Iraq's Power Market: "Crisis" and "Opportunity" – Systemic Collapse and the Potential of Distributed Energy

On August 11, 2025, Iraq once again faced a massive power outage, but this was not an isolated technical failure; it was the inevitable result of the long-term systemic collapse of the national power grid. Extreme heat raised power demand, causing two major transmission lines to fail, plunging Iraq into near-total darkness. Only the Kurdistan region maintained normal power supply. The intense heat and severe drought put immense pressure on the country's power system. Iraq's power demand surged, nearly double its existing capacity.

The huge power gap, aging transmission network, and unhealthy energy structure make it impossible to solve the issue solely through state intervention in the short term. However, as seen in Lebanon and South Africa, this crisis is strongly catalyzing a vibrant yet highly chaotic distributed photovoltaic and energy storage market—especially residential solar and storage. For global market participants, Iraq is a risky but clearly potential-filled market, with the government’s target of 12 GW of solar capacity corresponding to a $15-20 billion potential market.

1. The Root of the Collapse: A Dysfunctional National Grid

The recent outage affecting central and southern Iraq was triggered by a failure at the Hamidiya power station, which caused a chain reaction in the transmission lines. The fundamental reasons are rooted in three structural flaws in the entire power system:

An Unbridgeable Supply-Demand Gap

The Ministry of Electricity of Iraq forecasts that peak demand in the summer of 2025 will reach 55 GW, while the actual generation capacity is only 27 GW. A gap of over 50% means that power outages have become the norm.

A Defunct Transmission and Distribution Network

The infrastructure is severely outdated, leading to transmission losses exceeding 40%. This means that even if generation capacity is adequate, nearly half of the electricity is wasted in transit and does not reach consumers.

Contradictory Energy Structure

Despite being a major oil-producing nation within OPEC, Iraq’s power generation relies heavily on natural gas. Additionally, the country loses up to 33 GW of energy potential each year due to gas flaring. Moreover, its dependence on electricity and natural gas imports from Iran makes Iraq's energy security vulnerable to external factors.

These fundamental issues across the “generation, transmission, and distribution” chain make Iraq’s energy crisis long-term, fundamentally different from the short-term power shortages in South Africa, and more akin to the energy crises faced by Iran and Pakistan.

2. Market Opportunity: Strong Demand for Photovoltaics and Energy Storage

In the context of a failing national grid, an energy self-sufficiency movement is emerging from the bottom up, driven by “survival needs rather than policy guidance.”

Economic Drivers

For ordinary consumers, choosing solar energy is not based on environmental concerns but economic considerations. A solar system costing between 5-10 million dinars can provide a return on investment in 1-3 years, much more cost-effective than spending 5-10 million dinars per month on backup diesel generator services. The case of farmer Abdallah al-Ali is highly representative: after installing solar panels, his monthly electricity bill dropped from nearly 1 million dinars to around 80,000 dinars.

Mature Resources and Technology

Iraq has some of the best solar irradiation conditions in the world, with more than 14 hours of sunshine during the summer. The sharp decline in global photovoltaic costs in recent years has made this technology market-competitive in Iraq without the need for subsidies.

Market Self-Growth

By 2025, Iraq's distributed solar installation capacity has reached 42 MW, with a target of 12 GW by 2030. Local installers like “Mosul Solar” have seen business explode from 2024 to 2025, with 70% of their customers coming from rural areas with poorer grid access.

3. "Wild West" Market: Current Market Characteristics and Dynamics

Iraq’s solar and storage market is in the early stages of a chaotic “gold rush,” and its main characteristics are:

A Surge in Participants

This year, many foreign companies have entered the Iraqi market through exhibitions and project inspections. The market is highly active but disordered, resembling a “wild west” scenario.

An Overabundance of Low-Quality Products

This is a demand-driven market with minimal capacity for product screening (practically no control). As a result, the market is flooded with low-cost, low-quality solar and storage products, posing long-term safety and performance risks to users.

Policy and Capital Catching Up

Despite the market starting to grow independently, top-level policy is lagging significantly, with the absence of key policies like feed-in tariffs. However, the government and large capital players are starting to catch up: the Central Bank has launched a $760 million special loan program, and international giants like TotalEnergies and UGT Renewables have committed to investing in 7 GW of large-scale solar projects.

4. Professional Market Entry Strategy

In an environment of both high risk and high opportunity, any market participant must adopt a cautious and precise strategy.

Risk Awareness First

Political instability, security threats, bureaucracy, and resistance from entrenched private generator operators are core risks that must be fully assessed before entering the Iraqi market.

Focus on Off-Grid and Distributed Solutions

Given the unreliability of the national grid, off-grid and hybrid grid solutions (such as residential solar-storage and solar water pumps) are the lowest-risk and fastest-return market segments.

Partner with Local Core Players

In a market with ambiguous regulations, establishing public-private partnerships (PPPs) or joint ventures with local partners who can navigate the complex political and business environment in Iraq is key to project success.

Build Barriers through Quality

In an environment flooded with low-end products, price wars are shortsighted. The strategic focus should be on offering high-quality, long-lasting products with reliable warranties (such as 15-year warranties provided by local companies) to create a brand moat and attract a more discerning customer base.

Influence Policy Development

The current policy vacuum provides a window for forward-thinking companies to influence future market regulations. Actively engaging with the government to advocate for clear industry standards and incentive policies is an effective way to gain a first-mover advantage.