How to Keep the Lights on in Kurdistan

Iraqi lawmakers breathed a sigh of relief on June 15 when the Trump administration renewed sanctions waivers to allow Iraq to import critical natural gas and electricity from Iran. The move indicated the U.S. administration’s awareness of Iran’s critical role in powering Iraqi homes and industries, but it also came a mere three days before the expiration of the previous waiver and after multiple statements by U.S. officials that Iraq wouldn’t get an indefinite pass. In other words, Iraq can’t rest easy.

The country’s electricity problems are well known, with recent reports focusing largely on central and southern Iraq, where power outages and scorching summer temperatures have sparked protests over foreign meddling and insecurity. But little attention has been paid to the Kurdistan region, which relies on Iranian natural gas for its energy needs even as it provides electricity to non-Kurdish areas of Iraq.

Iraqi Kurdistan is particularly vulnerable to energy insecurity. In the past, the central government has punished the region by excluding international oil companies with Kurdish operations from bidding rounds in Baghdad and by blocking independent oil exports. More recently, in response to the Kurdistan Regional Government’s failure to send 250,000 barrels of oil per day to Baghdad in compliance with the federal budget, Iraqi lawmakers have called for salary cuts in the region—a move that would jeopardize the regional government’s ability to repay its debts to Turkish and Russian energy companies and would further deter international development of the region’s oil and gas fields.

On a more day-to-day level, Kurdish residents face rolling blackouts as a result of the regional government’s severe mismanagement of its electricity sector and, thus, Kurdish private companies’ decision to work with the Ministry of Electricity in Baghdad instead of its counterpart in the Kurdistan region. Their reasoning was that Baghdad was more able to pay them and provide gasoline for power stations. As a result, though, Kurdish residents have faced shortages.

Making things even worse, the two regional neighbors upon which Kurdistan relies most to provide electricity—Iran and Turkey—have more than once shown their willingness to restrict fuel, electricity, and water access in Kurdistan to exert political influence or to prompt loan repayment.

For these reasons, decentralized renewable electricity has become an increasingly attractive option for a population that just wants to keep the lights on. Local Kurds have already started to capitalize on the region’s favorable conditions for renewable energy. While solar is by no means more popular than private diesel generators, solar photovoltaic installation companies have begun emerging in Erbil and Sulaymaniyah, and international companies and organizations are working with local partners to develop solar photovoltaic and energy storage systems in refugee and internally displaced person (IDP) camps.

“If any person or company in the world is thinking to open a factory [for the manufacturing of photovoltaic solar panels, inverters, or batteries] here in Iraq, it is a very clever idea,” said Saad Mohammad al-Ghannam, an engineer at Infinity Green Power, one of the largest solar power system installers in Iraq. He said that Kurdistan’s high average annual sunshine and flat roofs make the region naturally appealing for solar energy investment. Ghannam suggested that if the Kurdistan Regional Government subsidized residential solar systems that could be linked to a regional grid, electricity access and reliability would greatly increase.

Wind power is similarly appealing, especially in areas of eastern Kurdistan where mountains such as Azmar and Piramagrun form natural wind corridors. Despite the region’s amenable climate, geography, and architecture, however, renewables projects face some problems. Bank loans are hard to get. Investment and licensing regulations are byzantine. And private equity and venture capital are virtually nonexistent. The regional government, which currently subsidizes about 85 percent of its population’s electricity costs, has also hesitated to transition away from a focus on hydrocarbons.

Nevertheless, international organizations have been making the case for renewables to local communities, policymakers, and even internally displaced persons. In particular, the International Organization for Migration has worked to integrate solar systems into its infrastructure development portfolios for communities with large refugee and IDP communities, while the United Nations Office for Project Services has developed a plan to provide off-grid and hybrid renewable energy solutions in areas liberated from the Islamic State. The International Energy Agency has even published a road map for Iraq that includes a strong focus on the country’s solar potential.

“We try to work on the creation of new jobs and economic activities where we think there would be a potential for growth via the introduction of new services or products in the market,” said Adeline Defer, an advisor in the private sector development project at the German development cooperation agency, known by its German acronym, GIZ, in Iraq. After gathering sufficient interest from provincial governments, local entrepreneurs, and the Federation of Chambers of Commerce and Industry in the region, GIZ developed a program to provide technical and business development training to help young graduates, the unemployed, and IDPs and refugees install and maintain solar-based equipment. Its project, which is set to begin next month, fits within the organization’s priorities to provide trainings focused on renewable energy, waste management, and recycling.

Yet for such efforts to really pay off, the adoption of renewables at a wide scale must be preceded by an overhaul of the electricity sector, namely through privatization and decentralization. Privatization would encourage more cost-conscious behavior at all levels of the electricity supply chain—from producers and distributors to consumers. It would also encourage better metering of electricity use, which would reduce theft, allow providers to shut off power to nonpaying customers, and lower consumption, since consumers would have to pay more realistic retail prices. Decentralization of electricity provision to local and provisional governments would help, too, increasing accountability and reducing the distance between consumers and power stations.

Local advocacy groups, companies, and nongovernmental organizations will undoubtedly play an important role in education and awareness-raising, but large-scale change must be led by the Kurdistan Regional Government itself. It is the only entity with the power to make the bureaucratic changes necessary for the development and financing of renewable technologies. At the very least, it will need to stop aligning the public against reform with arguments that privatization will reduce the subsidies they receive. Instead, it could inform the public of the financial benefits of decentralization: It would allow municipalities to make the best use of—and profit from—their respective geological gifts (such as bodies of water or wind corridors) while reducing costs related to transmission loss and electricity theft.

Decentralization and privatization would eventually take away the national political parties’ ability to control when and where reliable power is distributed, but it will ultimately allow the Kurdistan Regional Government to achieve its goals of energy efficiency, security, and independence. It can either bite the bullet and make unpopular reforms now, or it can continue allowing its energy assets to be used as pawns in a broader geostrategic game. Electricity reform may not rally the Kurdish population in the short term, but it can provide a long-term, practical solution to the region’s energy woes.