Cost of power ‘unsustainable’ in Lebanon as state grid collapses

No longer subsidised, the price of diesel used in private generators has increased sixfold in three months

The 24-hour interruption of Lebanon’s state-powered electricity supply on Saturday has heightened fears among professionals that power is rapidly becoming a luxury that few – even hospitals – can afford.

The price of diesel, which is used to run private generators in the absence of state electricity, has increased sixfold in the past three months since the government lifted subsidies.

Diesel is now entirely unsubsidised and must be paid for in cash dollars.

“Paying for generators is expensive,” said Mohamed Antabli, who owns a juice shop in Beirut. “Everyone is in debt now. We have to do this to keep our businesses from closing or else we cannot survive.”

Lebanon’s state utility company, Electricite du Liban, has not matched demand for decades, but the country’s power crisis took a turn for the worse this summer, when production dwindled to a few hours a day.

The main reason for the power cuts is the shortage of fuel imports, which the cash-strapped government can barely afford any more. Hour-long blackouts have occurred more than 15 times in the past month, calculated Marc Ayoub, an energy policy researcher at the American University of Beirut’s Issam Fares Institute for Public Policy and International Affairs.

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The situation is unsustainable. We can’t go on like this
Sleiman Haroun, head of the syndicate of private hospitals

But on Saturday, EDL warned of a complete blackout until the arrival of a new fuel shipment next week. Power plants were able to start again on Sunday after the army offered 6,000 kilolitres of gasoil. The central bank then unlocked a credit line of $100 million, so the Energy Ministry could import fuel.

“The situation will continue like this as long as EDL does not get a continuous supply of fuel and does not have reserves,” Mr Ayoub said.

The one-month-old Cabinet said that reforming the electricity sector and slashing power cuts was a priority. It will meet on Tuesday to discuss power shortages, a representative for Prime Minister Najib Mikati said by phone.

“Electricity will surely be the number one priority on the agenda,” Fares Gemayel said.

He said the issue was not discussed during last week’s meeting because Energy Minister Walid Fayyad was away on official visits.

In the meantime, prolonged power cuts are taking a toll on local businesses and shops in the country, which has long relied on tourism and services for revenue.

Roy El Khoury, who manages the Lost Hotel in Beirut, says he has lost hundreds of thousands of dollars in cancelled reservations this summer. Buying fuel oil for the private generator costs upwards of 30 million Lebanese pounds per month, or $1,546 at the current market rate, he said.

“We are trying to stay on our feet, but I don’t know how long we can stay like this,” he said.

Mr El Khoury fears the hotel will soon need to ration electricity.

“Now our situation is worse because it is the low season,” he said.

But paying steep prices for generators is sometimes not enough to keep customers. Ziad, an employee at Rashad sweet shop in Beirut, said that even though the company has generators running 24 hours a day, sales are down this year.

“Customers are buying less ice-cream because they can’t store it in their fridges,” he said.

While private businesses are free to increase their prices, government-run entities are not allowed to deviate from the official, yet largely defunct, peg of 1,507 Lebanese pounds to the dollar for their services. The market exchange rate is 12 times as high.

This has come to slowly paralyse operations. Hospitals can no longer afford to pay staff. At Saida government hospital, employees have been on strike for nearly two weeks and only receive life-threatening cases.

“We turn off ventilation and reduce lighting as much as possible,” said Khalil Kain, who runs the hospital’s maintenance and cleaning departments. “Our generators have been working for 36 hours straight. They could overheat and stop any time. This endangers the lives of our patients.”

Running the hospital’s private generators now costs more than $15,000 a month, 10 times as much as before Lebanon’s economic collapse two years ago, Mr Kain said.

Hospital suppliers have to navigate a fine line between increasing their prices yet remaining affordable. “We can’t tell them that we want [cash] dollars,” said Bilal Zahra, who runs an oxygen company in Saida. Like most Lebanese companies, his business relies on imports for spare parts, which must be paid for in cash dollars.

Because of the crash of the local currency, the hospital is now paying 8,000 Lebanese pounds for a litre of oxygen instead of 1,500 Lebanese pounds, even though Mr Zahra’s company’s profits have gone down by half. “I’m surviving,” he said.

Yet having a few hours of electricity a day is still better than having none at all, because they allow generators to cool off, according to Sleiman Haroun, head of the syndicate of private hospitals.

“The situation is unsustainable,” he said. “We can’t go on like this.”

Updated: October 11th 2021, 4:56 AM
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