An unusually hot summer has once again placed the spotlight on the parlous state of Lebanon’s power sector. Residents took to the streets in early August to protest against electricity outages lasting several hours a day.
In response, Electricite du Liban (EdL) issued a statement, confirming what everyone already knew: the state utility did not have sufficient generating capacity to meet public demand, especially during the peak summer months.
Lebanon’s power sector is plagued by inefficiencies, theft, under-investment and a lack of fuel feedstock. With power demand exceeding supplies by 700-900MW, rationing has become a fact of life. Although Beirut gets off relatively lightly, receiving electricity on average for 21 hours a day, other areas are not so fortunate, with supplies lasting as little as six hours a day.
Officials are acutely aware of the problem, the origins of which date back to the 1975-90 civil war. EdL has long been regarded as a hugely inefficient entity. Since it owns both generating plants and the distribution network, this has inevitably retarded the sector’s development, already struggling with a lack of feedstock and investment.
The aim is to cut the electricity sector’s losses to zero by 2014, and turn in a profit thereafter
Lebanon boasts two combined-cycle plants at Beddawi and Zahrani, each with installed capacity of 435MW, which accounts for half of total generating capacity. At least 200MW is imported from Syria, and Beirut has requested additional supplies from Egypt.
No new power generation capacity has been built since the two plants were installed in the 1990s. Private investors have largely steered clear of the sector, with regulatory uncertainty and political events key issues for potential developers. However, the private sector is involved in operating and maintaining the two plants, as well as running concessions in the distribution sector.
Lack of power has led residents and businesses to invest heavily in back-up generators. An estimated one-third of all power consumption is met from this source, described as ‘self-generation’, a share that looks set to increase in the coming years.
EdL’s problems are numerous and a major burden on government finances. In 2009, it received $1.5bn in state support, representing 13 per cent of all public spending, an unsustainable amount for a country with one of the world’s highest debt to gross economic product (GDP) ratios. The utility has to deal with widespread electricity non-payment and theft. The Energy & Electricity Ministry estimates 25 per cent of EdL’s losses are “non-technical”, with on average 5 per cent being lost through non-collection and 20 per cent through actual theft of electricity supply, with citizens illegally tapping into electricity lines.
|Lebanon power factfile, 2009|
|Installed generating capacity (MW)||1,500|
|Peak power demand (MW)||2,500|
|Growth in peak power demand (%)||5|
|Reserve power margin (%)||na|
|Number of power customers||na|
|Number of IPPs/IWPPs concluded||0|
|Additional capacity requirement by 2019 (MW)||2,500|
|Estimated cost of required capacity ($bn)||2.9|
|na=Not available/applicable; IPP=Independent power project; IWPP=Independent water and power project. Source: MEED Insight|
Corruption is also reported to be rife in EdL, which is subject to political interference. EdL is effectively under the control of Lebanon’s March 8th political movement, a pro-Syrian bloc. These factions have filled the company with placemen whose primary loyalty is to their political paymasters. Effective reform of the Lebanese electricity sector will be impossible unless EdL is removed from the sphere of political patronage.
Plans to sell off EdL have been on the drawing board for a decade, but cannot proceed given the fragile and complex political balance in Beirut as no consensus can be reached among the political parties.
This has not stopped the Western-backed government of Prime Minister Saad Hariri attempting to chart a course to improve electricity supply. A five-year investment plan was unveiled in June 2010 by Energy Minister Jebran Bassil. It calls for generating capacity to rise to 4,000MW from 1,500MW, along with a major upgrade of transmission and distribution (T&D) infrastructure. At the same time, the construction of a new regassification terminal is planned, which would allow liquefied natural gas (LNG) to replace the more expensive heavy fuel oil as feedstock.
Costing an estimated $4.9bn, the programme envisages that the government will provide $1.5bn, the private sector $2.4bn and foreign donors $1bn. The aim is to cut the sector’s losses to zero by 2014, and turn in a profit thereafter.
The investment is desperately needed if Lebanon is to keep a handle on demand, which is forecast to increase by 60 per cent by 2015. The increase implies a doubling in existing capacity, according to the World Bank. The forecast does not include any reserve margin and assumes the share of self-generation is maintained. It is difficult to see, however, how the money will be raised given the endemic political and financial difficulties Lebanon faces.
Along with power generation, the T&D sector also needs a major overhaul, given that technical losses average about 15 per cent. Under planned sector reforms, T&D will be unbundled from EdL while the 22kV network will be extended and rehabilitated. Substantial investment is also required for underground cabling and overhead lines over the next five years, if electricity losses are to be reduced.