Electricity reform is one of Iraq’s most difficult policy
challenges. For decades, Iraqi governments, including Kurdistan
Regional Goverment (KRG) have poorly managed investment in
the electricity sector, while electrical demand has continued to
climb. The governments have made little progress in curbing
demand by collecting tariffs or instituting energy efficiency
standards in building codes. The results of this
mismanagement are chronic shortages and politically sensitive
pricing, which have kept demand and supply permanently out
of balance.
Over time, this mismatch produced a hybrid system
where the subsidized public grid could not keep the lights on
and a parallel market of expensive privately run diesel
generators filled the gaps. The result was absurd but durable:
households paid twice for electricity — once to the
government and again to neighborhood generator operators —
and still went without reliable around-the-clock supply.
The Runaki program, which was introduced by the Kurdistan
Regional Government (KRG) in 2024, is the most substantive
Electricity reform is one of Iraq’s most difficult policy challenges. For decades, Iraqi governments, including Kurdistan Regional Goverment (KRG) have poorly managed investment in the electricity sector, while electrical demand has continued to climb. The governments have made little progress in curbing demand by collecting tariffs or instituting energy efficiency standards in building codes.
The results of this mismanagement are chronic shortages and politically sensitive pricing, which have kept demand and supply permanently out of balance. Over time, this mismatch produced a hybrid system where the subsidized public grid could not keep the lights on and a parallel market of expensive privately run diesel generators filled the gaps. The result was absurd but durable: households paid twice for electricity — once to the government and again to neighborhood generator operators — and still went without reliable around-the-clock supply.
The Runaki program, which was introduced by the Kurdistan Regional Government (KRG) in 2024, is the most substantive attempt in recent years to break this cycle. By combining smart meters, digital billing, and progressive tariffs with a commitment to centralized electricity management, the program aims to deliver 24-hour power across the Kurdistan Region by the end of 2026.
Around 5.5 million residents — or roughly 85% of the population — are currently connected through the program, with coverage expanding across Erbil, Sulaymaniyah, Duhok, and Halabja.1
In its early phase, Runaki delivered real gains: around-the-clock supply in covered areas, stronger billing discipline, and a visible decline in generator dependence.
But the spillovers of the U.S.-Israel war with Iran have exposed a vulnerability that pricing reform alone cannot fix. The conflict has disrupted power provision in the Kurdistan Region, mostly because of the precautionary shutdown at the Khor Mor natural gas field, which underpins roughly 80% of the area’s electricity generation.2 Even in areas fully served by Runaki, supply fell sharply — sometimes to just 10–12 hours a day — forcing households and local authorities to restart diesel generators as an emergency measure.
This article argues that recent war-time disruptions do not reverse the Runaki reform, but they do fundamentally reframe it. To remain sustainable, Runaki must now incorporate energy security considerations alongside its pricing and efficiency agenda.
Before Runaki: The Political Economy of a Broken Electricity System
Before Runaki, the Kurdistan Region — like the rest of Iraq — ran on a dual electricity system. The public grid provided subsidized power, but consistently failed to meet demand. Private neighborhood diesel generators filled the gap at more expensive market prices.
This arrangement was inefficient, but remarkably durable.
Electricity was underpriced, which encouraged overconsumption and eroded incentives to pay bills. Diesel generator operators, meanwhile, offered a flexible — if expensive — backup. Transmission and distribution losses were among the highest in the world. According to a World Bank estimate, this often reached between 50% and 60% of total electricity output.3 The system persisted because it worked politically, even as it failed economically.
The fiscal cost was equally striking.4 Each year, the KRG paid more than 2.6 trillion IQD (around 2 billion USD) to independent power producers supplying the grid, while collecting just 0.6 trillion IQD (roughly 462 million USD) in revenue due to both technical limitations in billing and widespread power theft.5 As Figure 1 illustrates, the system persisted not because it was working, but because it served the interests of those within it.
Runaki's Reform Logic
Runaki targets two of the system's deepest flaws: weak enforcement and distorted pricing. Smart meters and digital billing reduce theft and non-payment and strengthen revenue collection. Progressive tariffs introduce price signals that better reflect the real cost of producing electricity. As Figure 2 shows, lower consumption brackets remain affordable — protecting poorer households — while higher consumption becomes progressively more expensive. This shifts the incentive structure away from politically driven pricing and towards consumption that reflects economic reality.
In a similar setting, Jordan’s electricity tariff reform demonstrated that gradual price increases, combined with progressive tariffs and targeted compensation, can improve cost recovery while protecting low-income households. Meanwhile, World Bank findings show that reform outcomes depend heavily on distributional design and public acceptance.
The KRG’s Runaki adopts a similar progressive pricing logic, but places greater emphasis on digital metering and enforcement. However, it faces stronger energy security constraints that complicate implementation.7
The results have been significant. According to KRG Minister of Electricity Kamal Mohammed, peak demand in Runaki-covered areas has fallen by around 40%.8 For example, a residential compound that previously needed 10 megawatts now requires only 6 megawatts. This has allowed the grid to move closer to continuous supply without requiring a corresponding increase in generation capacity. This represents a powerful demonstration of what price signals can achieve on the demand side.
The KRG’s billing data paints a reassuring picture of affordability. Around half of households are billed below 73,000 IQD (approximately 53 USD) per month and 80% of households are below 160,000 IQD (around 121 USD).9 However, winter bills reportedly have risen — driven by longer billing cycles and higher consumption — exposing a gap between the pricing design and how it is perceived by the public.
This points to a need for clearer public communication and seasonal adjustment mechanisms.
The reform also delivers a meaningful environmental benefit. Gas-fired combined cycle power plants emit roughly 230–370 grams of CO₂ per kilowatt-hour.10 Even at the upper end of that range, gas-generated electricity is far cleaner than diesel, which typically emits around 800 grams of CO₂ per kilowatt-hour.11 Shifting from diesel generators to grid-based gas power can therefore cut emissions by more than 60%, which is a clear if under-discussed benefit of the Runaki program.
Electricity Reform Under Pressure
Runaki is not being implemented in tranquil conditions. Security concerns arising from war between the US and Iran have repeatedly disrupted the supply of natural gas to power plants across the region.12 These disruptions have forced the system to fall back on diesel generators out of operational necessity.13
These disruptions have complicated the reform's trajectory considerably, including in ways that were foreseeable. The Khor Mor gas field had been targeted by missile and drone strikes on multiple occasions prior to Runaki's launch in 2024, making supply interruptions a known risk.14 The fact that the program was designed without explicit provisions for this vulnerability represents a key gap in its original architecture.
Energy security should have been embedded in Runaki from the outset, not treated as a separate problem to be managed after the fact.
There is also a distributional dimension. Runaki has reshuffled economic rents across a system that long depended on informal arrangements and localized markets.
The diesel generator sector, in particular, supported tens of thousands of jobs and sustained networks of fuel supply chains, maintenance services, and neighborhood billing operations.15 By centralizing electricity provision, Runaki ended this ecosystem and reduced the role of diesel generator operators.
Under normal conditions, this kind of displacement generates predictable resistance. Reported protests in Sulaymaniyah16 and Ranya over tariffs and smart meters reflect the tensions inherent in moving away from underpriced electricity towards a consumption-based model.17
In practice, diesel generators are no longer the backbone of the system, but they are not obsolete either. They increasingly function as a contingency layer, activated when centralized supply is constrained.18 This dual role reduces immediate pressure from the generator economy, but it also suggests that the end goal may not be a clean transition away from generators, but rather a more resilient hybrid electricity system shaped by persistent security-risks.
Structural Risks in a Volatile Environment
Energy Security The most immediate risk is the system's heavy dependence on the Khor Mor field as its single source of gas supply.19 As recent disruptions have demonstrated, any interruption in gas flow impacts the system almost instantly, triggering sharp reductions in electricity generation. Runaki's reliability is in effect held hostage to the security of upstream energy infrastructure.
Political Sustainability Electricity tariff reform ultimately depends on public acceptance, which is in turn related to the credibility of the service provided. Households are likely willing to pay higher or more visible bills when supply is reliable. When it is not — as recent supply shocks have shown — that willingness may erode quickly and resistance to the reform can intensify.
Seasonal Demand Pressure Electricity consumption in the Kurdistan Region surges in summer and mid-winter, driven by increased use of air conditioning and heating respectively. Demand rises by roughly 44% between seasons from around 4,500 to 6,500 megawatts,20 as illustrated by Figure 3. Even without disruptions, these peak periods compress the margin between available generation and system load. Combined with fuel supply constraints, they can push the system to breaking point.
2. Grid-Scale Solar Deployment
Iraq's solar irradiance is among the highest in the world. Despite this, installed solar capacity remains negligible. The primary barriers are not technical but institutional — land allocation procedures, power purchase agreement frameworks, and grid-connection protocols all require modernisation. Pilot projects in Muthanna and Karbala demonstrate that utility-scale solar can be delivered at costs significantly below existing thermal generation.
Taken together, these risks point to a broader reality: Runaki's success will depend not only on correcting pricing-distortions, but on the program’s ability to function under uncertainty. In this context, energy insecurity could undermine public trust, which could unravel the reform itself.
Structural Reform or Managed Reliance?
The central question is whether Runaki constitutes a genuine structural reform or a more temporary rearrangement. On paper, the program addresses the system's core problems: it strengthens billing, aligns pricing with consumption, and reduces dependence on informal electricity markets and diesel generators. However, recent security disruptions complicate this picture.
There has been no formal decision to return to diesel generators as a parallel system, but in practice the government has had to rely on them during periods of gas supply disruption. This is not part of the reform design; it is a response to immediate constraints.23
The return to diesel generators does not necessarily signal failure, but may instead reflect a pragmatic adaptation to a volatile operating environment. However, it does suggest that the original vision of fully phasing out generators may need to be revisited and a greater emphasis on system resilience, fuel diversification, and contingency planning be built in.
For instance, establishing diesel storage capacity near major power plants, which would enable them to operate temporarily on alternative fuel, could provide a short-term buffer during gas supply disruptions from Khor Mor and help prevent system-wide shutdowns. Additionally, making concerted efforts to develop other Kurdistan-based gas fields, such as Chamchamal, which is currently under a development project, as well as Miran and Bnabawe, would diversify gas sources and reduce security risks.
POLICY TAKEAWAYS
- Electricity reform cannot be separated from energy security. Even well-designed pricing reforms cannot function without a stable fuel supply.
- Diesel generators remain a necessary fallback. Runaki has reduced reliance on generators, but recent supply shocks confirm they still play a critical contingency role.
- Public acceptance depends on reliability, not pricing alone. Households are more likely to accept higher tariffs when supply is consistent, but they may resist when it is not.
- Resilience must be built into the system. Diversifying fuel sources and planning for backup generation are essential for the reform to hold over the long term.
Conclusion
The Runaki program represents one of the more serious attempts to reform the electricity sector in the Kurdistan Region and the rest of Iraq. It addresses long-standing inefficiencies and introduces a more disciplined approach to pricing and revenue collection and has real results to show for it. The experience of recent months has made one thing clear: electricity reform in Iraq is not only a political or economic challenge. It is also a security challenge. Runaki is no longer simply a reform program. It is a test of whether a pricing-based electricity system can function in a context where energy supply remains exposed to geopolitical risk. Runaki could still deliver a lasting transformation if the KRG can strengthen system resilience, maintain public trust, and adapt to these realities. If it cannot, the region risks drifting back to the model it was trying to leave behind.