Thursday, November 15, 2012

Iraq’s National Electrical Grid Continues To Struggle, While Kurdistan’s Flourishes


Iraq’s national grid reached a record high in output in the third quarter of 2012. It added over 1,000 megawatts to its production. The government was still meeting less than 50% of demand. In contrast, in northern Iraq, the Kurdistan Regional Government (KRG) was reaching 85% of demand, and has even started exporting power to three neighboring provinces. This provides a stark contrast in strategies as Baghdad has relied upon a centralized public system, while the KRG has turned to private companies.

By October 2012, Iraq saw a large increase in power output, but it was still not enough to satisfy the public’s needs. At the end of the month, the Electricity Ministry claimed that it was producing 8,000 megawatts. The Special Inspector General for Iraq Reconstruction (SIGIR) disagreed, and said that Iraq was only producing around 7,300 megawatts at that time. Still, SIGIR said that was the highest amount ever for the Ministry. In comparison, in the 2nd quarter, the national grid was putting out 6,200 megawatts. This 1,100 megawatt increase was due to new power plants coming on line in May and June, and older ones being refurbished. Despite this large jump, the government was only able to provide an average of 10-12 hours per day to the citizenry. As has happened every year in recent history, supply was far short of demand, which was around 15,000 megawatts. The Electricity Ministry claimed it could have done an even better job, if not for the Oil Ministry, which failed to deliver the required fuel for power plants. Also contributing to national output is around 1,050 megawatts imported from Iran, and 20 megawatts from several power ships docked in Basra. The end of international sanctions, and the growing buying power of Iraqis, especially those with government jobs, has led to a huge increase in consumer goods being used across the country. That’s why demand has increasingly gone up at just about the same rate as production, causing the power gap, and constant blackouts.

The government has led the growth in the power sector. The Electricity Ministry does most of the work, but the Oil Ministry is just as crucial as it delivers fuel to the plants. There is also Deputy Prime Minister Hussein Shahristani that is in charge of the energy portfolio in Baghdad. Every couple months, the Electricity Ministry makes announcements about their grand plans. For example, right now it has 41 power plants under construction. It has claimed that it will reach 12,330 megawatts by April 2013, 20,000 megawatts by 2014, and then 22,000 megawatts by the end of 2015 when all of the new plants are supposed to come on line. The International Energy Agency has predicted that supply and demand would finally meet at that time if the new electricity plants were not delayed. The problem is the government has consistently missed its marks. For example, it said it would reach 7,450 megawatts by June, and 9,000 megawatts by July. That was later reduced to 8,000 megawatts by August. None of those amounts were ever met. Almost as soon as those announcements were made the Ministry tried to step back from them. In July, Electricity Minister Abdul Karim Aftan stated that some companies would not finish their work on time. By September, Deputy Premier Shahristani said that the Electricity Ministry’s predictions should not be listened to, and that its numbers were theoretical only. He also told SIGIR that some of the deals recently signed for constructing new power plants and installing turbines would not come to fruition. Baghdad is the center of a highly inefficient government. Corruption is rampant, which takes a heavy toll on any public tenders offered. Most of the bureaucracy is not used to dealing with private businesses, because of its socialist past. Third, there is no control on usage, as Iraqis don’t pay their power bills. Finally, the entire grid is poorly designed, has large amounts of power stolen, and has the highest levels of waste in the Middle East. SIGIR reported that up to 1/3 of the power generated is lost before it ever reaches users as a result. Despite these repeated failures the central authorities have not considered privatizing the system. That’s because of its tradition of having a command economy.

The complete opposite has occurred in the north. In Kurdistan, the regional government is producing 1,950 megawatts. That meets 85% of demand, and averages out to around 20 hours per day, twice the amount seen in the rest of the country. Not only that, but the KRG has started exporting power to some of its neighbors. In June, it began delivering 200 megawatts to a part of Tamim province, 50 megawatts to an area near Mosul in Ninewa, and 10 megawatts to the Tuz district of Salahaddin in August. These deals were worked out individually with the provincial governments, and did not include Baghdad. The KRG is not done. It recently singed deals with two South Korean companies to build another power plant and install transformers. Unlike in the rest of Iraq, the plants in Kurdistan are privately owned and run. They are doing a far better job producing electricity than in the rest of the country. The government plays a large role in the regional economy, but the KRG has been far more open to private investment, and creating an enticing business environment, because it has wanted to develop quickly after it got real autonomy following the 2003 fall of Saddam Hussein.

The two parts of Iraq are taking different paths to provide electrical services to the public. In Baghdad, the central government is attempting to direct and run the national grid. While production has gone up for the last several years, it has no control over usage, and can’t meet its own goals. In Kurdistan, the regional government has allowed private companies to run the major new power plants, and the results have been far superior as it has the highest average power supply, and is nearly meeting demand. These two approaches will continue on their separate paths, as the differences between the two politically will prohibit any kind of cooperation that might be able to solve the country’s pressing need for electricity.

SOURCES

Ali, Nashoor, “Iraq only producing one third of its electricity needs,” Azzaman, 8/28/12

Hassoun, Nasir, “$28 Billion Allegedly Squandered on Electricity Projects in Iraq,” Al-Hayat, 8/2/12

Ismael, Mahmoud, “Kurdistan exports electricity to Tuz Khurmatu,” AK News, 8/15/12

Mohammed, Fryad, “Kurdistan to export electricity in 2015,” AK News, 7/6/12

Razzouk, Nayla, “Iraq’s Kurdistan Signs Power Agreements With KNOC, Posco,” Bloomberg, 8/6/12

Sabri, Abdullah, “Production of electricity will reach 9,000 megawatts this month, says Electricity Ministry,” AK News, 7/2/12

Salah, Khayoun, “Iraqis enjoy almost continuous power supply after years of blackouts,” Azzaman, 10/31/12

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/12
- “Quarterly report to the United States Congress,” 10/30/12

Yee, April, “Iraq aims to double power output,” The National, 10/24/12

1 comment:

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