Masdar, a subsidiary of Mubadala Investment Company, and Iraq’s Ministry of Electricity and National Investment Commission signed an agreement on Wednesday that implements the first phase of solar projects that will boost the country's goal of generating 20-25 per cent of its energy from renewables, equivalent to 10-12 gigawatts by 2030.
The agreement, a sign of strengthening ties with the UAE under the government of Iraqi Prime Minister Mustafa Al Kadhimi, will build power stations in five locations across Iraq that will generate 1GW. The second phase of the agreement will add another 1GW of capacity.
As part of the first phase, Masdar will develop photovoltaic projects with a capacity of 450 megawatts in the Dhi Qar governate in southern Iraq; a 100MW and a 250 MW plant in Ramadi in the central part of the country; a 100MW plant in Mosul in the north, and a 100 MW plant in Amarah in the southeast.
The agreement was concluded in Baghdad in the presence of Mr Al Kadhimi, Suhail Al Mazroui, the UAE's minister of energy and infrastructure, Ihsan Ismaael, Iraq's oil minister and Adel Karim, Iraq's minister of electricity. Salem Issa Qattam Al Zaabi, the UAE ambassador to Iraq, Mohamed Jameel Al Ramahi, the chief executive of Masdar, were also present. The agreement was signed by Suha Al Najjar, president of Iraq's National Investment Commission, Maha Hamoudi Abdul-Jabbar, the director general of the investments and contracts department at the ministry of electricity, and Mr Al Ramahi of Masdar.
“This agreement represents an important step forward in relations between the UAE and Iraq and will support Iraq’s efforts to achieve its clean energy and climate change goals," Mr Al Mazroui said. “Through this milestone agreement, we look forward to exploring similar such opportunities in the region, and to consolidate our partnership with our brothers in Iraq in order to ensure a more sustainable future for the region."
Masdar chief executive Mr Al Ramahi said the agreement will facilitate knowledge exchange between the two countries who share a common goal to diversify the energy mix and to take a lead on climate action.
Iraq, the second-largest oil producer in the Organisation of Petroleum Exporting Countries, is one of the least diversified exporters in the Middle East and is looking to increase the percentage of renewables in its total power production capacity by the end of this decade to address supply issues and meet climate objectives. The country, which is estimated to have 8.4 per cent of the world's proven reserves of oil, derives close to 90 per cent of government revenue from the sale of crude.
Iraq has suffered from the vagaries of the oil markets, which affect its ability to finance several infrastructure and utility projects in the country. The country has been forced to import electricity from neighbouring states as its war-ravaged infrastructure still provides limited power.
"Iraq's infrastructure was heavily damaged over the past decades and that's why we are always short of electricity so adding 2GW in two phases is going to be a significant contribution to our energy needs," Ms Al Najjar told The National.
Baghdad has spent $120 billion over the past seven years to meet its electricity requirements, according to the International Energy Agency. Last year, the Paris-based agency said it was stepping up its support for Iraq as it faced delays in implementing critical projects due to the fall in oil prices from the Covid-19 pandemic.
Iraq has taken tentative steps to restructure its economy away from fossil-fuel dependency as the world prepares to reach net-zero emissions by 2050.
"Having a company like Masdar is a confidence in Iraq and the attractiveness of the market," Ms Najjar said. "For a company like Masdar to do 2GW in Iraq which is more than 15 per cent of their total capacity shows the significance of Iraq to their operation and that Iraq is a promising market."
Masdar, fully owned by Mubadala Investment Company, is a major player in the renewable energy sector around the globe. It currently operates in more than 30 countries with a total renewable energy capacity of more than 11 gigawatts, representing a combined investment of approximately $20 billion.
"Masdar’s has proven its pioneering status through its diverse projects portfolio and contribution to the UAE’s efforts to build a competitive, knowledge-based economy, one based on innovation and sustainability with an advanced infrastructure," Mr Al Mazroui said.
As Iraq presses forward with diversifying its energy sources and tapping solar energy to plug its power deficit the project developed by Masdar will help facilitate the country's 2021-2030 sustainable transition plan and enable it to attract other large players in the energy sector, Ms Najjar said.
Last month, Iraq signed an agreement with French energy major TotalEnergies for four oil and gas projects worth $27 billion. The France-based company will invest in projects to recover gas being flared across three oil fields in Iraq and use the gas to generate power from a plant with 1.5 Gigawatts capacity in the first phase. The move will help the country plug its power deficit and use its energy reserves more efficiently.
Iraq plans to eliminate gas-flaring by 2022. The World Bank estimates about 16 billion cubic metres of gas from Iraqi fields were flared in 2015, costing the economy billions in lost revenue.
The development of Iraq's renewable energy sector is an important step for the country. It will help it reduce the environmental impact from gas flaring, lower pollution levels and help the country save the oil that it uses to generate electricity.
The solar energy deals are being funded by investors, which is a "significant shift", as Iraq's government is not funding the projects, Ms Al Najjar said.