Sceptics often cite the appalling state of Iraq’s electricity system as clear evidence that the 2003 invasion has failed to deliver the results promised by the US-led coalition almost eight years ago.

At the end of 2002, Iraq had the capacity to produce about 4,766MW of electricity, though production was down to 3,300MW by the time Saddam Hussain was deposed. In the chaos that followed, the country’s electricity infrastructure was vandalised and looted. Yet power production was reported at about 4,000MW in June 2004.

With the master plan … Iraq finally has a blueprint that could bring an end to decades of power shortages

Since then, practically no progress has been made, other than in the Kurdish areas, in lifting power generation capacity. According to the executive director of the Iraq Energy Institute, Luay al-Khateeb, Electricity Ministry power stations were delivering 4,792MW of electricity in August 2010. This was just 26MW more than they produced the same time in 2002.

Power imports to Iraq

At present, more than 1,000MW of electricity is being imported from Iran and Syria, while power plants operating in the Kurdish areas are producing 1,250MW. Power demand meanwhile has soared in recent years, growing six times faster than new capacity has been installed. Demand is now estimated to be about 13,000MW, more than twice the level seen in 2003.

Recent surveys show that Iraqis consider power supply problems to be a bigger issue than security. About 20 per cent of the population is believed to be without access to electricity. The failure of the power system was the cause of riots in southern Iraq in June 2010 that led to two deaths and the resignation of Iraq’s electricity minister. It is estimated that power shortages cost the economy some $40bn last year.

As a result, improving the supply of electricity is a top priority for the newly installed government. Economic growth and domestic harmony is impossible without a stable power supply in a country wrecked by 30 years of war, sanctions and internal conflict. The Iraqi government’s response to the problem is finally becoming tangible. New power generation capacity equating to 3,380MW is already under construction and contracts for a further 7,200MW are soon to be signed.

Bids are also due in January for the Electricity Ministry’s first four independent power projects (IPPs), which will have a combined capacity of 2,750MW.

Baghdad is offering four 25-year build-own-operate contracts to develop the gas-fired plants, at Samawa, Diwaniya, Shat al-Basrah and Amara. Each project will have a capacity of 500MW, except the Basra scheme which will have a capacity of 1,250MW.

Private power generation funding for Iraq

The ministry and its advisers intend to conclude the IPP bid evaluations by March 2011, before carrying out negotiations with the bidders in April and May. The projects are expected to reach financial close between July and September 2011. As the additional generation capacity is urgently needed, interested parties were not requested to prequalify for the tender process.

Iraq’s IPP programme has evolved many times since its launch. The original scheme comprised eight projects; two of those have since been scrapped and the others are to be directly procured rather than relying on private finance.

The projects planned or under way should ensure that electricity supply across Iraq will be more or less in balance with demand by early 2014. That is the good news.

The bad news is that before then, power shortages are likely to become more intense during the summer of 2011 and even worse in 2012. But while tackling the current power shortfall, Iraq’s government is also making long-term plans for the sector to ensure the current problems are not repeated.

At the end of 2010, it completed a 20-year electricity master plan in partnership with the US’ Parsons Brinckerhoff. The document’s baseline forecast is that power demand outside the Kurdish areas will rise to 32,000MW in 2030. The high-growth projection is for consumption to hit 45,000MW that year. Either way, the figures suggest Iraq’s economic growth in the next two decades will be significant.

Fuel change in Iraq

A key element of the master plan is the recommendations about technology and fuel use. It says gas is the most economical fuel for generation and that Iraq should therefore phase out crude-oil-burning power stations and cut heavy fuel oil use. It recommends that future capacity should use a combined cycle configuration, where waste heat is reused.

Most of the recently awarded projects have used simple-cycle gas turbines, following major deals signed with the US’ GE and Germany’s Siemens in 2009. The master plan shows that Iraq should have more than enough gas to meet projected demand from power generation. This year, it will produce less than 1 billion standard cubic feet a day (cf/d) of non-associated gas. Plans to lift oil production radically imply a sharp rise in gas availability to 6 billion cf/d in 2019. The master plan’s projections show gas required to produce electricity will rise to 2.5 billion cf/d that year.

Iraq’s power plans only make sense if there is matching investment in transmission and distribution. The master plan calls for massive investment in the grid and network connections. A loss reduction programme is also planned to raise the efficiency of the entire network.

New power generation capacity

It is estimated Iraq will need to install $29bn-worth of new generation capacity between 2015 and 2030, calculated at constant 2009 prices. The master plan envisages that the bulk of this, some $23bn, will be covered by private, foreign investors. A further $8.5bn will be needed to be spent on transmission projects. Once investment in distribution projects is included, the total amount required to be spent on power infrastructure rises to $55bn.

For private power developers and equipment providers, Iraq is set to provide a rich seam of work over the coming decades. But Baghdad will need to draw up bankable offtake agreements and provide assurances over gas feedstock, if it is to attract the foreign investment it requires.

With the master plan, however, Iraq finally has a blueprint that could bring an end to decades of power shortages that have held back the country’s economic growth.