Lebanon minister hopeful about plan for 24/7 electricity by next year

Energy Minister Nada Boustani has ambitious plans to reform Lebanon’s deeply flawed electricity sector

The Turkish floating power station Karadeniz Powership Orhan Bey, which generates electricity to help ease the strain on the country's woefully under maintained power sector, is docked near the Jiyeh power plant, south of Beirut, Lebanon, Monday, April 8, 2019. (AP Photo/Hussein Malla)

Lebanese energy minister Nada Boustani said she is confident that her reform programme for the deeply flawed local electricity sector would be implemented over the next decade so that Lebanon could enjoy electricity 24/7.

By increasing electricity production by reducing losses, increasing prices and building temporary units followed by permanent ones, Mrs Boustani says she hopes to pave the way for Lebanon to produce enough electricity to meet local demand by next year and reach a surplus by 2030.

Her plan was endorsed by the Cabinet on Monday and still needs to be ratified by Parliament.

Electricity reform was also one of the key conditions demanded by international donors when they pledged nearly $11 billion of subsidised loans for Lebanon last year to help it invest in its crumbling infrastructures.

A man passes by private generators, which provide electricity, in Beirut, Lebanon March 27, 2019. Picture taken March 27, 2019. Reuters

Currently, insufficient production capacity coupled with ageing power plants, technical losses and fraud translates into daily cuts that reach between 3 and 12 hours a day, depending on the region. Lebanon can only produce 2,334 Megawatts despite peak demand reaching 3,562 MW, according to the energy ministry’s policy paper which was distributed to journalists on Saturday a press conference given by the minister.

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Temporary production units should enable the country to increase production by 1,450 MW next year, which technically translates into 24/7 electricity supply.

The Lebanese government hopes to attract international companies such as Siemens or General Electric to invest in its electricity sector via public tenders. However, experts worry the process will not be transparent as some public tenders conducted by the energy ministry in the past have been opaque.

For energy consultant Jessica Obeid, the government must ensure “sustainable, least-cost solutions, in a highly transparent procurement process with the best contract terms since the government would most likely be signing long term agreements”.

A previous reform plan announced in 2010 by then Energy Minister Gebran Bassil – now Foreign Minister – who is from the same Free Patriotic Movement party as Mrs Boustani, failed to bridge the gap. This led to several Lebanese journalists to question Mrs Boustani on the feasibility of her plan.

“The atmosphere today is positive”, repeated the minster on Saturday. She said that all political parties understand the importance of reducing the deficit of the state-run national utility company, Electricite du Liban (EDL) which reached $1.8 billion in 2018 and $30 billion over the past 25 years.

These figures represent a heavy strain on Lebanon’s ballooning public debt of $85 billion.

Facade of Lebanon's electricity company in Beirut. Reuters

Mrs Boustani refused to dwell on why previous plans failed, stressing that what was important was to move forward today to implement her plan.

In the past, “the main issue has been the absence of political will and weak governance”, which will be key in the implementation of the new electricity reform plan, says Mrs Obeid.

According to the ministry’s policy paper, EDL’s deficit is primarily due to the fact that prices were frozen in 1994 when crude oil cost nearly four times less than today. EDL currently produces electricity from fuel oil, but the energy ministry plans for EDL to increasingly rely on natural gas and renewable energies.

Mrs Boustani said that electricity prices will increase starting next year to adjust to current production costs and reduce EDL's deficit. However, she argues that the Lebanese will spend less money overall on electricity because they will not have to pay for private generators anymore. EDL’s production should increase in parallel, thus reducing the hours of daily electricity cuts.

The electricity sector has been also burdened over the past eight years by the presence of roughly 1 million Syrian refugees, who consume 500 MW and cost EDL an extra $275 million a year.

In addition to this, over one-third of the electricity produced is lost during transport and distribution. Most of this loss (21 per cent) is due to “non-technical” reasons, according to the energy ministry’s policy paper, referring indirectly to fraudulent activities such as non-collection of bills or people illegally hooking up into power supplies. A decrease of 1 per cent in losses would translate into 20 billion Lebanese pounds (Dh 48.4 million) in savings for EDL, claims the ministry’s policy paper.

Mrs Boustani said the government would crack down against fraud starting next week with the help of Lebanese security forces.