Renewable Energy
Renewable Energy in Lebanon - Outdated and Under Funded
January 7, 2016
This article has been produced by the efforts of the following members:
Alexandra Ensor - Team Analyst, Studying the Energy Sector in Lebanon
I. Jamie Arabi - Leader of the Lebanon Risk Assessment Team
Keywords: Lebanon, energy, investment opportunity, renewable energy, government
The political situation in Lebanon has left an unquestionable mark on the country's ability to make changes to legislation. However, the current focus on renewable energy has transcended the political deadlock with the help of the United Nations (UN) and other organizations. Renewable energy in Lebanon is a growing focus, with incentives such as low-interest loans available to both residents and small businesses.
The energy sector in Lebanon is affected by supply issues, and by government inefficiency. Currently, there is too much demand and not enough energy to consistently provide energy to the Lebanese populace. In Beirut, for example, the current 220-kilovolt-power supply network was regularly reaching capacity in August 2015. This was a result of high temperatures creating increased power demand. This was in addition to the fact that, since the late 1970s, power supply companies have implemented rolling blackouts throughout the country. In Beirut, as well as other cities, such blackouts have become the norm, and private energy companies have come to provide electricity during blackouts – for a high cost. So, although the rolling blackouts seem to be a limited issue, significant problems with power supply plants, like Beirut’s, persist. The plants have not been maintained, and many do not have the capacity to receive energy from any sources other than the current one. This illustrates the clear need for alternatives to the state energy system, but the ineffective and inefficient government poses a challenge.
Moreover, the constitution requires that decisions by the Chamber of Deputies (the legislative branch) be made with a two-thirds majority. This requirement leads to inherent inefficiencies, and the current standstill only perpetuates it. Due to the current lack of a President, important government decisions are not being made - such as the general maintenance to the main power supply plant in Beirut discussed above. No doubt, this raises questions about the reliability of the Lebanese government. Further, the current energy debt sits at about $27 billion, or just under half of the total public Lebanese debt. So, not only is the deadlock creating problems, but the energy situation is increasing stress on the Lebanese economy - which is projected at 0% growth in 2015.
The renewable energy sector in Lebanon, while small, is growing. The UN has taken steps to increase the presence of renewable energy sources with the Small Decentralized Renewable Energy Generation plan. This plan aims to increase investment in the renewable energy sector, and to increase the number of small, private energy generation plants in Lebanon. While this seems to be a good initiative, the currently-listed contributions on the UNDP website are just under $1.6 million - a very low figure in relation to the state's budget and population. Although steps are being taken to improve the renewable energy prospects in Lebanon, it is difficult to invest in this sector.
In order to invest, a company must first 'privatize,' whereby they gain approval from the Lebanese government in order to formally begin their work in the country. Until such time, the state holds ownership of the company. For any investor, letting go of ownership, even for a short while, is a very unattractive. Further, the transmission company - the company that works to transport energy from the plant to the homes that use the energy - will own the transference of the energy. In this case, the transmission company is a part of the government. While this process might be considered to be standard, there are many problems with it.
It is important to know that the Lebanese government is not dependable and the likelihood of the government making timely decisions regarding approval is low. The law that outlines these mandates was originally produced in 2002 but was not been passed until 2012, after the previous government had been replaced. While investing in the country, a company will (eventually) be completely private; however, it will still rely on the government and the transmission company to transport the energy from the plant to its location of need. The company does not have the option to privately monopolize the transport of energy. Moreover, the company must be able to trust that the government will consistently maintain the transmission systems, and that it will be cooperative throughout this process.
Theoretically, Lebanon possesses a good environment for investment. It has a free-market economy and a liberal financial environment. The problems arise when the government situation is taken into account. While the economic system seems to be relatively appealing, government regulations create problems and the reliability of the government is questionable. If a company were to make the decision to invest in the energy sector in Lebanon, the ability to make a profit would rest heavily on the state's ability to make decisions.
