Generator cartels vs. solar energy

The future only looks bright for owners of private diesel generators, writes Charles Lawrie [Getty].

Inequity in Lebanon is rarely as stark as in the baking heat of summer, when the rich keep cool in the comfort of air conditioning (AC) and the poor are left to sweat it out.

The distinction lies in whether one relies on the beleaguered public power company, Electricité du Liban (EDL), which provides a maximum of four hours of electricity per day, depending on where one lives.

Lebanon’s rolling blackouts, the bane of daily life for most households, only worsened following the 2019 economic collapse, and are made worse still during the hotter months due to rampant AC usage.

Lebanon’s ever-dependable private generators have been stepping into the gap for years and are now offering 24/7 electricity access – to those who can afford it.

For an extraordinary $320 per month, or just under $4,000 annually, households in central Beirut can access a premium service, sufficient to run two standard AC units simultaneously day and night.

Lebanon set for another summer of blackouts

The country’s electricity crisis has its roots in the post-civil war period when EDL opted to continue relying on expensive fuel-powered thermal plants to produce power.

The company also set tariffs in the 1990s and didn’t raise them again until 2023, allowing inflation to eat away at their value. Lax bill collection, systematic customer non-payment, and electricity theft created further long-term revenue leakages.

Consequently, EDL hasn’t been remotely close to recovering costs for some three decades, precipitating a cycle of underinvestment and poor coverage.

Propping up the flagging electricity provider cost the Lebanese treasury a mind-boggling $43 billion to EDL, or roughly 46 percent of Lebanon’s public debt, between 1993 and 2020. Meanwhile, political-sectarian squabbling has long paralysed electricity sector reforms and blocked the implementation of an independent regulatory body. 

Today, Lebanon’s electricity comes mostly from power plants built in the 1990s: Deir Ammar, outside Tripoli, and Zahrani, south of Saida.

These electricity stations burn diesel oil imported through a complicated swap deal with Iraq involving oil traders implicated in the 2020 contaminated fuel scandal.

A recent report revealed that EDL plans to rely on this import deal until at least 2028, even though the Iraqis have yet to be paid for diesel imported since 2021

By 2028, Lebanon is expected to owe Iraq $5.5 billion in unpaid fuel bills, without the Lebanese having come close to 24-hour power from their public utility provider. 

Thus, the future looks bright for the owners of private diesel generators, stacked like shipping containers in neighbourhood parking lots countrywide.

If EDL’s tariffs had been absurdly low, generator subscriptions now fluctuate wildly: in Beirut, households typically pay over $100 per month for a 5-ampere connection, which barely sustains a standard AC unit, while in the northern Akkar region households pay around $40.

Generator bills were estimated to account for an average of 44 percent of monthly household income in 2023, 88 percent for the poorest households, while others went without a subscription at all.

A 2020 World Bank study found that private operators typically run generators with a 500-kilo volt-ampere (KVA) output, able to supply roughly 300 households each. The same study found that economies of scale allow owners’ profits to increase exponentially with each new generator they add.

Residents reflexively denounce the owners of these generators as a mafia with murky ties to unidentified figures in the political class. While there is little evidence to suggest a nationwide generator ‘mafia’, turf wars for customers have taken place between rival generator owners, including gun battles last year in Tripoli and Beirut.

“Lebanon’s ever-dependable private generators have been stepping into the gap for years and are now offering 24/7 electricity access – to those who can afford it”

Beyond causing economic hardship, a forthcoming study links increased pollution from private generators to rising cancer rates in Beirut. Tens of thousands of AC units pumping hot air outside also contribute to the ‘urban heat island effect’, further warming the city.

A more positive response to Lebanon’s electricity woes, however, has been the accelerating adoption of solar photovoltaic (PV) panels since 2019.

The removal of fuel subsidies in 2021 caused a massive uptick in solar imports, with 100 megawatts (MW) installed in 2021 and 500 MW installed in 2022.

In areas such as Baalbek-Hermel, residential solar PV adoption rates now likely exceed 70 percent, putting these regions among the most solarised in the world. Factories in the fertile Bekaa Valley, too, have installed vast solar arrays.

Mending the energy divide

Yet solarisation has its limits. According to internal EDL documents, renewable energy sources will likely account for only 12 percent of total generation capacity by the decade’s end, driven by large-scale, privately financed solar farms.

In built-up areas, residents are less likely to install solar panels, given limited roof space, neighbourly arguments over roof access, and the high cost of solar panels and batteries. In 2023, a 5-kilowatt (kW) solar PV and battery system cost around $5,000.

While there is no simple fix for the energy sector, steps toward a better future in Lebanon are apparent.

First, the state should increase generator inspections and flex its regulatory muscle to ensure generator owners use metered pricing at government-set tariff levels and install pollution-reducing filter systems.

Second, building codes should be revised to require passive cooling, improved insulation, and more natural building materials such as clay bricks and wood.

Third, the Iraqi fuel deal should be amended to swap Iraqi fuel for compressed natural gas from Egypt, a far cheaper and cleaner alternative for running Deir Ammar and Zahrani power plants.

Finally, the Lebanese government could raise its renewable energy aspirations by accepting Qatar’s offer to install a 100 MW solar array, which appears to have been mysteriously nixed by unspecified political factions.

Earlier this year the World Bank laid out a scenario in which, through shifting electricity production to natural gas and solar, Lebanon could reduce energy costs by 41 percent, reduce CO2 emissions by 43 percent, and significantly reduce air pollution. In the meantime, most Lebanese households will have to reach for the hand fan as they face another long, hot, and smog-filled summer.

Charles Lawrie is Triangle and Badil’s Energy Specialist. He is currently pursuing a doctorate in International Relations at the University of Sussex and is an Affiliate Scholar at the American University of Beirut’s Issam Fares Institute.

Follow him on X: @charlie__lawrie

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