead of all Middle Eastern countries with the exception of Saudi Arabia. In fact, Iraq’s oil export revenues in 2021 exceeded 75 billion dollars and in March of 2022, oil export revenues reached their highest level since 1972 at a staggering 11 billion plus dollars. Iraq has invested more than 80 billion dollars in its power sector since 2005, yet still struggles to provide power and basic infrastructure to its residents.
Iraq’s power outage crisis is multidimensional with political, economic, and societal factors all affecting its ability to provide electricity. Firstly, the Iraqi electricity infrastructure has suffered extensive damage over the last 30 years. Iraq has experienced major conflicts since the 1980s starting with the eight-year war with Iran and continuing with the ongoing factional struggles. Beyond the direct damage from several periods of war, the electricity system in Iraq has also suffered from sabotage, looting, and direct interference by several militant groups over time.
These same militant groups use private generators to provide electricity as a lucrative source of income. Estimates suggest the number of privately owned generators to be about 4.5 million across Iraq; generating anywhere between 6 and 10 billion dollars for their owners. This profitable business provides incentives to militants to deliberately disrupt the nation’s electricity infrastructure. Such opportunities, along with rampant corruption, ensure that public investments in the power system result in little progress.
The power sector also faces technical inefficiencies. The transmission and distribution network loses around 40% of generated electricity due to much needed maintenance and upgrades. Other technical barriers include ineffective metering, meter billing, electricity theft, and challenges with customer payments.
People in Iraq have little trust for state institutions and often do not believe the accuracy of their electricity bills, increasing their unwillingness to pay. Estimates say that only one third of produced electricity is paid for by customers, with revenue loss estimated to be as high as 60%.
Another factor that affects Iraq’s ability to generate electricity is the supply of fuel for power stations. Notably, more than 97% of Iraq’s electricity production comes from oil and natural gas, with oil accounting for almost 70%. However, Iraq is dealing with recurrent shortages of fuel. Oil smuggling to Iraq’s Kurdistan region and Syria is prevalent due to oil price differentials. Exacerbating the shortage is the recent suspension of fuel supply from Iran due to unpaid bills.
The above summarised factors collectively hamper the effective national supply of electricity. Iraq also has experienced a substantial increase in the demand for electricity. The Iraqi population growth rate averaged 2.6% between 2000 and 2021; effectively doubling the population from 23 million to more than 40 million. This growth in population has quadrupled the demand for electricity from 6,700 MW in 2003 to more than 27,000 MW in 2018.
The power crisis in Iraq has had a tremendous impact across multiple sectors. A primary example is the poor supply of electricity for air conditioning, especially during periods of extreme summer temperatures (crossing 50 C or 122 F during peak summer days,) which result in a public health crisis with many hospitalised. Water access is also affected as most water pumps rely on electricity, adding additional pressures to public health by disrupting the availability of fresh water. Additionally, power shortages affect economic activity by hindering private sector growth, limiting hours of operations and types of services. Businesses find themselves paying extra for private generators further impeding their ability to grow. Using oil and natural gas to generate electricity along with private generators are serious contributors to worsening pollution. Power outages also increase the likelihood of social instability as protests and violence spread, since power outages affect the poor disproportionally.
Several solutions have been recommended, some of which are currently being explored, including capturing gas for local use, creating a support committee to directly confront interference with the power network, and network privatisation.
Perhaps, one of the most ambitious projects is the plan to produce 10GW of renewable energy sources by 2030 by primarily investing in solar panel projects using bilateral agreements specifically with the United Arab Emirates (UAE). Cleaner energy offers a real opportunity for Iraq to take advantage of their country’s renewable energy potential with Iraq receiving more than 3300 hours of sunshine annually; placing it just outside the top 10 countries with most annual sunshine hours. Moreover, Iraq’s vast desert area in the country’s west enjoys enough solar radiation to supply the country with all its energy needs and perhaps even allow the country to establish itself as a regional energy supplier.
In 2016, a pilot study testing suitability and effectiveness of solar energy in Iraq documented savings of a total of $2300 and almost 60,000 kg of CO2 over the four-years study period for each of the six selected households. Solar energy in Iraq can potentially be beneficial in a multitude of ways as although there are initial infrastructure setup costs, there is little-to-no maintenance therefore minimising recurring costs. More importantly, Iraq would no longer need to produce oil and gas to generate electricity; further lowering economic costs. Solar energy is also clean and sustainable which would help Iraq to actively contribute to the fight against climate change and also reduce environmental damage by lowering air pollution. Another benefit of solar energy is the potential creation of job opportunities among Iraq’s bulging youth population through operational and support roles. More research is needed to quantify the impact of solar energy not just on the local infrastructure needs, but also the labor market.
Solving the power outage crisis requires a two-tiered approach. The first is a short-term holistic approach that addresses all of the factors listed above. The second approach is a long-term plan to invest in solar panels with the goal to transform the energy sector into a clean and sustainable sector. The success of both plans relies on political stability. Political stability is necessary to allow space and time to resolve the energy crisis. Political stability in Iraq however is hard, if not impossible, when most players are enjoying lucrative financial benefits from the current state of affairs.
The views expressed in the Near East Policy Forum are those of the authors and do not represent the views of the Near East Policy Forum or any of its partner organisations.
About the author
Dr. Georges Naufal is an associate research scientist at the Public Policy Research Institute (PPRI) at Texas A&M University, and a research fellow at the IZA Institute of Labor Economics and Economic Research Forum (ERF). He was also an Associate Professor of Economics at The American University of Sharjah in the United Arab Emirates. His research on the Middle East has been cited by regional and international media outlets such as the New York Times, Bloomberg, Reuters, the Washington Post, and NPR.