Iran, Iraq Power Export Contract Renewed for Two Years

EghtesadOnline: Importing electricity from Iran is of vital importance for Iraq (both politically and economically), the Iraqi Minister of Electricity Majid Mahdi Hantoush said at the weekend.

News ID: ۷۵۰۱۶۶

06 June 2020

After meeting Energy Minister Reza Ardakanian in Baghdad on Wednesday (to extend a power import contract from Iran) Hantoush said: “We appreciate Iran’s assistance in importing 1,200 megawatts of power (per day). Prospects for cooperation between Iran and Iraq in the electricity sector are great and we are optimistic about enhancing two-way collaboration,” ISNA reported.

Drawing on Iran’s expertise to fix the Arab country’s old and dilapidated power grid is on the agenda, he added.

The Iraqi official expressed hope that (in summer) Iran would not reduce the volume of electricity export to his country (whose unpaid bills for Iranian electricity is close to $1 billion).

According to ISNA, close to $400 million of the debt was settled after the meeting on Wednesday. No details were disclosed on (the money transfer) mechanism or how Baghdad intends to clear the balance.

The first electricity export contract between the two neighbors was signed in 2005. It has been renewed on yearly-basis over the past 15 years. This time, however, the agreement was extended for two years (2020 and 2021) during the meeting of the two ministers.

Iran has exported close to 65 billion kilowatt hours of electricity to Iraq since 2005 worth $6.2 billion, of which $5.9 billion has been paid.

“Iran has agreed to expand cooperation in power production, export and sharing know-how and technology” in the key sector, Hantoush said.

Iraq is the biggest importer of electricity from Iran. It needs more than 23,000 MW (per day) to meet growing domestic demand. Years of war, civil strife, terror attacks and the failed US invasion in 2003 almost destroyed its power infrastructure, creating a whopping 7,000 MW daily deficit.

Besides importing electricity from Iran, Iraqi power plants also depend on Iranian natural gas to generate power. A shortage in previous summers fueled unrest in some provinces.

High Consumption

Referring to the unprecedented domestic consumption in the past few days surpassing 54 gigawatts, Ardakanian said, “This year the situation is different and we hope the  Iran Power Generation, Distribution and Transmission Company (Tavanir) can live up to its pledge to supply Iraq with enough power.”

On Wednesday (June 3 the temperature reached 38 degrees Celsius) and consumption in Iran exceeded 54,000 megawatts, up 12% from the same day of last year.

This was while several factories have closed due to the bad economic conditions, recession, instability in forex rates and the Covid-19 pandemic.

Tavanir officials have warned that if necessary daily supplies (1,500 MW) to Turkey, Iraq, Pakistan and Afghanistan could be reduced to meet rising domestic demand.

Despite the fact that installed power capacity is 84 gigawatts, lack of investment in replacing dilapidated equipment such as transformers is a major setback as less than 60 GW of what is generated in power stations can be transferred to homes and factories, he said.

Power consumption in Iran grows between 5% and 6%, but expansion plans have been undermined in recent years due to financial constraints, poor management and the heavy burden of energy subsidies.

The cost of installing new transformers has risen dramatically and the result is that old equipment is used well beyond their shelf life, which add to the list of problems and hurts grid efficiency.