Iran’s electricity sector has strong potential to grab a significant share of Iraq’s power market, but Iranian enterprises have not made their mark in the field, a member of the Iran Chamber of Commerce, Industries, Mines and Agriculture's Exports Commission said.
“Iranian companies (both private and state) have proved their mettle in executing major power projects, such as construction of dams and hydropower stations, as well as thermal and combined-cycle power plants, at competitive prices, but they are losing the Iraqi market to their rivals,” Hamidreza Salehi was also quoted as saying by ILNA.
Access to cutting-edge knowhow is not sufficient to win development projects in Iraq, Afghanistan and Pakistan, as foreign relations play a more important role, he added.
The ICCIMA official said old strategies and ineffective diplomacy have failed and a new approach should be adopted to enable Tehran to have a say not only in Iraq, but also in other regional states planning to develop their power sectors.
Salehi said Iran is about to lose ground in Iraq’s electricity market to Emirati, Turkish and Saudi firms that are negotiating deals worth $40 billion to develop Iraq’s aging power infrastructure.
Saudi Arabia and Iraq signed an executive deal last week on the 435-km power transmission line (1,000 megawatts|) that will extend from Arar in northern Saudi Arabia to Yusufiya near Baghdad.
“Iran and Iraq signed a memorandum of understanding in 2018 to boost energy collaboration and renovate the Arab country’s power infrastructure. However, little has happened since then and the MoU is apparently shelved,” he said.
Improving Security
Salehi regretted that Iran, which played a key role in improving Iraqi security and economy, is easily overlooked when it comes to major contracts.
He added that Iran has not even been able to elevate the MoU to “a real contract” after four years while others (Turkish, Egyptian and Saudi firms) are in talks with the Iraqis for lucrative long-term contracts.
Iraq has been importing power and natural gas from Iran over the past decade.
“During the visit of Iraqi Prime Minister Mustafa al-Kadhimi to Tehran in 2019, neither a contract was signed and nor did the authorities discuss the MoU. When he [al-Kadhimi] went to Turkey, negotiations to develop the Iraqi power sector topped the agenda,” the ICCIMA official said.
“Positively impacting Iraq’s economy is as important as helping ensure security in the region, because robust economic collaboration is key to long-term mutual interest.”
Over 65% of energy in Iran are produced by private companies that can also play a key role in helping Iraq meet its growing electricity needs.
Iraq is the main importer of Iranian electricity for more than a decade. The Arab neighbor needs 23,000 plus megawatts of electricity, but decades of instability and fighting have destroyed its power infrastructure. It has a power deficit of 7,000 MW.
Daily power generation capacity in Iran is 70,000 MW and its average annual export is 1,500 MW to Iraq, Pakistan and Afghanistan.
Iran also exports 15 million cubic meters of gas per day to Baghdad from Naftshahr in Kermanshah Province through a pipeline diverging from the 6th Iran Gas Trunkline.
Power Export
According to Homayoun Haeri, a deputy energy minister, power export from Iran to neighboring countries generated $600 million in 2021.
"The state-run Iran Power Generation, Distribution and Transmission Company [Tavanir] cannot raise power exports unless infrastructures are developed," he said.
Haeri noted that although neighboring states are willing to import more power from Iran, Tavanir cannot boost exports as its output capacity is constrained by lack of investment.
Revenues generated by electricity export are more sustainable than those of oil and gas, as power prices are less dependent on oil and gas prices in the global markets.
According to the official, in the last few years, oil prices have fluctuated between $50 and $100 per barrel, although electricity export prices have not undergone such drastic changes.
"Not only is electricity an exportable commodity, but it also enjoys other unique features that distinguish it from gas," he said.
Moreover, seasonal peak differences with neighboring states can facilitate power exchange, resulting in boosting power plants' efficiency.
Stressing on Iran's capability to turn into a regional electricity export hub by tapping into its infrastructures and skilled workforce, he added, "Notwithstanding Iran's 10-year record in electricity exchange with regional countries, surprisingly no plans have been made to make it a regional hub yet.”
Pointing to measures taken by Iran's competitors, including China, Qatar and Saudi Arabia, to extend their national grid to export electricity to Europe, he said, "The Persian Gulf littoral states have taken serious steps to transfer their electricity to Europe by extending a subsea cable from the Red Sea to the Mediterranean Sea. Also, the Chinese have embarked on constructing power plants in Pakistan and synchronizing Turkey's power grid with that of Azerbaijan."
