Sunday, September 27, 2009

Work Begins On Improving Iraq’s Electricity Supply But Problems Remain

This year Iraq is embarking on a massive development plan to increase its electrical network. It is buying new turbines, constructing new power plants, and garnering international loans and other financial assistance to pay for it. Iraq still lacks the capacity to supply all the power the country needs however.

In December 2008 Iraq signed a $3 billion contract with General Electric (GE) and Siemens to add over 10,000 megawatts to Iraq’s power grid. The problem was with Iraq’s budget cuts it had no money to pay the companies. Finally, in August 2009 the Iraqi Central Bank agreed to loan Baghdad $2.4 billion to pay part of the contract. Now equipment is finally being delivered, and work is going to begin.

On September 19, it was announced that Canada’s SNC-Lavalin Group and the Iraqi owned URUK Engineering Services each won $85 million contracts to install six turbines delivered by GE. SNC-Lavalin is going to install two 125-megawatt turbines in Hilla in Babil province in the next 18 months, while URUK is going to build a power plant with four 40-megawatt generators in Taji, Baghdad province within 15 months.

On August 19 Iraq finalized a loan from the International Monetary Fund (IMF). The loan is for $5.5 billion over five years at 1% interest. The IMF stipulated that it be spent on development projects, and most of it will go to improving the power system.

At the same time, not everything is going according to plan. The summer heat has put a seasonal strain on the power system. At the beginning of September people in Kut, the capital of Wasit demonstrated over the lack of fuel and electricity. A few days later the Electricity Minister gave a press conference to try to explain why there were still power shortages in the country. In August and September, the Electricity Ministry also complained about a Chinese, an Iranian, and a Jordanian company for not completing their work on five separate power plants.

For five straight quarters Iraq has increased its electricity production. The problem is that the supply is not close to meeting demand that has sky rocketed since the 2003 invasion. Not only that, but the power system is so old and decrepit after years of wars, sanctions, and lack of maintenance, that it can’t handle the amount of electricity that is needed. If Iraq was to ever install all of the power plants it requires, the entire grid would have to be rebuilt to handle the capacity, and Iraq does not have anywhere near the money to pay for that.

SOURCES

Aswat al-Iraq, “$2.4bn to pay for GE, Siemens contracts-minister,” 8/9/09
- “Iraq to get loan to improve electricity,” 8/19/09

Reuters, “Iraq awards power contracts to SNC, URUK,” 9/19/09
- “Iraq scraps $3 bln bond sale, eyes local debt,” 8/9/09

Al-Rubaai, Salah, “Protest over power shortages in southern Iraqi city,” Azzaman, 9/3/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09

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