Iraq’s Uneasy Road to a Green Economy

Faced with chronic electricity shortages, Iraq has set a target to meet 10 percent of its energy needs from renewable sources by 2028 through deployment of large-scale solar, wind, and biomass sources. However, reaching that goal may be impossible without implementing major economic and political reforms and overcoming structural and technical hurdles.
Iraq’s Uneasy Road to a Green Economy
Photo by: Zbynek Burival

In recent years, a growing number of Middle Eastern countries have set ambitious goals to add renewable energy into their domestic energy mixes. Even oil and gas-rich countries in the region (such as Saudi Arabia, Kuwait, United Arab Emirates, Bahrain, and Qatar), which have been heavily dependent on fossil fuels to power their economies for years, are adopting ambitious renewable energy targets as prices of clean energy technologies have fallen in recent years and are expected to come down further.

Currently, electricity generation from fossil fuels costs $0.05 – 0.17 per kilowatt hour (kWh) in major global economies.

Currently, electricity generation from fossil fuels costs $0.05 – 0.17 per kilowatt hour (kWh) in major global economies. In contrast, according to International Renewable Energy Agency, a global organization that promotes adoption of clean energy, power generation from renewable sources is likely to cost $0.03 – 0.10 per kWh by 2020. Demand for energy continues to outpace supply in the region where population rates are increasing, including in Iraq. Rising from the ruins of war, Iraq is trailing behind its neighbors in adopting renewable technologies.

Historically, Iraq has been heavily reliant on oil and gas-fired power. Its total primary energy use depends more than 90 percent on oil and the rest on natural gas. Overdependence on fossil fuel production and consumption has resulted in extensive damages to the environment and to public health.

For example, oil production, which requires massive amounts of water use, has reduced supplies of drinking water; gas flaring from oil extraction is responsible for pollution and public health problems; sabotage of oil transportation infrastructure has led to spills, leaks, and localized pollution; and burning oil fields and damaged industrial installations during the war released hazardous substances into the environment. The falling prices of clean energy technologies make a strong case for diversification of the energy mix to renewables to meet the growing power demand in Iraq and to lower its dependence on more expensive fossil fuels.

Growing electricity demand and the social unrest over the lack of power in sizzling summer heat last year put pressure on the Iraqi government to provide reliable electricity supplies to its people. In an effort to boost the country’s energy supply security, the Iraqi leadership is aiming to develop renewable energy to generate power. Recently, Iraq set out a plan to meet 10 percent of its energy needs from renewable sources by 2028 through the development of large-scale solar, wind, and biomass capabilities with more than $50 billion in investments. The country hopes to reach an installed capacity of more than 5 gigawatts (GW) of solar energy, about 1 GW of wind power, and around 0.2 GW of bioenergy by 2028.

Traditionally, hydropower has been Iraq’s sole source of renewable energy. However, hydropower’s generating capacity there plummeted from 5.1 GW to nearly 1.5 GW due to mismanagement and neglect. At this juncture, the country’s renewable energy potential remains completely unexploited.

That is bad news. The good news is that Iraq has favorable conditions for developing renewable energy. More than half of the country could potentially rely on solar power. Studies showed that the solar index gets stronger from north to south. Particularly, western and southern regions of Iraq have the most favorable climatic conditions to produce solar energy due to higher solar radiation compared to the rest of the country. Iraq’s deserts could become global providers of solar power in the future due to strong solar radiation. Photovoltaic solar cells would be suitable to produce electricity in all regions of Iraq, but especially for off-grid generation in remote and rural areas.

Offshore wind power in the Arabian Gulf, near the southern Basra region, is also promising. Theoretically, both solar and wind power could supply enough energy to rural populations of Iraq. Recognizing the power of the sun in the country, Iraq had ambitious goals to build its solar energy capacity in the 1980s and late 2000s. However, the decades of war and low oil prices killed these plans.

Emerging from decades of successive conflicts and destruction, the current Iraqi economy is unable to finance the development of renewable energy facilities. Therefore, the success of diversification to renewable energy sources in Iraq will largely depend on foreign investment. To attract investors, the Iraqi government is providing incentives such as tax breaks, tariffs based on favorable terms, land rights, and assistance to get permits, among other initiatives.

Iraq’s Renewable Energy Offset Program (REOP) is perhaps the most important catalyst in developing the renewable energy infrastructure in the country.

Iraq’s Renewable Energy Offset Program (REOP) is perhaps the most important catalyst in developing the renewable energy infrastructure in the country. REOP is an arrangement with oil producing companies operating in Iraq to invest in renewable energy projects there. The program aims to help the country offset its greenhouse gas emissions from fossil fuel production by developing renewable energy infrastructure and generating power from clean energy sources. By capitalizing on REOP, Iraq could significantly expand its domestic, renewable energy capabilities.

However, these measures are nowhere enough to develop renewable energy in this war-torn nation.

Looking from the current political and economic standpoint, reaching the 10-percent renewable energy target by 2028 will be difficult for Iraq. It will have to implement drastic reforms to get to that level. National security and economic stability would be an overarching need for building non-oil sectors of the country’s economy, including telecommunications, health services, manufacturing, tourism, wholesale and retail trade, as well as the nascent renewable energy sector. Reforming the country’s weak financial sector will be critical for local banks and energy firms to build relationships and partnerships with foreign investors.

At the structural level, a lack of a coherent policy, legal provisions for the use of renewable energy, regulatory clarity for trading electricity, and legislation for investment in clean energy presents a major barrier to investments. With no clear policy and legal frameworks, it will be hard for investors to build and run their businesses in Iraq. Navigating the notorious bureaucratic and administrative maze will be an additional burden on them. To date, Iraq’s ability to entice foreign investors has been limited to oil and gas industries, while other sectors of the economy have been largely neglected.

At the technical level, without rebuilding the decrepit electricity infrastructure, Iraq will not be able to make clean energy projects work. Currently, more than 30 percent of electricity is lost in the rundown national transmission network. While solar power will be indispensable for off-grid and remote villages, the central government must restore transmission lines to connect large-scale renewable energy projects to the national grid. Iraq also needs to train a local workforce to install, operate, and maintain solar cells and wind turbines.

In the meantime, the country’s leadership is continuing to invest in oil and gas facilities and modifying gas turbines into combined cycle power plants. Building more fossil fuel-based energy infrastructure will take away the opportunity to add clean energy units into the national energy mix. Since Iraq has to craft its renewable energy policy from scratch and lay the groundwork for building the green economy, the 10-percent renewables target will be impossible to meet by 2028 unless Iraq implements far-reaching and bold reforms.