Decentralizing And Restructuring of Iraq’s Electricity Supply System

By Isam AlKhalisi

The following article was written exclusively for MEESby Isam AlKhalisi, an independent consultant who worked in the construction, operation and management of power plants for Iraq’s National Electricity Administration, subsequently on design and project management of power plants and other public utility systems. Email: isam.alkhalisi@ntlworld.com

For almost 14 years Iraq’s national electricity supply system has failed in its duty to provide energy, vital to most aspects of the citizens’ private and public life. The stock justification is that it was all because of war, sabotage and looting. But no explanations are ever given as to why a system is maintained whereby a problem originating in a remote location can spread to affect large areas or the whole country without devising solutions to eliminate or minimize repetitions.

Extensive electricity load shedding and large area shutdowns have been accepted features of life since the first Gulf War. A typical case, in September 2004¹, occurred when an interruption at a single point in a transmission line in the north of the country caused most of the state, even towns hundreds of kilometers away, to suffer shutdown for days afterwards. This serious failure in the electricity system was, in fact, a by-product of sabotage to an oil pipeline: the subsequent fires melted a section of the electricity line. Nevertheless, it highlighted some inherent faults in the design and architecture of Iraq’s national electricity system.

Most prominent of these is the existence of bottlenecks in the system whereby an accident, of any nature, will interrupt power supplies to areas far away from the point of fault. In the above case, the power station involved supplies less than 10% of its installed capacity to the adjoining areas, with the remainder transmitted elsewhere via the line which was damaged. With such substantial loss to the system, generators in other parts of the country try to make up for the lost supply, become overloaded and then themselves shut down.

The cited circuit interruption happened near Baiji Power Station but could have occurred, as it did before and has since, at many similar points along the hundreds of kilometers of Iraq’s high voltage national grid. Yet even more new generators are being installed at the Baiji station, as at most other existing stations, increasing the ratio of exported supply to outside areas relative to local need, thus increasing the probability of general failures.

Centralized System

Iraq’s centralised electricity generating system follows the model originated in developed countries early in the last century when coal was the principal fuel for electricity generation, but transportation of solid fuels cost more than electricity transmission. The same rationale was applied in Iraq in the 1950s when the country’s first three central power stations were put into operation. At that time, although Iraq’s power plant fuels were liquid, residual or crude oil, or natural gas, the country had a very limited fuel distribution network.

With advances in technology and the availability of liquid fuels and gas, and for economic considerations, the Western world has now moved towards locating all new fossil power stations nearer load centers rather than the sources of the fuel. Not only is this evolved model more economically rational for Iraq to follow, crucially, it is also more suitable for a country without a peaceful operating environment. The attacks on the World Trade Center towers and the Pentagon in September 2001, as well as the power cuts on the East Coast of North America², the Italian peninsula³, parts of Scandinavia⁴ and in London at different times in the summer of 2003⁵, have all influenced reevaluation of the suitability of centralised power generation for the 21st century.

The Achilles heel of centralised power generation is its vulnerability to external disturbances such as freak weather – and wars or internal conflicts, as also demonstrated in Lebanon and Bosnia. In research published by the Department of Engineering and Public Policy at Carnegie Mellon University⁶, a simulated model of 284 identical 12mw units were substituted for an existing system consisting of 32 generating units ranging in size from 12mw to 400mw (3,405mw total capacity) to meet a demand of 2,850mw. It was found that, using the IEEE Reliability Test System, the sensitivity of the simulated model to systematic attacks decreased to up to 1/5th of that of the centralised system. In most developed countries the drift from a pure centralised power generation system over the last few decades has been clearly discernable. In the UK, where the public electricity supply system’s total installed generation capacity is around 72,000mw, 51 new power stations were commissioned between 1991 and 2001. Their total capacity, excluding nuclear and hydro plants, is in excess of 21,000mw. The largest provides 2.55% of the national installed capacity. In comparison, Iraq was planning before the war for five new power stations totaling 7,300mw each to carry between 12% and 18% of the hoped for total installed capacity upon completion.

Missed Opportunity

Iraq, however, missed the opportunity in the aftermath of the 1991 Gulf War to reconstruct its energy network to a decentralised pattern. With the construction of hundreds of kilometers of crude oil and gas pipelines already completed, this could have been feasible but funding, up to 1996, and foresight were inadequate. Admirable efforts were made to raise the generating capacity from 1,800mw to around 4,000mw by 1993. It remained around this level – a far cry from the 10,000mw pre-war installed capacity – until the hostilities of 2003. After 1996, when funds became progressively available under the UN Oil-for-Food program, efforts were concentrated on building new large central power stations which require long lead times for project planning, contract formalities, manufacturing and site preparation. By the end of 2002, $1.7bn⁷ of the country’s Central and Southern regions approved and available electricity allocation was awaiting Iraqi government completion of contracts with manufacturers. Another $1.7bn had already been spent by October 2003. Had the bulk of the Oil-for-Food funds allocated for electricity works been devoted to installing smaller plants dispersed nearer load centers, full load demand could well have been met. The increasingly common power cuts could well have been substantially reduced, if not eliminated, country wide. Furthermore, the effects of sabotage or looting of transmission assets in the wake of the 2003 war would have been considerably lessened.

The signs had been there for far earlier, however, that a fully centralised power generation system is unsuitable for Iraq. A first cautionary note came in the 1967 Middle East war, when one Israeli aircraft was shot down over the western desert. It was rumored that the plane’s intended targets were the middle region’s two main power stations and Iraq’s then only oil refinery, all within a 10km radius. In 1982, the Israelis bombed the nuclear reactor in Baghdad. In the war with Iran, two central power stations in Baghdad and Basra were irreparably destroyed. In the 1991 Gulf War all of the country’s 17 fossil-fuelled power stations were damaged either substantially or totally. Thirteen years and billions of dollars later, Iraq’s generation capacity could only be brought to less than 40% of the pre-1991 capacity. The war of 2003 was by itself kinder to Iraq’s electrical supply system, apart from destruction to a few distribution substations. However, in the following period the system has been repeatedly brought to standstills by acts of sabotage or looting, and recovery has been slow. Deterioration in the security situation has obstructed rehabilitation work and the installing of new generators, and confusion has been created by the sudden involvement of new unfamiliar authorities with untested procedures for work orders and materials ordering. But the underlying technical causes that allowed the quick spread of local incidents to affect large areas or the whole country lie in the architecture of the system.

Design Flaws

Basic design flaws in individual power stations are also evident. Most of the central power stations do not have emergency (black start) facilities to enable individual stations to restart independently after each shutdown, emergency or otherwise. They depend on other stations running properly with the interconnecting lines healthy and energized. In at least two separate occasions in 2003, main power stations, one in Baghdad and one in Basra, could not be restarted after transmission lines were interfered with, thus depriving the system from electricity for days at a time until the lines were repaired and interconnections restored. In other cases, stations could not be restarted even when black start facilities were available; in two other separate instances power stations could not be restarted for lack of fuels normally pumped from nearby refineries. However, the refineries’ own pumping facilities could not be operated for lack of electricity. This deadlock was only broken days later in both cases after repairs to distant transmission lines were carried out and power supplied from faraway stations, including a hydro-electric plant in the distant north.

Iraq’s electricity supply industry is state-owned, and hence the government has had a full monopoly on the generation, transmission and distribution of electricity for the domestic and industrial sectors. At the same time there is no legal obligation on it to guarantee continuity or quality of supply to its customers, nor has there been accountability to the public beyond occasional media releases. No budget has been published for the industry for over three decades. The veil of secrecy was only partially lifted after 1996, when the government was obliged to justify applications for funds after it agreed to deal with the UN in the Oil-for-Food Memorandum of Understanding. Limited reports were then made available – but the public in Iraq had no access to the internet where these were published. But the administration of the electricity organization has always been opaque. One past President of the Electricity Commission was jailed, rumored for unauthorized side dealings. He was released in the general amnesty given to all prisoners before the last war. After the war and up to 28 June 2004, contracts totaling $694mn were awarded by Iraq’s Ministry of Electricity in conjunction with the Coalition Provisional Authority (CPA), on top of $501mn⁸ expended directly by the CPA, all from Iraq’s own funds. As far as can be discerned, these outgoings were not scrutinized by any Iraqi supervising authority, nor by the US Congress as no federal funds were involved, nor by the International Advisory and Monitoring Board, the audit oversight body for the UN-appointed Development Fund for Iraq.

Electricity As Political Tool

Centrally-generated and centrally-managed electricity in Iraq was used and abused, like other apparatus in a regime accountable only to itself. In the 1980s contracts for new power plants were awarded, some times unnecessarily, but for vested interests. By 1991, Iraq’s installed electricity generating capacity was more than twice the load demand at the time. Between 1991 and 2003, when the country was under electricity rationing, electricity was used as a political tool to reward or punish sectors of the population. It was quite common for large sectors of the country to suffer longer blackout periods than scheduled when the bulk of the electricity supply was directed to a single town or a favored region. Areas where party officials lived were assured of uninterrupted electricity supply, while other areas were plunged into darkness. In the summer of 2002, Baghdad City had continuous power supply when the rest of the country suffered daily power cuts of between seven and 13 hours⁹. All this affected the morale of the industry personnel who worked around the clock to ensure continuous flow of electricity, but whose families were left without power. Resentment also built up in the provinces, particularly in towns with electricity generating plants which supplied electricity elsewhere. Pent-up frustration found its relief in the chaos which followed the 2003 invasion. The London Guardian (4 October 2003) showed a photograph taken near Basra of twisted high-voltage electricity pylons, with the cables still attached, over the caption “Around 500 of the pylons have been toppled by saboteurs, some of them utility workers anxious to keep power supplies from Baghdad and for themselves.”

After the 2003 war the occupation coalition brought in “advisors” with the brief to direct "emergency repair or rehabilitation of power generation facilities and electrical grids" and "to restore capacity to Iraq’s power system, which had been looted and was dilapidated from decades of neglect and mismanagement"¹⁰. Inept preparation and lack of knowledge of the intimate working of the system became apparent within days of the start of the occupation, when saboteurs and looters attacked high voltage transmission lines. Intelligent planning and forethought might have expected and pre-empted such actions. Diffused authority, confused management and, at times, a foreign army residing inside a power station have all contributed to the destabilization and alienation of the workforce in the post-war administration. This, coupled with the need for quick-fix solutions, which at times brought further new problems¹¹, has accounted more for the delays in restoring power supply than the acts of sabotage.

Since April 2003 only few changes to the basics of running the electricity industry have taken place. On the positive side, the Occupation’s CPA Administrator rescinded the government monopoly for electricity supply but due to deteriorating security and ongoing conflicts the challenge has not yet been taken up by the private sector. However, changes in the management structure could prove regressive.

Management of Iraq’s public electricity supply, its largest public service industry and the biggest absorber of public funds has been transferred from a semi-independent Commission to a bureaucratic Ministry headed by a political appointee. This Ministry now has around 35 disparate departments, each headed by a Director General answerable to an “interim” Minister who is also the Chief Executive Officer. Politicisation of top management of an industrially based organisation of national strategic imperatives increases the potential for short term thinking, mediocrity and even corruption. In neighboring countries, ministers for electricity act as chairmen of boards, leaving the day-to-day running to dedicated full-time professional CEOs.

Change of organizational structure in an uncertain political climate, together with the injection of “advisors” of influence answerable to outside authorities may have contributed to the drop in morale among workers and engineers and the slow pace of recovery of the system, despite a substantial infusion of funds. And neither the new management nor, indeed, USAID and their contractors, has shown any inclination to examine the root problems in the technical structure of Iraq’s electricity supply system.

Establishing the Interim Governing Council and the later transfer of administration to the Interim Government has made no changes to the previously established approach to building Iraq’s public electricity system despite its demonstrated vulnerability. All newly announced generating units are either additions to existing power stations that are already overpopulated with generating units, or new power stations of 10 to 20 generating units each. Such a high concentration of investment in so few sites is the result of sloppy planning and/or of influence of influential corporations and their facilitators who prefer a few large contracts to many smaller ones. Splitting up such large contracts into smaller lots at different locations would have introduced elements of competition among suppliers, contractors and plant operators with shorter times for completion and a spread of desperately needed employment opportunities, quite apart from spreading risks in times of violent conflicts and lawlessness. International relations and local geopolitical undercurrents are outside the control of professional planners of electricity supply systems, but failing to take them into account is surely negligent.

Appropriate Management Model

For effective decentralization of power generation, an appropriate management model is required. This must be based on geographical considerations to provide local accountability for the service, and at the same time, shorten lines of authority to facilitate quick recovery to a reliable system. It is proposed that the country is sectorised into a number of island networks, each under the management of a local board. The sectors can be drawn in clusters encompassing load and population centers or perhaps along administrative divisions. Each Sector Board will be made responsible for covering the electrical energy needs of its area to strict national regulations. Neighboring networks will have the facility to interconnect with each other as well as to the National Grid. In normal operating conditions, all networks operate under the management of a National Control Centre yet each island network, with its own regional control centre, would be self sustaining and self sufficient with a pre-defined spare generating capacity for local and national needs. Each Board will have two distinct cost centers, one for generation and one for distribution.

The National Grid, which must remain a single integrated entity, will control frequency and voltage and real time system security as well as energy exchanges between regions. Predetermined surplus capacities will be guaranteed from each region for frequency control and for emergencies. The regional Boards, accountable to their respective local authorities, will interact technically and managerially with each other and with the National Grid as defined in new national regulations. Enforcement of these will be mandated to a state national agency, to be called, say, The Office of Electricity Services Regulation, constituted from the core organisation of the old Electricity Commission and responsible to the Council of Ministers and Parliament. Projects planning and execution will be the responsibility of the local Boards in conjunction with local and national planning guidelines. Initial funding for the Boards must come from the present sources as directed by central government. In the long run and under stable conditions, local Boards may be made self financing and focusing state subsidy to specified categories of consumers rather than the blanket subsidy that is at the moment.

New plants, some may be privately financed and some may feed directly into distribution networks, will still operate in conjunction with the National Control Centre which must be part of the national grid but, in emergencies, may disconnect to operate independently. Individual stations must be much smaller in unit numbers and, depending on locality, unit sizes than the existing or planned plants. The prime function of new electricity generating plants will be to fulfill the requirements of their localities, with predetermined extra capacity to feed the national network on agreed schedules or in emergencies. A ceiling must be placed on the number of units and capacity of individual stations. Privately financed power stations may be licensed to supply consumers under bilateral contracts with individual bulk consumers, for which the National Grid makes wheeling charges, or on long-term agreements with the National Grid. Industrial enterprises, such as chemical and refinery plants, must be encouraged to install their own combined heat and power or cogeneration plants and to sell excess capacity to the grid. The larger the number of plants, the higher the probability of maintaining at least a partial supply instead of total shutdown in the event of acts of war or sabotage. Damaged transmission towers would only produce local power shortage.

Financial Implications

Net financial implications for both hardware and the proposed devolved administrations for Iraq’s electricity system are likely to be of minor impact on the present budget for the system. Installed costs of smaller sized power stations may be marginally higher relative to total installed capacities but little of that will be for imported hardware, the rest will be extras in local works. On the other hand modern power plants require a considerably smaller number of operators per installed kw than old-fashioned generating plants. The Office of Electricity Services Regulation will be mandated to issue rules, standards and benchmarks to supervise performance of Regional Boards for safety, reliability, efficiency and tariff levels. It may also be assigned the supervision of the Boards’ financial activities whilst they are under public ownership. But this must nonetheless allow the Boards freedom to encourage initiatives and promote competition to lower costs of production. All senior executive appointments within the Regional Boards and Regulating Office must be made according to transparent procedures and open to applicants nationally.

Transition to a decentralised electricity supply system will require further deliberations to consider the final formats for both the technical and organizational aspects of the scheme. It must also be subject to wide public consultations. While working on the legal, administrative and financial aspects of setups for the new regional organizations, technical cadres of the existing administration can proceed immediately to explore sites for new smaller generating plants to predetermined criteria for losses, supporting services and risk assessments. Local consultants can be engaged to prepare not only feasibility studies but to draw up specification and assistance in the supervision of construction and taking over.

Splitting the electricity supply industry from a single national organization into competing, generating and distributing concerns joined by a single National Grid and Pool entity is neither original nor new. Most countries of Western Europe have implemented such schemes since the 1990s. Several countries in the Middle East are in different stages of converting into such systems. Most countries, though, embark on this process for eventual privatization of the industry, to introduce elements of free enterprise and competition, and to attract foreign investment. It is clearly premature to bring privatization into Iraq at the present indeterminate political state of the country, but this may be regarded as desirable by an incoming full sovereign government and parliament. But regardless of private or public ownership, the electricity system must be run efficiently, and the economic advantages of decentralization are overwhelming.

Smaller Power Stations’ Advantages

In summary: smaller power stations spread around the country will:

Be less vulnerable to attack from acts of sabotage or war, and if forced into shutdown, will have a smaller effect on electricity supply nationwide.
Have shorter lead times to be manufactured, installed, put into operation, and be on-line than the larger plants.
Diversify suppliers, thus increasing vendors’ competition. Spares are more available from diverse sources.
Be more suited to the daily load pattern with predominantly domestic and low load factors. Smaller units require shorter times for start-ups and shutdowns.
Provide more employment opportunities, which will also be spread out throughout the country, both at the construction and operation stages.
Be less complex and less technically demanding, so enabling more local participation.
Be training grounds for local skilled technicians who will be useful to the local communities in other, related industries.
Allow locally-recruited employees to serve their own communities.
Be regarded as part of the public amenities for the area and communities will be empowered to protect them.
Draw in participation from local national investors. Large sized power stations limit participation and competition to very few multinational companies. Local investors have vested interest in national projects, different perception of country risk and commit for longer terms.