On October 9, Iraq took a crucial step toward regional energy integration by joining the Gulf Cooperation Council Interconnection Authority (GCCIA). Originally created to link the power grids of the six Gulf Cooperation Council (GCC) nations — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE — the GCCIA’s latest expansion into Iraq underscores the importance of cross-border energy collaboration to meet rising electricity demands across the Persian Gulf region. Iraq’s inclusion, and its existing energy ties with Iran, hint at the potential for a broader initiative: a Gulf-wide power grid that could eventually include all eight states bordering the Persian Gulf.
Electricity demand in the Persian Gulf has surged due to rapid population growth, industrialization, and the need for energy-intensive activities such as desalination. From 2010 to 2023, the region’s population grew from 153 million to 194 million, and it’s projected to exceed 300 million by 2050. This demographic increase has intensified the strain on power generation systems, which predominantly rely on fossil fuels. Electricity consumption per capita rose by 74% between 2000 and 2022, driven by economic growth, infrastructure expansion, and rising commercial activity.
The Persian Gulf’s hot climate, with summer temperatures regularly hitting 50°C, has made space cooling a necessity, further boosting electricity demand. The region also depends heavily on desalination for freshwater, a highly energy-intensive process. This demand is compounded by longstanding government subsidies for electricity, which have encouraged high consumption levels among residents.
As of 2023, the Persian Gulf states had a combined power generation capacity of 272 gigawatts, with 70.4% coming from natural gas, 25% from oil products, and 2.2% each from nuclear and renewable sources. The residential and commercial sectors dominate power usage, accounting for 40% and 30%, respectively, while the industrial and agricultural sectors make up 22% and 6%.
To keep up with rising demand, cross-border electricity trade has become increasingly common in the Persian Gulf region. Between 2016 and 2022, the region’s electricity trade amounted to 126.5 terawatt-hours, with Iran accounting for a significant portion by exporting power primarily to Iraq. Iraq, which imports 40% of its electricity needs from Iran, has long struggled with power shortages. In 2022, despite an installed capacity of 29.4 GW, only 15.7 GW was effectively available due to inefficiencies, while demand peaked at 30.5 GW.
However, Iraq’s energy dependence on Iran faces challenges due to U.S. sanctions, which complicate payments and have led to an $11 billion debt. Although Iraq has proposed an oil-for-gas barter agreement with Iran, U.S. opposition and other regional tensions have hindered a smooth resolution.
As discussions around integrating Iran into the GCCIA grid progress, significant opportunities arise. A unified Persian Gulf energy network, including Iraq and Iran, would not only enhance energy security but also enable resource-sharing across the region. Iran’s renewable energy potential, particularly in solar and wind, could help balance power distribution. Such integration could also utilize time-zone differences to extend peak energy supply periods, allowing for more efficient solar power use across the Persian Gulf.
Despite obstacles — including the need for infrastructure investment, coordinated pricing, and political challenges — a Gulf-wide power grid holds transformative potential. Enhanced energy interdependence could stabilize regional relations and facilitate cooperation on broader issues like water security and climate adaptation, both of which are critical as the Persian Gulf grapples with extreme heat and water scarcity.
With Iraq now connected to the GCCIA, this pivotal agreement has opened doors to expanded regional energy collaboration. As diplomatic relations between Iran and the Arab Gulf states progress, the prospect of a unified Persian Gulf power grid becomes increasingly feasible, promising a new era of cooperative resilience for the Persian Gulf’s energy sector.
