[Insight] Iraq's energy storage market: Systemic collapse and opportunities for distributed energy

On August 11, 2025, Iraq suffered another massive power outage. This was not an isolated technical failure, but the inevitable result of a long-term, systemic collapse in the country's power system. Scorching heat drove up electricity demand, causing two major transmission lines to fail, plunging Iraq into near-total darkness. Only the Kurdistan region maintained normal power supply. High temperatures and a severe drought put immense strain on the country's power system. Iraq's electricity demand soared, nearly tripling existing capacity.

The massive power gap, aging transmission network, and unhealthy energy mix make it impossible for the country to resolve the problem in the short term through national efforts. However, as has been the case in Lebanon and South Africa, this crisis is forging a vibrant, yet highly volatile, market for distributed solar and energy storage—particularly for residential applications. For global market participants, Iraq presents a risky yet promising market. The government's 12 GW solar target represents a potential market of $15 billion to $20 billion.

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

The power outage affecting central and southern Iraq was directly triggered by a ripple effect on transmission lines triggered by a failure at the Hamidiya power station. The underlying cause lies in three structural flaws within the entire power system:

• Unbridgeable Supply-Demand Gap

The Iraqi Ministry of Electricity predicts that peak summer demand will reach 55 GW in 2025, while actual generating capacity is only 27 GW. This power shortfall of over half means power outages are commonplace.

• Failed Transmission and Distribution Network Infrastructure

Severely aged infrastructure results in transmission losses exceeding 40%. This means that even when sufficient power is generated, nearly half is wasted in transit and never reaches consumers.

• Contradictory Energy Structure

As a major OPEC oil producer, Iraq relies heavily on natural gas for power generation, and loses 33 GW of energy potential annually due to gas flaring. Furthermore, its reliance on Iranian electricity and natural gas imports makes its energy security highly vulnerable to external factors.

This fundamental problem, spanning the entire power generation, transmission, and distribution chain, guarantees the long-term nature of the predicament. It differs fundamentally from the South African model, which is characterized by a simple lack of power generation capacity, and is more similar to the situations faced by Iran and Pakistan.

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

Against the backdrop of a failing national power grid, a bottom-up energy self-help movement is emerging, driven by necessity, not policy.

• Economic Drive

For ordinary users, choosing solar energy isn't driven by environmental considerations, but rather by economic considerations. A solar system costing 5-10 million dinars has a one-to-three-year payback period far superior to paying 50,000-100,000 dinars per month for backup diesel generators. The case of farmer Abdallah al-Ali is particularly representative: after installing photovoltaics, his monthly electricity bill plummeted from nearly 1 million dinars to approximately 80,000 dinars. 2. Mature

• Resources and Technologies

Iraq boasts world-class solar irradiation conditions, with over 14 hours of sunshine in summer. The sharp decline in global photovoltaic costs in recent years has made this technology competitive in Iraq without subsidies.

• Spontaneous Market Growth

By 2025, Iraq's distributed solar capacity will have reached 42 MW, with a target of 12 GW by 2030. Local installers like Mosul Solar Energy Company are expected to see a surge in business between 2024 and 2025, with 70% of their customers in rural areas with poorer grid access.

3. "Grassroots Melee": Current Market Characteristics and Dynamics

Iraq's solar-plus-storage market is in the early stages of a typical, chaotic "gold rush," with the following key characteristics:

• Flock of Participants

Since the beginning of this year, a large number of foreign companies have entered Iraq through exhibitions and project inspections, resulting in a highly active but chaotic market characterized by a "grassroots melee."

• Prevalence of Low-Quality Products

This market is defined by rigid demand, with little ability to screen product quality ("almost no control"). As a result, the market is flooded with low-cost, low-quality photovoltaic and energy storage products, posing long-term safety and performance risks to users.

• Policy and Capital Catch-Up

Although the market has taken off naturally, top-level design is severely lagging, lacking key policies such as the Feed-in Tariff. However, the government and large capital investors are beginning to catch up: the central bank has launched a $760 million special loan program; international giants such as Total Energy and UGT Renewables have pledged to invest a total of 7 GW in large-scale solar projects.

4. Professional Market Entry Strategy

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

• Prioritize Risk Awareness

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

• Focus on Off-Grid and Distributed Energy

Given the unreliability of the national power grid, off-grid and hybrid grid-connected solutions directly targeting end users (such as household solar-plus-storage and solar water pumps) currently represent the lowest-risk, highest-return market segments. While residential energy storage system purchases in developed countries are driven by electricity cost savings and arbitrage opportunities to capitalize on peak and valley electricity price fluctuations, the purchase of residential energy systems in the Middle East, a group of countries and regions that China refers to as "Belt and Road Initiative" initiatives, is driven more by a rigid demand for stable electricity supply. This situation is detailed in our article [Insight] Global energy storage demand is surging, with varying reasons but consistent results.

• Tie in with key local partners

In a market characterized by ambiguous regulations, establishing public-private partnerships (PPPs) or joint ventures with Iraqi partners capable of navigating the complex local political and business environment is crucial to project success. For B2C products like residential energy storage systems, local companies with mature B2C sales channels and logistics capabilities are undoubtedly excellent partners and can continue to leverage their existing advantages in the local market.

• Build a competitive advantage through quality

In an environment flooded with low-end products, price wars are short-sighted. The strategic focus should be on providing high-quality, long-lasting products and services with reliable warranties (for example, a local company may offer a 15-year warranty, but whether the local company can survive for 15 years may be questionable). This will build a brand moat and attract a customer base that demands higher reliability. Not only is the product's quality stable, but pre-sales and after-sales service capabilities are also crucial. Promptly addressing any issues and improving the user experience is crucial for Middle Eastern customers.

• Influencing the Development of Rules

The current policy vacuum provides for visionary companies with a window to influence future market rules. Actively engaging with the government and advocating for the establishment of clear industry standards and incentive policies is an effective way to gain a first-mover advantage. As mentioned in our article [Insight] Global energy storage demand is surging, with varying reasons but consistent results, low-repurchase products like real estate, automobiles, and energy storage systems require all participants to enter the market with a "quickly seize the market share" mentality. If you don't "capture" a rooftop or a balcony today, the next opportunity to sell it will be an average of 10.5 years from now.

The following chart shows the latest statistics from the China Energy Storage Application Association (CESA) database. This chart shows the total amount of new overseas energy storage orders from Chinese companies in different regions 2025 1H, measured in MWh. The first group, circled in red, represents the "Middle East group." The countries and regions listed, from top to bottom, are: UAE（阿联酋）, Saudi Arabia（沙特阿拉伯）, Turkey（土尔其）, Egypt（埃及）, and other Middle Eastern countries（中东未披露具体国家）. By 2025 1H, the total installed capacity of energy storage systems in the Middle East was remarkable, but this impressive achievement is just the beginning.

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Kada Energy, a subsidiary of REBIO GROUP, is collaborating with leading local companies, primarily in Belt and Road countries, as well as leading Chinese energy storage manufacturers. Based on information on each country's policies and regulations, population breakdowns, income levels, credit conditions, power systems, power outages, and distribution channels, it provides comprehensive services, including product design, pricing, marketing strategies, and logistics supply chains.

We help local distributors quickly seize market share and China manufacturers quickly secure orders. If you're interested in collaborating with us, please feel free to contact us.