$2.5bn: Indirect losses for Lebanon’s economy due to deficiencies in the power sector
$2.32bn: Funds the Lebanese government needs to secure from the private sector
Source: Energy and Water Ministry
For Lebanon’s citizens, electricity shortages are an all-too familiar feature of the summer months. Every year, residents take to the streets to voice their discontent with the government that has failed to eliminate blackouts once again when power is most needed. The most recent demonstrations were seen in the city of Sidon, in the south of the country, in mid-August.
The budget to support the investment for the power programme has not been made available
The continuing power shortages are particularly disappointing to those whose expectations were raised by the approval last year of a comprehensive policy paper for the electricity sector. The event was hailed as a triumph for cross-party cooperation in the government.
The problem is the budget to support the investment for the power programme has not been made available. Even if the budget had been allocated, the programme would still have faced significant hurdles as it relies on significant funds from the private sector.
Meeting power demand
As the country’s demand for power continues to grow, it is increasingly important for the government to make real progress. The Energy and Water Ministry has said that the lack of improvements in the power sector is costing Lebanon about $1.5bn a year directly and $2.5bn a year in indirect losses for the national economy.
About 7.5 per cent of Lebanon’s electricity is imported from Syria and Egypt. The recent political instability in both the power exporters has highlighted the need for the country to secure its own power supplies.
Lebanon’s power sector comprises thermal power, hydropower and electricity imports. Thermal power plants account for 2,038MW of installed capacity, but the actual generating capacity is 1,685MW. This is equivalent to 88 per cent of the total installed capacity.
Lebanon has three heavy fuel oil-fired power plants at Zouk, Jieh and Hraycheh, two diesel-fired combined-cycle gas turbines at Beddawi and Zahrani and two diesel-fired open cycle gas turbines at Sour and Baalbek.
There is 274MW of installed hydropower capacity in Lebanon, but the actual generating capacity is 190MW. The facilities are located at Litani, Nahr Ibrahim and Bared. This accounts for 4.5 per cent of the total energy mix.
Lebanon imports about 590 gigawatts an hour (GWh) of power from Syria and 527GWh from Egypt. This accounts for about 7.5 per cent of the total.
Lebanon’s installed power generating capacity and available power imports in 2009 was 1,500MW. Average power demand ranged between 2,000MW and 2,100MW with a peak of 2,450MW in the summer of that year. The government moved to reform the electricity sector in the response to this shortfall.
In a report, Energy Minister Gebran Bassil identified certain causes affecting the sector. “This crisis is caused by the lack of worthy investments,” he said.
“[Also] a high fuel bill, the operating status of power plants half of which are old and inefficient and the other half uneconomical.” Bassil also blamed large technical and commercial losses in the transmission and distribution network, ineffective tariffs structure as well as organisational problems with utility provider Electricite du Liban.
As a solution, he proposed a series of improvements including acquiring temporary capacity from power barges, small generators and power imports, new combined-cycle gas turbine capacity and rehabilitation of existing plants.
Some 1,500MW of independent power projects (IPPs) are also proposed. The first project would be built at Deir Amaar next to an existing power project. Phase two of the project would have a capacity of 450MW. This scheme was launched some time before the programme and its progress has been very slow.
The International Finance Corporation (IFC) and Switzerland’s AF-Colenco are advising on the project. According to an IFC source, “[the advisers] are waiting for a change in government” before preparing the bid documents.
Alternative energy in Lebanon
Similarly ambitious are Lebanon’s plans to develop 60-100MW of wind power capacity, 15-25MW of waste-to-energy capacity and a 50MW solar project at Bsarma el-Koura, along with the rehabilitation of its hydropower projects.
In reality, securing approval for the electricity sector policy paper was only the beginning for Lebanon in terms of rejuvenating the sector.
The next step needs to be budget approval so that funds are available to pay for government-procured power capacity and to provide equity for the IPPs.
Lebanon will then need to convince lenders to invest in its projects. It wants to secure about $2.32bn from the private sector for its short-to-medium term plans. Only $50m was invested by any party between 2002 and 2009.
The country’s first IPP is likely to benefit from significant multilateral bank assistance. However, in the long-term it will need to inspire confidence among international investors. So far, few are convinced.