The Lebanese authority’s failure to manage the electricity sector is not a new phenomenon for the Lebanese people as electricity shortages have been prevalent in their daily lives for the past 30 years.
The internal disputes within the Lebanese government along with the negligence of its institutions left the state-run electricity company Electricite du Liban (EDL) to be a major example of a failed institution. However, with the beginning of the economic crisis in October 2019, the performance of the EDL worsened. Multiple factors, including ongoing political disputes, the COVID-19 pandemic, and the August 4, 2020 explosion at Beirut Port, exerted heavy pressure on the economy and hard currency reserves. Driven by these pressures, inflation rates in Lebanon kept on increasing and reached around 228.85 percent by August of 2023 according to a report conducted by Blom Invest in that same month. At the same time, people’s purchasing power and EDL’s income were hit by the depreciation of the Lebanese pound, with significant impacts on EDL’s ability to produce electricity and on the people’s ability to pay for it.
Jumping forward to the situation at the latter part of 2023, access to electricity services remains a conundrum amidst still high inflation rates and dwindling real incomes. Paying for power to light their homes and run their appliances has become more difficult for locals who already have to pay for commercially operated generators to fill the gap of the EDL, which at its full capacity provides only 12 hours of electricity a day, a number that is not reached in most cases.
The EDL’s electricity currently covers three to six hours on average depending on the area. There are very few areas that exceptionally have a high number of hours of electricity coverage such as Jezzine district, which is at an average of 14 to 20 hours. In a March 2023 study conducted by Human Rights Watch and Consultation and Research Institute (CRI) which covered 1,200 households, it was found that the cost of electricity has affected nine out of ten households’ ability to pay for other essential services. Low-income households were mostly affected by the rising costs as they had to sacrifice other essentials that they were barely even able to access. Furthermore, the study showed that amongst the poorest 20 percent of households, one in five cannot afford access to a generator which is the sole available source of a more stable electricity supply.
A fraught landscape for attempted solutions
While there were no large-scale projects to deal with the intensifying electricity crisis by the Lebanese Ministry of Energy and Water, certain agreements were supposed to take place to kickstart major projects. One of these major agreements was signed on January 26, 2022 by Lebanese, Syrian, and Jordanian officials that entailed supplying Lebanon with electricity from Jordan via Syria. The agreement, which would have provided 250 megawatts of energy for Lebanon, was supposed to receive $200 million in funding from the World Bank. Furthermore, this agreement was part of two US-brokered agreements which were supposed to address Lebanon’s severe electricity shortages. A second agreement was signed by Lebanon, Syria, and Egypt on June 21, 2022 to supply Lebanon’s power plants with natural gas from Egypt. The gas was supposed to pass through the Arab gas pipeline, which starts from Egypt, continues through Jordan, and then reaches Lebanon via Syria. At the signing ceremony, Minister of Energy and Water Walid Fayad told the press that around 650 million cubic meters of gas would be brought to Lebanon through the pipeline annually to the Deir Ammar power station in the north. Media reports have even claimed that Syria and Lebanon undertook renovation on select parts of the pipeline before the agreement stalled. Until today there have been no updates by the Lebanese government on the status of these agreements. When approached by Executive, the Ministry of Energy and Water declined to comment on the matter.
According to Marc Ayoub, an energy policy researcher at the Issam Fares Institute for Public Policy and International Affairs (IFI), the failure of these agreements was caused by a combination of geopolitical factors and the mismanagement of the Lebanese government. “The absence of progress in these energy agreements with Jordan and Egypt goes beyond the Lebanese government’s failure as it is also related to the complex political situation in the region,” he tells Executive.
In fact, the agreements were proposed by Dorothy Shea, the U.S. ambassador to Lebanon, only weeks after Hezbollah in 2021 announced a plan to import fuel supplies from Iran. The move was viewed by observers as a bid to counter Hezbollah’s strategy to provide fuel. The passage of electricity through Syria sparked internal division in the U.S. Congress as the Caesar Act–legislation that places sanctions on the Syrian government–is still active. Ayoub notes that even so, the agreement was used as a point of persuasion by the U.S. envoy Amos Hochstein during the negotiations over the sea border between Israel and Lebanon. However, Ayoub points out that with the latest war in Gaza, the political atmosphere made it almost impossible to move forward with the agreement.
As per Ayoub, the Lebanese government did what it could to move forward with the deal, but a set of political complications led to stagnation. Funding for the deal hinged on whether the Lebanese government could meet the conditional demands of the World Bank. One World Bank stipulation required the EDL to increase electricity bills. Although the EDL followed through, they failed to meet the World Bank’s requirement of enhanced bill collection, as they were unable to collect fees from various areas.
In addition to facing political barriers in the US and being hampered by operational conditions at EDL, Dr. Patrick Mardini, the CEO of the Lebanese Institute of Market Studies (LIMS), tells Executive that the project of relying on imported fuel or electricity from nearby countries under the circumstances prevailing in 2022 and the first nine months of 2023 is in itself not a viable idea. Mardini’s rationale is that the financial constraints faced by the Lebanese government would not allow it to continuously fund the electricity supplies from Jordan and gas from Egypt that were supposed to be financed by the World Bank at the initial phase.
Mardini says that he does not see the problem as solely political or tied to the Caesar Act as Fayad claims, but rather a problem of the government’s noncompliance to the World Bank’s demands, especially when it comes to establishing a regulatory authority. Even though there are conflicting views over the cause of the failure to establish the ERA in the more than 20 years since its legislation, there is no doubt that the agreements have completely failed.
Moreover, based on the data from Lebanon’s central bank, the Banque du Liban (BDL), which extends until March 2023, the electricity output of the EDL continues to deteriorate. According to Mardini, in lieu of absent government support, outputs have become mostly reliant on the risky solution of arranging fuel deals with the Iraqi government. Maintaining a continuous supply of fuel from Iraq became harder to finance, especially after the step taken by the BDL’s Deputy Interim Governor Wassim Mansouri to put an end to money lending from the central bank to the Lebanese government.
Next steps?
Faced with these challenges, reaching a resolution for the recurring electricity problem seems difficult. Mardini suggests that “the only solution for the electricity sector in Lebanon is to move forward with a privatization process of the country’s electricity sector and take away the full control from the Lebanese Ministry of Energy and Water on electricity services.” In this context, Mardini saw that the revival of Law No. 462/2002 as necessary. The law aims to dismantle EDL’s monopoly, dividing the sector into three areas: production, distribution, and transmission. Also, introduction of independent power producers (IPPs) and electricity distribution companies (EDCs) into the sector would involve creating a wholesale electricity market where IPPs compete to sell electricity to EDCs, who, in turn, sell it to the broader market. “The ministry has been resistant to these changes and has been seeking funding repeatedly and relying on unreliable solutions such as fuel imports,” Mardini tells Executive.
Ayoub asserts that “given the current political turmoil in Lebanon, which has left the country with an interim government and without a president for a year, it would be impossible to implement the solutions that are needed to revitalize the sector.” He further notes that “with time, people have become more reliant on renewable energy, and commercial generators are an aspect that will eventually shrink the size of outputs required from the EDL in the future.”
The future of the electricity sector appears grim given Lebanon’s ongoing political paralysis and the Ministry of Energy and Water’s reliance on unsustainable solutions that are barely enough to keep EDL afloat. As the local population cannot afford to wait for resolution of these issues, they are pushed to look to individual and collective solutions to meet their energy needs as the only viable option to deal with constant electricity shortages. However, since the steps taken by the local population, such as solar panel installation, are relatively new, taking such initiatives to the community and municipal level would require a process of trial and error before they could be relied upon more broadly and inclusively. Therefore, innovation is the only way that the Lebanese people will be able to secure their energy needs in the coming years.