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Iraq, PowerChina ink agreement to develop up to 2 GW of solar power

Highlights

First phase of agreement to include 750 MW

Iraq under US pressure to lower dependence on Iranian energy

Iraq signed this year solar agreements with TotalEnergies, Masdar

Iraq and state-owned PowerChina have signed an initial agreement to develop up to 2 GW of solar power plants, the prime minister's media office said Aug. 25, as OPEC's second-biggest producer seeks to lower its dependence on imports of Iranian electricity.

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In the first phase, PowerChina will develop 750 MW, the media office said, without disclosing more details about the agreement.

PowerChina's Dubai-based MENA office was not available for comment.

Iraq is under increasing pressure from the US to wean itself off electricity and gas imports from Iran, which has been subject to US sanctions since 2018.

The US administration has been granting Iraq waivers since 2018 to continue importing Iranian energy.

The US State Department granted another sanctions waiver allowing Iraq to import Iranian electricity until December as it grapples with frequent power outages and lack of domestic capacity, a department spokesperson said Aug. 5.

Iranian intermittent supply of gas and electricity has led to widespread shortages in Iraq this summer, when the temperature has soared to 50 degrees Celsius, especially in the south.

Adding to Iran's outage is the difficulty Iraq is facing in paying billions of dollars of dues to sanctions-hit Tehran, complicating Baghdad's ability to settle its arrears without the threat of financial repercussions.

Gas-flaring dilemma

Despite the intermittent supply and US pressure, Iraq's overreliance on imports of Iranian energy and delays in capturing its own flared gas for power generation, which is mainly gas-based, is unlikely to abate soon.

Iraq was the world's second-worst flaring nation after Russia in 2020, burning some 17.37 Bcm of gas last year, according to the World Bank. Iraq has been the world's second-worst gas-flaring nation since at least 2016, World Bank figures showed.

Cash-strapped and politically-hobbled Iraq has been slow to capture its associated gas, which forms the majority of its production, due to the financial crisis gripping the country and its complicated ties to Iran, which still wields power in its neighbor.

Frequent attacks on power lines and pylons blamed on a resurgent Islamic State have also exacerbated Iraq's power shortages.

Solar projects

Iraq has signed renewables agreements this year with TotalEnergies and Masdar, the renewable energy arm of Abu Dhabi's sovereign wealth fund Mubadala Investment Company.

Iraq's agreement with Masdar includes the development of at least 2 GW of solar projects in the country, the two sides announced June 25.

Iraqi officials said the agreement would help further the country's goal of generating 20%-25% of its energy from renewables, equivalent to 10-12 GW by 2030.

In March, Iraq signed an agreement with TotalEnergies to build a 1 GW solar power.

Iraq is also seeking to import power from Jordan, Turkey, Saudi Arabia and grid of the six-member Gulf Cooperation Council.