Urgent call for Lebanon’s electricity crisis

Lebanon’s electricity is heading to the worst crisis ever, as the decades-old electricity rationing problem has long become a normal part of everyday life in Lebanon. H.E Hassan Diab, Prime Minister and Qatar Leaders had a conference call in order to discuss the problem and take measures urgently to avoid blackouts from this coming August. It means that, until July, only 1,500 Megawatts will be fed to the network due to the current economic crisis in Lebanon on one hand, and the soaring prices of oil in the world on the other.

H.E Hassan Diab, Prime Minister of Lebanon (Photo: QGN, 4th March 2020)

The Qatari support for the electricity industry of Lebanon is expected close to the budget of 5.3billion Qatar Riyals (USD1.48billion), with the development of gas fired power facilities, fuelled directly from Qatari LNG. With Qatari fundings, Hassan Diab will restructure the energy and electricity sector across the country, and stop the crisis the soonest possible. Notice, that Lebanon’s electricity crisis has pushed it to the brink of financial ruin, as power cuts hobble the economy and subsidies have racked up one of the world’s largest public debt burdens.

Over the years, new politicians are elected and with them come along promising assurances that in the year 2018, Lebanon will have a 24/7 electricity supply. Yet, time and time again, as we approach (even pass) these promised years, the rationing not only remains unaltered but grows worse. The second decade of the 21st century of advancement, technology, and speed is here. With its arrival, many countries of the world celebrated the outstanding achievements that they have already accomplished in the past 10 years and looked forth with excitement at the ones awaiting to be attained. In Lebanon, however, there are no such celebrations. Instead, there are protests and more protests against the many mistakes and failures of the ruling class. The most basic of the Lebanese people’s needs to thrive and produce are denied to them. Among numerous others, the deprivation of electricity is a major obstacle in the face of any society.

The aforementioned promises by politicians and the many proposals and offerings presented by other countries should have already solved the problem of electricity in Lebanon. So why are our cities still dark at night? Why is Lebanon “extinguishing” in darkness?” More than 40% of the general deficit of the Lebanese government comes from the domain of electricity (2,500 billion Lebanese Pounds in the latest estimates). The many consistent failures in this domain over the years have been dangerously depleting the economy and creating a continuous, challenging cycle of failure and deficit.

Hence, the government’s efforts should be put into solving the problems present at the roots of these failures, which, in turn, would return positive results for the economy and decrease the general deficit. The solution being worked on, however, is not very productive. Since before the end of 2019, the caretaker government has been working on a 2020 budget that will supposedly be “less deficient” than that of the past year. As good as it sounds, there is an alarming implication to be made of this declaration.

As it can be deduced from the caretaker Finance Minister’s statement, that “the financial contribution of the electricity sector will be reduced to 1,500 billion Liras,” the lower deficiency of the new budget will be the result of the government decreasing its expenses on Electricité du Liban.

Not only does this financial cut not end the deficit caused by the Lebanese electric sector, a deficit that is expected to build right back up with time, but it also means that the hours of supply provided to the citizens will consequently be reduced further. The deficiency is also expected to increase soon because of the predicted rise in the prices of oil in the world caused by the Saudi oil facilities being recently damaged in a military strike. In context, the designated 1,500 billion LBP roughly equal to less than 10 hours a day of supply over the entire year.

What about the new factories?

As confirmed by sources of Al Joumhouria, the Electricity of Lebanon’s institution is expected to have more factories up and running in the near future and, thus, will require additional funds to operate them. But these factories will not be ready for production before at least three years due to various legal and procedural issues. This necessitates the implementation of a temporary solution to keep a steady supply of electricity before the new, permanent factories can begin production.

The solution might be to run a bid in which candidate temporary suppliers can step in and increase the hours of supply. But this also requires time; as much as a full year. Therefore, if this option is chosen by the Minister of Energy, and if the financial contribution of the electricity sector remains 1,500 billion Liras, it seems that the barely-10 hours of electricity will not be increased before at least the near-end of 2020.

No electricity after July?

Recently, the Electricity of Lebanon said in a statement that it is “forced to continue to take the necessary precautions to maintain the greatest possible stability in the electrical current feeding for the longest possible period, as this vital commodity is of economic, social and security importance.” This means that, until this July, only 1,500 Megawatts will be fed to the network due to the current economic crisis in Lebanon on one hand, and the soaring prices of oil in the world on the other. In its statement, the institution added that “it will technically able to put additional energy with a minimum of 500 megawatts and increase feeding hours if it has the necessary capabilities.”

“The amount of available fuel is sufficient until the end of July 2020,” explained the caretaker Minister of Energy Nada Boustani in a separate statement. This issue is directly caused by the delay in the approval of this year’s budget, along with the previously mentioned 1,500 billion LBP.  If it is not approved before the end of the next month, Lebanon will go dark.

The history and how big is the problem?

The government, World Bank and International Monetary Fund all say electricity reform is vital to cutting debt, now equivalent to about 150 percent of gross domestic product (GDP). The government says net transfers to state power firm Electricite du Liban (EdL) now amount to $1 billion-$1.5 billion a year, most of it spent on fuel oil. This is equivalent to about a quarter of last year’s budget deficit of $4.8 billion.

The accumulated cost of subsidizing EdL amounts to about 40 percent of Lebanon’s entire debt, the IMF said in 2016. The World Bank says electricity shortages rank second only to political instability in hindering business. The economy has expanded by an annual rate of just 1-2 percent in recent years. Relying on fuel oil power plants and diesel generators also comes with a health cost: air pollution that can cause respiratory disease. Air pollution in Beirut was three times levels deemed a hazard by the World Health Organization.

Consumer power prices have not changed since 1996, when oil cost only $23 a barrel. Crude now trades nearer $70. But asking people to pay more when the service is so poor is a tall order. The main power plants have an average capacity of just over 2,000 megawatts (MW), compared to peak demand of 3,400 MW. For Beirut, the best supplied city, that means daily cuts of three hours a day. Elsewhere, it can mean outages for much of the day. Lebanon plans new, privately financed, gas-fueled plants. But it does not yet have a regulator that can set prices or arbitrate disputes between government and power producers. Distribution and revenue collection are also big problems. EdL collects payments for only half the power it produces, with some power lost through creaking transmission network and other supplies siphoned off the system through unauthorized cables. In 2012, the government appointed private companies to run metering, billing and payment collection for EdL, but it gave them little power to enforce payment.

Lebanon has made sporadic attempts to end power shortages for decades, but its efforts have been thwarted by conflict, political instability and the challenge of policy-making in a system of government that depends on a delicate balance of interests across that nation’s fractious sectarian groupings.Slideshow (3 Images) Lebanon had no president for two years from 2014-16 and had a caretaker government for nine months until February this year because of political squabbling over cabinet appointments. Even with a government in place, it has few resources to spend on power infrastructure when nearly half of state revenue is needed to service public debt.

This has led to quick fixes rather than long terms solutions, such as renting floating fuel oil power stations on barges paid for through deficit spending. Jessica Obeid, a power specialist with the Organisation for Petroleum and Energy Sustainability in Lebanon, said private generator companies did play a role in hindering reform, but maneuvering among rival political parties was also to blame.

Sources: Qatar Agency News, QGT, LebanonNews, Reuters, AlJazeera News, FTArabic, TTFRP, Qgnews, QPnews, AlFaisal Daily, Qbusiness Week, Arabic Electricity News.