Can Lebanon fix its failing energy sector?


After losing power for 24 hours in 2021, Lebanon continued to face severe power shortages due to years of poor infrastructure investment that led many people to rely on polluting diesel generators. for their food. The Lebanese population currently receives between one and two hours of electricity a day, and with ongoing political instability there is little hope of this changing any time soon. So how could Lebanon fix its failing energy sector?

Lebanon’s economic crisis began in 2019 after excessive spending led to rising debt and heightened political tensions as no outside power was willing to bail out the country. As the currency depreciated rapidly, lose about 90% of its value to date, much of the broader middle class has been forced into poverty. In 2021, estimates suggest that public debt has reached 495% of GDP. In terms of electricity, Lebanon has faced blackouts for years due to poor infrastructure spending. Today, with such high debt, the government can no longer afford to run national power plants, which means people have virtually no access to grid electricity.

With no political power taking responsibility for the economic and energy crises, few outside powers have been willing to step in to help. Moreover, the rise of the Hezbollah militia is hunting others. But several neighboring countries have expressed their willingness to offer assistance if Lebanon achieves greater political stability.

Saudi Arabia severed ties with Lebanon about four years ago after the rise of Iran-backed Hezbollah. But now Lebanese Prime Minister Najib Mikati is expected to visit Saudi Arabia to potentially mend relations. As Iran and the United States continue their talks to reach a nuclear deal, with the potential reinstatement of the JCPOA, it is in Saudi Arabia’s interest to rebuild relations with other Arab states.

However, several neighboring countries are reluctant to give Lebanon funding unless it can form a stable government, having already lost money in the country. If realistic economic reforms can be put in place, enabling an IMF deal, Saudi Arabia and others may be willing to invest.

In January, Jordan signed a contract with Lebanon and Syria to supply its electricity to Lebanon. The deal will send 250 MW of power to Lebanon through the Syrian power grid to help ensure greater energy security by providing roughly double the current power ration. The project should costs about $200 millionwith funding from the World Bank.

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This could alleviate some of the difficulties faced on a daily basis in Lebanon due to electricity shortages. However, the country’s energy system requires a complete overhaul to establish long-term potential for energy security. State-run energy company Electricity of Lebanon (EDL) is on the verge of collapse. Marc Ayoub, energy researcher at the Issam Fares Institute of the American University of Beirut, Explain “In the absence of any political solution, we are just kicking the streets.” And “If we pay 200 million dollars, we continue for two or three more months, so what? We can’t go on like this,” he added.

The Lebanese government sees a way out through a new energy reform, but it is still unclear whether this is realistic. In mid-March, Lebanon’s cabinet approved a strategy to restructure the country’s energy sector, with the aim of appealing to donors. The reform will allow the establishment of an electricity regulatory authority in 2022 and will lead to an increase in electricity tariffs. Through a $3.5 billion investment in reformthe government hopes to achieve 24-hour electricity across Lebanon by 2026. But with a poor track record of following through on previous energy reforms, donors have little faith in the new plan.

Experts say Lebanon must consider renewable sources for a viable new energy reform, with the potential to establish greater energy security based on national resources. A 2020 report from the International Renewable Energy Agency suggests that Lebanon could significantly expand its renewable energy sector, with around 300 days of sunshine per year and the potential to harness wind and hydropower.

And Lebanon seems to respond to this suggestion. A 2022 policy statement from the Ministry of Energy and Water provides for develop 1,200 MW of solar and wind energy and 200 MW of solar storage by 2026. However, achieving this would require significant external funding and effective government oversight.

Jordan could provide a medium-term solution to Lebanon’s energy problems, adding enough electricity to the grid to alleviate the difficulties faced due to Lebanon’s energy crisis. But a long-term solution simply cannot be established until political stability is achieved and clear energy reform can be implemented. International bodies and neighboring states are ready to invest in the future of Lebanese energy, both fossil fuels and renewables, but without the assurance that their money will not be lost, Lebanon will remain in a state of serious energy insecurity.

Bu Felicity Bradstock for Oilprice.com

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