Electricity Solutions Projects in Iraq: Ambitions and Challenges
In a significant development for Iraq's energy sector, the Gulf Cooperation Council (GCC) has signed a pivotal contract to implement the Gulf electricity market linkage project with Iraq. This initiative aims to enhance energy security by supplying Iraq with approximately 3.94 terawatt-hours of electricity annually by 2025, at competitive prices lower than local production costs, thus reducing public expenditures.
The agreement was formalized at the Gulf Interconnection Authority's headquarters in Dammam, Saudi Arabia, marking the project's expansion outside the six GCC countries. The groundwork for this project commenced in June 2023, following an initial agreement signed in July 2022 between the Gulf Electricity Interconnection Network and the Southern Iraq Electricity Network. Significant progress has already been made, with the Iraqi Ministry of Electricity completing the power transmission line from the Kuwaiti Al-Wafra Station to Al-Faw in southern Iraq.
The project, which involves extending a 435-kilometer power line from Saudi Arar port to Al-Yusufiyah Station near Baghdad, is expected to yield substantial financial benefits. It has reportedly saved about $3.6 billion since its inception, with operational costs around $1.5 billion. This initiative is projected to generate an annual trade potential of $300 to $400 million, marking a significant step towards establishing a competitive electricity market in the region.
Addressing Iraq's Energy Crisis
Iraq has faced severe electricity shortages since the early 1990s, exacerbated by the destruction of its national grid during the Second Gulf War. The peak energy demand in Iraq reaches 34,000 megawatts, while current production stands at only 26,000 megawatts. Iraqi economic experts emphasize that the Gulf interconnection project is vital for improving electricity supply and reducing the frequency of scheduled power outages.
Experts predict that this interconnection will not only enhance reliability and stability in energy delivery but also help Iraq reduce power cuts significantly—by 500 megawatts in the first stage and potentially 2,000 megawatts by the end of 2026. In addition to the Gulf connection, Iraq is also working on electrical connections with Turkey and Jordan to bolster its energy infrastructure.
Future Prospects and Regional Integration
The Gulf electricity interconnection project represents a strategic move towards addressing Iraq's ongoing energy crises. It aligns with the GCC's broader vision to establish a regional electricity market that transcends individual interconnections. By 2025, the GCC aims to enhance the stability of its electricity network and create opportunities for surplus electricity exports to countries like Iraq, which is currently navigating a complex energy landscape.
The GCC Interconnection Authority was established in 2001 to oversee the project, and significant milestones have been achieved since then, including the approval of an agreement regulating cooperation among participating countries. As Iraq continues to grapple with its energy challenges, the Gulf interconnection project offers a promising avenue for recovery and sustainability in its electricity sector.
