Economy

Lebanon braces for blackouts as fuel supply crisis deepens

By Nohad Topalian in Beirut

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Electricité du Liban on November 3rd announced it had been forced to shut down two power production units in the Zouk Mikael and Jiyyeh power plants and reduce the output of two other units in the Jiyyeh plant. [Nohad Topalian/Al-Mashareq]

Lebanon’s power supply programme entered a phase of severe rationing in the beginning of November, with all regions experiencing power cuts of up to 21 hours a day, citizens and officials told Al-Mashareq.

If additional lines of credit are not opened for the purchase of fuel for power plants, the country is at risk of plunging into darkness, they said.

Lebanon’s power company, Electricité du Liban (EDL), on November 3rd announced it had been forced to shut down two power production units in the Zouk and Jiyyeh plants and reduce the output of two units in Jiyyeh plant.

This move, which EDL said was the result of a shortage of fuel, will reduce the company's power production by about 320 megawatts.

Rising oil prices have led to a shortage of subsidised fuel oil, the company said.

Meanwhile, two Algerian tanker ships with a cargo of fuel oil have been anchored off the coast since October 26th, awaiting a resolution to the price issues.

Despite calls made by Prime Minister-designate Saad al-Hariri to the Algerian authorities, the ships have yet to unload their cargo.

Electricity sector problems

Since the 1990s, Lebanon has suffered from a chronic problem in the electricity sector, resulting from its failure to rehabilitate its power plants.

To bridge the gap between electricity supply and demand, customers have been forced to take out costly subscriptions to obtain power from private generators, which have been largely unregulated by the government.

Two power-generation barges, rented from Turkey, also have been helping address the shortfall resulting from the shortage of fixed infrastructure.

The severe rationing of fuel oil has had a negative impact on the economy and on the Lebanese people, said Tony al-Mallah, of the town of Mazraat Yachouh.

"We can no longer pay two electricity bills to power our homes and businesses," he told Al-Mashareq. "It is time the state finds a permanent solution based on generating electricity from power plants, instead of renting ships to supply it."

"The state has spent huge amounts of money on electricity since 1990, and it was all in vain," Yusuf Homsi, a carpenter from Antelias, told Al-Mashareq.

The budget deficit and Lebanon's debts are mounting because of the cost of electricity, he said, and "citizens pay two bills, one to the state and another to private generator owners".

"What is funny and sad at the same time is that we are headed toward total darkness," he added.

Shortfall in funding for fuel

An EDL source, who asked to remain anonymous, said the company was forced earlier this month to "shut down two production units in the Zouk Mikael and Jiyyeh power plants because of the lack of fuel".

This happened "even though we had repeatedly warned that EDL would have to shut down its production units one by one in all its power plants, including the two Turkish barges, because of the shortage of funds to purchase fuel", he said.

"Earlier this year, EDL asked the Finance Ministry for 2,800 billion Lebanese pounds ($1.86 billion), but it gave us only 2,100 billion ($1.4 billion)," he said.

Of this amount, only 250 billion remains ($166 million), "which allows us to provide seven hours of electricity per day", he added. "We are now asking for 700 billion pounds ($464 million) to buy enough fuel till the end of the year."

Without this, he said, "Lebanon will plunge into darkness".

The shortfall "was caused by the increase in oil prices, as EDL received its funds in advance, based on $60 per barrel, and today the price is $85 per barrel", he explained. "In September, EDL requested an advance of 642 billion pounds ($426 million) instead of 700 billion to cover the fourth quarter."

This would have provided 21 hours of power per day to Beirut and 18 hours per day to other areas outside Beirut administrative district, he said.

Annual demand to grow by 3%

"All the solutions that have been developed for the electricity sector to date have only resulted in more rationing and further decrepitude of the network," said Roula Rached, a media professional who specialises in economic affairs.

Instead of being linked to new power plants or production units, the network was rehabilitated to increase supply, she told Al-Mashareq.

Two Turkish barges docked at the Zouk Mikael and Jiyyeh thermal power plants were installed to make up for the growing shortfall in supply, she said.

"The total cost of these ships exceeds $1 billion a year, in addition to the cost of supplying them with fuel, totaling $1 billion and covered with advance payments to EDL from the treasury," she said.

According to Rached, official figures indicate "40% of the total public debt of about $85 billion was spent on the electricity sector, with more than $36 billion spent on the sector from 1992 to 2018".

Meanwhile, "demand for electricity is expected to grow by 3% a year", she said.

The annual average demand for electricity is estimated at 2,350 megawatts, while the total amount produced and purchased is 2,300 megawatts, of which 13% is lost to technical waste during transmission and distribution.

"It is worth noting that consumption increases to 3,450 megawatts during peak hours in June, August and September each year," she said, noting that Lebanon needs to produce an additional 1,500 megawatts to cover the market’s need.

Each division of the electricity department -- production, transmission, distribution and administration -- has multiple problems, Rached said.

"However, the complexities of production remain the most difficult to solve because of the blatant negligence of old plants," she added.

These have not been well maintained, she said, and conflicting political views on whether to build new plants or rent barges also have hindered progress.

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