IEA Commends Iraq's Plans to Reform its Electricity Sector

The International Energy Agency has commended the Iraqi government’s plans to carry out important reforms of its electricity sector to address the significant challenges it is facing.

Demand for electricity in Iraq is growing far more rapidly than supply, contributing to power shortages and forcing the country to import electricity despite its rich energy resources. In a major report on Iraq’s energy sector published in April, the IEA offered a practical roadmap, containing both immediate actions and medium-term measures, to tackle the problems in the electricity sector.

The Iraqi Ministry of Electricity, under the leadership of Minister Luay Al-Khatteeb, is now launching a major initiative to improve the sector.

“I am delighted that the government is moving to implement the difficult but necessary reforms that will help make Iraq’s electricity sector more reliable, secure and affordable,” Dr Fatih Birol, the IEA’s Executive Director, said today. “Based on the International Energy Agency’s extensive experience dealing with electricity sector reform across the world, there is no alternative to a holistic approach in Iraq.”

The steps recommended by the IEA include reforming electricity tariffs and removing subsidies in order to boost revenues. This increased income can be reinvested in generation and distribution networks to bring down the huge amount of power that is currently lost through shortcomings in the system.

This approach will lift some of the burden on government budgets by stimulating the necessary private sector investment that can help propel the electricity sector to where it needs to be. Measures to remove subsidies will also have the important effect of incentivising more rational use of electricity and minimise wasteful consumption.

Tariff reform for the government-supplied grid has to also be paired with stronger regulation of neighbourhood generators, which were paid around USD 4 billion for the services they provided in 2018. That was 50% more than the Ministry of Electricity had to spend on capital projects that year.

Meeting the immediate needs of the Iraqi population is also imperative. In its April report, the IEA offered several recommendations to bring additional supply to Iraq quickly, efficiently and at least expense. One of the suggested actions was to explore the possibility of connecting Iraq with its neighbours to stimulate regional electricity trade.

“I am confident that the successful implementation of the changes highlighted in our report will lead to a far better electricity sector in Iraq than what we see today,” Dr Birol said. “The International Energy Agency has helped countries with similar reforms in the past, and we stand ready to continue supporting our Iraqi friends on this worthy path they have set for themselves.”

Dr Birol’s made his remarks on the occasion of the Iraq Energy Forum in Baghdad, which is organised by the Iraq Energy Institute, an independent policy institution. At the event, the institute announced that it was awarding its Iraq Energy Award for contributions to the country’s energy sector to Dr Birol, making him the first non-Iraqi to receive the award. Dr Birol was unable to attend the event in person, as he had previously planned, because of the need to remain at IEA Headquarters to manage any possible IEA response to the oil supply disruption in Saudi Arabia.