American Univesity of Beirut

Why Is the Electricity Sector Such a Failure?

​​November 29, 2021​​

What is wrong with the electricity sector?

The electricity sector was one of the first sectors in the country to reflect the economic, financial, and currency crisis we are currently witnessing. The central bank does not have enough money in foreign currencies to procure fuel for the public utility services. Consequently, we have started a deep blackout rationing program across all regions. Electricite du Luban (EDL) has been generating barely five to six hours of power on the national level, which is translated into two or three hours depending on the region. Unfortunately, this means people are relying on expensive private generators for the rest of their energy needs. If there is no electricity, there is no real economy and no real growth. 

Even before the crisis, the electricity sector could not provide sufficient electricity. Why does the electricity sector lose so much money? 

We stopped meaningful investments into the electricity sector in the late 1990s. The last two power plants that the government invested in or built were in 1998. Since then, we have been using emergency and temporary solutions and no long-term efficient solutions. There is also significant mismanagement of the sector. The electricity sector has always been a source of continuous political bickering and clientelism for the political parties. So, we have a cost at the financial-economic level, but we also have a cost at the institutional and managerial level. 

There have been attempts at reform, but the electricity sector has deteriorated even more rather than improved. Why does reform never work? 

The main problem in the sector is political interference, which has been the root cause for all the issues that we have reached recently. If we want to have reforms, we cannot keep the electricity sector as a tool for the political elite. We can barely produce a few hours of electricity, and political decision-making has blocked or halted all the reforms needed. We cannot talk about electric generation options without considering how many plants we need based on a least-cost assementand what workable models would allow the political parties to move forward with this sector, especially at the distribution level.  

What role is the IMF playing in updating the electricity sector? 

When it comes to electricity, the IMF program will allow for macroeconomic stability; without this, there is no real solution. The IMF has a role in stabilizing the banking sector, which will help with the currency crisis that is hurting the ability to pay for electricity. The IMF's reforms, though, are very costly, and they are not easy to implement. 

Is there any role for renewable energy in Lebanon's electric grid, and how likely is that to happen? 

One of the positive things that the economic crisis has created is an awareness of the importance of renewable energy. People started this summer to see the possibility and feasibility of having renewable energy systems on their rooftops, to have some energy security in their houses, shops, industries, et cetera. 

At the national level, we don't have the money to buy fuel. Lebanon should be part of this energy transition. Meaning we should move away from polluting, expensive fleets of power plants and invest heavily in renewable energies at the utility scale, specifically in solar and wind. Lebanon has pledged to reach 30% of renewable energy, a very ambitious and challenging goal.  

What can be done to resolve the increasingly problematic electricity issue in Lebanon? 

We have presented all possible options to the government, especially over the past weeks and months. The plan is there, the timeline is there, but there is no political will to go in that direction. We have talked about the renewable energy potential, mapped available public lands, and done a lot of studies on the feasibility of renewable energy projects. 

We have presented solutions that would be workable on the financing level, but there is no real way to implement any reforms. Through our channels and advocacy, the academic community, we try to engage with policymakers who usually don't listen to knowledge producers or scientific opinions. We try to bridge this gap between the two communities and present evidence-based research, and we need to continue pushing in order to see those studies implemented.

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