Iraq's Biggest Power Threat
Publish Date: Aug 06, 2015
Author: Harry H. Istepanian
Amid the war against ISIS and sweltering summer heat wave with temperature soaring above 50 degrees Celsius (120 Fahrenheit), thousands of demonstrators had come out on the streets of Baghdad’s Tahrir Square, chanting slogans against the country’s corrupt officials for plundering the public wealth and failing to provide basic services. The rally in Baghdad came two weeks after a similar protest in Basra (600 km south of Baghdad) and other southern provinces. Unlike the peaceful protests in Baghdad, the demonstration in Basra turned violent shortly after the protesters clashed with the local police. One protestor was shot dead and two seriously wounded after the protesters set fire to the local public offices.
For the past two months, Iraqis hardly had four to six hours of electricity during the day. The prolonged power outages, probably the worst in the country for a decade, have been causing water shortages in many areas. The southern provinces were the worst affected areas. Local municipalities are blaming electricity cuts for not being able to operate water pumping stations. In return, the Ministery of Electricity puts the fault on increasing demand due to the heat wave, fuel shortage and problems associated with the aging network.
Iraqi households for years have been relying on private diesel generators to run basic appliances, while small businesses and shop owners were unable to work for enough hours to earn their daily bread due to power cuts. Public hospitals all over the country, which care for the majority of the population are generally dependent on grid power. Despite diesel generators are provided to supply electricity during power outages, most of the gensets are struggling to have basic maintenance and overhauls. The protest in Baghdad later spread to other provinces, including Karbala, the holiest city for Shi’as. Similar protests erupted in other southern and middle Euphrates provinces but at lower scale, including Najaf, Muthanna, and Dhi Qar demanding the local councils to exert pressure on the central government to increase the hours of electricity supply to their provinces. Some council members even threatened to disconnect power stations within their provinces from the national grid. Several power plants have already stopped producing power due to low fuel gas pressure and rise in the ambient temperature affecting their cooling systems.
The local newspapers, satellite TVs and social media, are accusing the corrupt politicians and government officials for failing to solve the electricity crisis and mismanagement of public money for the last ten years. Many social media activists believe the protests are the potential start of a popular movement against the government calling for the resignation of top officials in charge of the energy portfolio, including the Minister of Electricity and the Senior Advisor of the Prime Minister for energy affairs, but no demand so far for an uprise or step down of the Prime Minister Hayder Abadi. While these protests do not mark a significant shift in the political power, but send a strong signal to the government to take harsh measures against corrupt officials who are mainly backed by the ruling religious parties. Many fears that further protests will destabilize already fragile political and security situation and might jeopardize the unity in the war against ISIS.
There is no exact estimate for Iraq’s electricity shortfall, but the country instant generation capacity is less than 10,000 megawatts – almost half of what the country needs. With no cash investment available to spend on new projects as country’s oil revenues are diverted to support the war. Many experts believe the sector has been badly affected this year by budget cuts. Testifying in front of the Parliamentary Committee, The Minister of Electricity, Qassim Al-Fahdawi, stated that the ministry’s 9 billion planned budget for 2015 has been cut down to 3 billion dollars by the Ministry of Finance and only 170 million dollars have been received so far, that's just to keep the current level of power flowing. For normal Iraqis, the general perception is the government has failed to deliver basic services even before ISIS and do not expect any relief to come soon. The situation is worsening with more Iraqis are becoming IDPs especially in the northern part and around Baghdad. The Internal Displacement Monitoring Centre estimates that at least 4 million Iraqis were internally displaced as of June 2015. The World Bank estimates that about $275 million will be required to satisfy the basic needs of refugee camps and IDPs for electricity in Kurdistan Region of Iraq alone.
The government has failed to address many grassroot problems of the power sector. Bad bill collecting has left the government short of funds to pay for future investment in the sector. For almost two decades, the Ministry had a poor record in recovering billions of dollars of unpaid electricity bills as it became a politically sensitive issue. Perpetuating all of this is a lack of efficiency and huge, highly structured bureaucracy, including more than 120 thousand government employees in the Ministry of Electricity alone. Many experts believe the sector development can not be accounted until measures are taken by the government in making effective policies to solve the electricity problem once and for all by properly utilizing all the resources available, allowing a major role for the private sector to invest heavily in the sector. Analysts and government officials estimate that Iraq is currently losing more $40 billion every year due to the electricity shortfall.
No doubt that recent confluence of public anger is once again underlining how easily Iraq's fragile political and economic situation could slip the country into a dire collapse with many challenging issues can find it all too easy to conspire. Brookings Doha Center, the Middle East’s most influential think-tank has projected just a few months before the recent protests, the economic challenges in the short- and long-term, due to policies inherited from the former Prime Minister Nuri Maliki and his administration. The fifteen page analysis report on Iraq’s electricity sector warned that basic services, like electricity would play a key role in shoring up the legitimacy of Abadi’s government as it is seeking to re-establish its authority over the ISIS controlled territories. The report suggests that Abadi government has to enforce difficult policy decisions to muster the massive capital investment needed for the sector given the extensive and ongoing damage war against ISIS. In order to solve the electricity shortage, the report suggests that Iraq needs first to invest in the country’s natural gas reserves to provide an answer to the lack of fuel supply given that the country has the world’s thirteenth largest proven gas reserves - around 3.4 trillion cubic meters.
Iraq’s problem is not just a shortage in pumping more power to the grid, but with processing fuel gas and delivering to the power plants. Iraq flares off more than 1600 million standard cubic feet per day as the unusable byproduct of oil extraction, wasting billions of dollars every year.
The best that can be said of Iraq these days is the government no longer has the leverage to invest in the energy sector with the increase in violence to the worst levels since 2003 and oil revenue fallen to the lowest levels for many years. In Baghdad, frequent car bombs, lack of basic services would only erode Iraqis’ confidence in Abadi’s government while the country is still far from the stability that most envisioned.
August 6, 2015 (Source: Iraq Energy Institute)
By Harry H. Istepanian, Senior Fellow at the Iraq Energy Institute