Lebanon draft electrical energy reform plan sees tariff hike, 24-hour energy by 2026

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BEIRUT — A draft reform of Lebanon’s crippled energy sector seen as important to addressing its monetary disaster envisages an “fast” hike in electrical energy costs, for the primary time in three a long time, and $3.5 billion funding to safe 24-hour energy by 2026.

The blueprint, dated February 2022 and seen by Reuters, was mentioned by the federal government earlier this week.

Vitality Minister Walid Fayad has referred to as for its approval by the federal government subsequent week forward of the primary parliamentary election, in Could, since a monetary meltdown in 2019. He has beforehand mentioned tariffs will likely be hiked when extra energy is added to the grid.

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The Worldwide Financial Fund, with which Lebanon is discussing a possible bailout program, mentioned final week stopping the sector’s drain on public assets was a key pillar of the nation’s financial restoration. Two earlier plans with comparable targets have gone unimplemented nonetheless, on account of political splits.

Lebanon has not had round the clock energy because the Nineteen Nineties and money transfers to state-run utility Electricte du Liban (EDL) to cowl continual losses have contributed tens of billions of {dollars} to its enormous public debt over three a long time.

EDL’s income now solely covers 4% of its $800 million working prices, the draft says.

“Distribution losses account for 37 p.c of vitality generated in 2021, which is properly above trade requirements and dooms the sector to monetary imbalance,” the draft says.

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The plan envisions EDL breaking even by 2023 and turning worthwhile by 2024 by growing invoice assortment, chopping technical losses and elevating the “absurd” worth of round 1 cent per kilowatt hour to between round 10 cents per KWH for many residential clients and 18 cents for others. Costs have been final amended in 1994.

It additionally requires the appointment of an Electrical energy Regulatory Authority (ERA) mandated by a 2002 regulation however by no means carried out on account of political disagreements, and for an audit and eventual corporatization of EDL.

Lebanon can solely produce 1,800 MW of energy whereas peak demand exceeds 3,000MW. The hole is stuffed by costly and polluting privately-run diesel turbines for many who can afford them.

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Weak governance, corruption and mismanagement are on the root of the sector’s issues, Jessica Obeid, a Lebanese vitality coverage marketing consultant and non-resident scholar on the Center East Institute instructed Reuters.

“Until these are addressed, residents is not going to have dependable, sustainable and reasonably priced energy,” she mentioned.

The plan envisages extending the present 3-4 hours of energy per day to 8-10 hours later this yr through imports of electrical energy from Jordan and gasoline from Egypt — each offers Fayyad has mentioned ought to go into power in spring. It foresees an extra 500MW of “short-term” era added to the grid within the mid-term.

To succeed in round the clock energy by 2026, the nation requires a “macro‐fiscal stabilization program to… present the consolation wanted for buyers to commit the sizable funding” wanted for a mixture of gas-fired energy crops and renewables.

Such a program requires broad political approval that has not but been forthcoming.

(Reporting by Laila Bassam, Timour Azhari and Aidan Lewis; Writing by Timour Azhari; Modifying by Philippa Fletcher)