Why Lebanon’s electricity crisis is so hard to fix

Why Lebanon’s electricity crisis is so hard to fix
Lebanon’s woefully inefficient energy sector — as illustrated by the labyrinth of cables that stretch across the capital city Beirut — has long been an economic thorn in the country’s side. (AFP)
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Updated 15 June 2020

Why Lebanon’s electricity crisis is so hard to fix

Why Lebanon’s electricity crisis is so hard to fix
  • An IMF official told Arab News “electricity reform is one of the key steps to re-equilibrate the economy”
  • The crisis gripping the sector is partly linked to smuggling of fuel oil and fuel products to war-torn Syria

BEIRUT: It is two in the afternoon and Verdun Street, one of Beirut’s upscale neighborhoods, is doubly lit up — by the midday sun and by street lights.

“Look at the street lamps shining brightly in the middle of the day while most areas suffer from power outages,” Fatima Hachem, 29, a local resident, told Arab News.

The incongruity of the scene — street lights kept unnecessarily on during daylight hours — is unmistakable in a country where residents get between three and 12 hours of electricity a day depending on the locality.

Such systemic inefficiencies are all the more glaring at a time when Lebanon is seeking a $10 billion loan from the International Monetary Fund (IMF).

Given its disproportionate contribution to Lebanon’s public debt, the urgency of an overhaul of the electricity sector cannot be overstated.

“Electricity reform is one of the key steps to re-equilibrate the economy,” an IMF official, speaking on condition of anonymity, told Arab News.

“We will see it as an emblematic and major improvement.”

 

The official added that, without reforms, “there would be no loan program.”

As a first step, the IMF has asked Lebanon to audit its national electricity company, known as Electricite du Liban (EDL). Loss estimates should note “not only the changes in price of fuel oil, but also the change in the exchange rate,” it said.

In recent months, the purchasing power of the Lebanese population has eroded, with the currency losing two-thirds of its value, dropping to LBP4,000 from LBP1,515 to the US dollar.

“At the moment, the Lebanese government links increasing tariffs on electricity to the increase in power generation, while the IMF believes that those two should not be tied. Also, eliminating electricity subsidies is the most significant potential expenditure saving,” the IMF official said.

To generate fiscal savings, it is imperative the Lebanese government increases tariffs as soon as possible, they said.

However, this would mean raising electricity charges for most of the population, who are already under economic pressure as a result of the COVID-19 pandemic.

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The power sector’s total bill comes to almost $2 billion annually, roughly 4.5 percent of the country’s gross domestic product.

Most of the losses can be attributed to a combination of fuel oil subsidies, tariff pricing on the basis of $20 per barrel since 1994, and theft from the power grid.

The problem is only set to worsen with an increasing population, including refugees (currently 1.5 million) whose numbers have grown through recent arrivals and whose electricity consumption has crossed the 400 MW mark.

Under the circumstances, Lebanon’s electricity shortfall is estimated at 1,600 MW.

Among the things the IMF wants to see are the creation of a regulatory authority for the electricity sector and the appointment of new board members for EDL, which after resignations has been left with only three members to oversee it.

INNUMBERS

44 per cent - EDL subsidies’ share of Lebanon’s entire debt

$1.5 billion - Yearly state transfers to EDL

$42 billion - Electricity sector’s debt

$94 billion - Estimated size of Lebanon’s public debt

2 - Power shortages’ rank as a business hindrance

Lebanon’s Energy Ministry, meanwhile, is pushing for an amendment to laws before the implementation of proposed reforms.

Electricity reforms already exist — but only on paper.

The law, 462/2002, permits the setting up of a regulatory authority, frees it from political interference, and disallows EDL’s monopoly over the electricity sector in terms of production, transportation and distribution of electricity.

The implementation, however, is easier said than done.

Christina Abi Haidar, a legal expert with 15 years’ experience in the energy sector, said: “Once we have a regulatory authority, the political authority would cease to exist.”

She told Arab News: “We only pass reform-related laws when we need to borrow from the international community, but we rarely implement them.”

Last month, Dr. Antoine Habchi, a Lebanese Forces MP, filed a lawsuit against the Energy Ministry for corruption and waste of public money.




Dr. Antoine Habchi, Lebanese Forces MP.  (Supplied)

“The electricity sector is a black box marred by corruption,” he told Arab News, “It is not in the interest of those planning on financially benefiting from it to implement laws or to fix the situation.”

Take Law 181 passed in 2011. It was enacted in support of a proposal by Gebran Bassil, the then energy and water minister, to enable the power sector to hire consultants, appoint a board of directors for EDL and establish a regulatory authority within three months.

The cost to the government was projected to be LBP1.772 trillion (equivalent to $1.175 billion at the time). The proposal was to be implemented within four years, resulting in most of Lebanon receiving power for up to 24 hours a day.

By the end of the period, the money had been spent, but unsurprisingly, there was no improvement in the electricity supply.

“We have spent the money, appointed consultants and built two new power plants in Zouk and Jiyeh, and over $350 million was spent on the primary works of rehabilitating the old Zouk and Jiyeh power plants,” said Habchi.

“But to date, we do not have a regulatory authority or a new board of directors for EDL. We also do not have 24/7 electricity supply.”

 

The new Zouk and Jiyeh power plants are said to lack the fuel treatment systems and separators necessary for the burning of any type of fuel.

After many bureaucratic delays, separators reached Lebanon, only to be held up at the Beirut docks instead of being transported to the site and installed.

Now, Lebanon is planning to have four gas-fired plants, two of which were built in 1996. Use of gas could save up to a quarter of a billion dollars per power plant in imported fuel oil costs, according to experts.

But here, too, problems have arisen.

The Selaata power project is a case in point. Work on the new plant is scheduled to start by the end of 2020, around the time when Lebanon intends to shut down the old Zouk and Jiyeh power plants.

Selaata is linked to a plan involving the installation of Floating Storage Regasification Units, or FSRUs, across the country to serve both new and existing plants operating on gas.




Lebanon plans to install Floating Storage Regasification Units, or FSRUs, across the country to serve both new and existing plants operating on gas. (AN photo by Leila Hatoum)

The initial idea was to have one FSRU for all of Lebanon, located in the northern, Sunni-majority Beddawi area.

However, the issue has sparked political debate along sectarian lines, resulting in the plan expanding to include three FSRUs, tripling the cost.

The argument in favor of Selaata is that there is a need for such a large power plant and that it will be constructed in an industrial area.

However, a number of ministers within the Cabinet object to the Selaata project on the grounds that it involves costly land appropriation.

They say the project was conceived only to please the Christian constituency of the Free Patriotic Movement party and not on merit.

Other concerns are insufficient feasibility and its environmental impact, in light of the power plant’s location close to the sea.

“The whole of Egypt has one FSRU, yet the smart people here in Lebanon want to build three FSRUs and waste public money on a useless power plant and overpriced land appropriation,” said Habchi.

Raymond Ghajar, the energy and water minister, declined to comment on the Selaata project among other issues.

Lebanon’s power crisis is also linked to the smuggling of fuel oil and fuel products to neighboring Syria, according to experts.

This is not only problematic from the standpoint of electricity generation, says Habchi, but also poses a risk in light of Washington’s Caesar Act, which bans aiding the Syrian regime.

Within its borders, too, fuel oil transactions are a cause for concern.

An official document obtained by Arab News suggests that subsidized fuel oil has been finding its way from the EDL to the private sector.

A letter numbered 198 and dated June 4, 2018, sent by Sarkis Hleiss, director general of the petroleum facilities in Tripoli and Zahrani (ports), to Cesar Abi Khalil, Lebanon’s then energy minister, asked for permission for the purchase of 6,000 metric tons of fuel oil.

More worrying than the amount is the likelihood that the deal was only the tip of the iceberg.

The letter said: “Due to the shortage of fuel oil in our possession, and in order to supply of the local market, your Excellency is kindly requested to accept the request from EDL to hand us a quantity that is about 6000 metric tons of fuel oil from the first tanker loaded with an ISO 8217 fuel oil reaching the oil facilities in Zahrani, knowing that we are ready to pay for the price of this quantity in cash, after determining its cost by the General Directorate of Petroleum, as always.”

The request was approved on June 6, 2018.

It seems that Lebanese taxpayers are paying double to receive electricity: Once, during the importing of fuel oil, and again when buying power from the private sector during blackouts.

Against this backdrop of mismanagement, wastefulness, incompetence and corruption in the power sector, what is the realistic probability of the Lebanese government getting the IMF loan?

Not much, says Nazih Najm, head of the energy parliamentary committee, who doubts that international donors will lend any money to Lebanon.

Najm is not even sure Lebanon needs to go cap in hand to the IMF. His logic: “We still have about $18 billion in foreign reserves at the Central Bank as well as gold reserves.”

* * * * * * * * * 

@Leila1H


Egyptian chief of staff calls on southern region’s military unit to be vigilant, combat-ready

Egyptian chief of staff calls on southern region’s military unit to be vigilant, combat-ready
Updated 8 min 10 sec ago

Egyptian chief of staff calls on southern region’s military unit to be vigilant, combat-ready

Egyptian chief of staff calls on southern region’s military unit to be vigilant, combat-ready
  • The chief of staff discussed the unit’s various combat missions and methods of confronting emergencies
  • Farid stressed the need to develop the field skills of fighters and improve those of officers

CAIRO: Egyptian Chief of Staff Lt. Gen. Mohammed Farid called on the personnel and officers from one of the southern region’s military units to be “vigilant and combat-ready to carry out the tasks of securing the country’s borders.”

During a meeting with personnel from the unit, Farid conveyed the greetings and appreciation of Egyptian President Abdel Fattah El-Sisi for their efforts and sacrifices in the fight to maintain the security of the country’s southern border against smuggling, illegal immigration and hostilities.

The chief of staff discussed the unit’s various combat missions and methods of confronting emergencies, praising their combat readiness and high morale.

Farid stressed the need to develop the field skills of fighters and improve those of officers to enable them to make quick decisions under various circumstances.

He inspected the unit’s procedures for raising combat efficiency, beginning with the presentation of a report that included the technical and administrative status of the unit following improvements to weapons and other areas.


Rescuers pull 394 migrants from dangerously overcrowded boat off Tunisia

Rescuers pull 394 migrants from dangerously overcrowded boat off Tunisia
Updated 01 August 2021

Rescuers pull 394 migrants from dangerously overcrowded boat off Tunisia

Rescuers pull 394 migrants from dangerously overcrowded boat off Tunisia
  • It was not clear if there were any deaths or injuries among the migrants
  • Migrant boat departures have increased in recent months as weather conditions have improved

ABOARD SEA-WATCH 3, Mediterranean: Two humanitarian rescue ships pulled 394 migrants from a dangerously overcrowded wooden boat in the Mediterranean overnight on Sunday in an operation lasting about six hours, a Reuters witness said.

The German and French NGO ships Sea-Watch 3 and Ocean Viking rescued the migrants in Tunisian waters 68 km (42 miles) from the North African coast, near oil facilities and other ships.

Sea-Watch 3, which assumed command of the operation, took 141 of the survivors while Ocean Viking took the rest. The yacht Nadir, from the German NGO ResQ Ship, later gave support.

It was not clear if there were any deaths or injuries among the migrants who were in the wooden boat, which was crammed with migrants on deck and inside the hull.

The craft was taking in water and its engine was not working, the Reuters witness said.

Migrant boat departures from Libya and Tunisia to Italy and other parts of Europe have increased in recent months as weather conditions have improved.

According to the UN-affiliated International Organization for Migration, more than 1,100 people fleeing conflict and poverty in Africa and the Middle East have perished this year in the Mediterranean.

Many of the migrants in this latest rescue were seen jumping off the boat and trying to swim to Sea-Watch 3, the Reuters witness said.

The migrants were mainly men from Morocco, Bangladesh, Egypt and Syria.


Haniyeh re-elected as chief of Palestinian Islamist group Hamas

Haniyeh re-elected as chief of Palestinian Islamist group Hamas
Updated 01 August 2021

Haniyeh re-elected as chief of Palestinian Islamist group Hamas

Haniyeh re-elected as chief of Palestinian Islamist group Hamas

GAZA: Ismail Haniyeh has been re-elected as chief of the Palestinian Islamist group Hamas, which controls Gaza, two Palestinian officials told Reuters on Sunday.
Haniyeh has led Hamas since 2017.


Majority of Turkey wildfires under control, official says

Majority of Turkey wildfires under control, official says
Updated 01 August 2021

Majority of Turkey wildfires under control, official says

Majority of Turkey wildfires under control, official says
  • Five fires were continuing in the tourist destinations of Antalya and Mugla, while 107 fires were ‘under control’
  • A heat wave across southern Europe, fed by hot air from Africa, has led to wildfires across the Mediterranean

ISTANBUL: More than 100 wildfires have been brought under control in Turkey, according to officials Sunday.
The Minister of Forestry and Agriculture, Bekir Pakdemirli, tweeted that five fires were continuing in the tourist destinations of Antalya and Mugla, while 107 fires were “under control.”
The fires in Antalya were continuing in Manavgat and Gundogmus districts. In Mugla, they continued in the tourist destination of Marmaris, as well as Koycegiz and Milas.
Police water cannons, usually used to control riots, assisted helicopters and fire trucks in Mugla to fight a fire. Blazes were still visible in footage taken early Sunday.

Panic-struck tourists were evacuated Saturday from some hotels in Mugla’s popular district of Bodrum as a fire rolled down the hill toward the seashore. Pakdemirli said the fires in Bodrum have been controlled.
Pakdemirli’s list showed fires began in 32 provinces from Wednesday onward. Six people have died.
While Turkish authorities are investigating whether the fires may have started as an act of “sabotage” by outlawed Kurdish militants, experts mostly point to the climate crisis, as seen by the drastic increases in temperatures along with accidents caused by people.
A heat wave across southern Europe, fed by hot air from Africa, has led to wildfires across the Mediterranean, including in Italy and Greece.
Temperatures in Greece and nearby countries in southeast Europe are expected to climb to 42 degrees Celsius (more than 107 Fahrenheit) Monday in many cities and towns.


Outgoing Iran president says government not always truthful

Outgoing Iran president says government not always truthful
Updated 01 August 2021

Outgoing Iran president says government not always truthful

Outgoing Iran president says government not always truthful
  • President Hassan Rouhani insisted he and his officials did their best
  • Rouhani blamed many of Iran’s current problems on Trump’s decision to withdraw from the nuclear deal

DUBAI: Iran’s outgoing president on Sunday acknowledged his nation at times “did not tell part of the truth” to its people during his eight-year tenure, as he prepares to leave office with his signature nuclear deal with world powers in tatters and tensions high with the West.

President Hassan Rouhani’s comments, aired on state television, come as officials in his government have appeared rudderless in recent months amid a series of crises ranging from the coronavirus pandemic to parching droughts fueling public protests.

After appearing just days earlier to be lectured by Supreme Leader Ayatollah Ali Khamenei about their failures in the nuclear negotiations, Rouhani’s remarks appeared aimed at acknowledging the problems his government faced in its waning hours. President-elect Ebrahim Raisi, a protégé of Khamenei, will be inaugurated Thursday.

“What we told people was not contrary to reality, but we did not tell part of the truth to people,” Rouhani said at his last Cabinet meeting as president. “Because I did not find it useful and I was afraid it would harm national unity.”

He did not elaborate on what he meant by his remarks. However, during his tenure, Iran’s paramilitary Revolutionary Guard mistakenly shot down a commercial airliner and killed 176 people onboard in January 2020, which the government refused for days to acknowledge until Western nations went public with their suspicions.

Rouhani, a relative moderate within Iran’s theocracy, insisted he and his officials did their best.

“If we have a defect, we apologize to the people and ask them for forgiveness and mercy,” Rouhani said.

He pointed to the country’s 2015 nuclear deal with world powers, which saw Iran agree to limit its enrichment of uranium in exchange for the lifting of economic sanctions. However, that deal now sits in tatters after then-President

Donald Trump unilaterally withdrew America from the accord in May 2018.

Rouhani blamed many of Iran’s current problems on Trump’s decision, which saw the value of the Islamic Republic’s rial currency crash. The president said that while Iran had plans to upgrade its armed forces after the expiration of a UN arms embargo in October 2020, it couldn’t due to its financial woes.

“We did not have the money to buy due to sanctions and not selling oil, but the contract is completely ready,” he said.