Iraq’s power balancing act

24 August 2010

Kurdistan has transformed its power sector with the participation of private companies. Baghdad must surpass this success with a mixed strategy of state-procured facilities and IPPs

Iraq’s government, when it is formed, will need to move quickly if it is to rebuild the country. Central to its plans will be the development of new electricity generation capacity. Without it, the country will continue to suffer crippling blackouts that will threaten stability.

Iraq has decided to tender a series of independent power projects (IPPs) and government procurement schemes. Should these come online as planned, more than 10GW of power will be added to the grid. If the government is to succeed in this programme, it will need to balance the interests of its people looking to invest in Iraq against those of foreign business.

The government will need to balance the interests of its people looking to invest in Iraq against those of foreign business

It has already made attempts to do so. It revised down the allocation of gas from the upcoming gas licences to power generation facilities from 100 to 50 per cent in the hope of attracting oil and gas majors. At the same time, by guaranteeing a certain amount of gas feedstock to the power projects, it is hoped the scheme will lure potential developers.

Iraqi Kurdistan has had a head start on the rest of the country in developing power generation capacity. The Kurdistan Regional Government (KRG) attracted private investors several years ago and has consequently transformed its power sector. From a region that faced crippling power shortages, Kurdistan is now a place where blackouts are infrequent.

Jordan-based Mass Global Investment Company developed three power plants in Kurdistan. The capacity has made a big difference to the region, but the developer experienced difficulty bringing the projects to fruition.

Iraq has a much larger task than Kurdistan – made worse by the continuing instability of the government – but a mixed strategy of government-procured facilities and IPPs bodes well. The IPPs have so far been well-received by developers. Iraq will need to work hard to ensure that this continues.

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