By Ghassan Karam
Since the beginning of civilized society the concept of “solus populi: – the well being of the people- has provided the strongest justification for the existence of government. Well being is a difficult concept to define but it is agreed that a major component of well being of a nation is to be seen through the unencumbered accessibility to what is regarded essential requirements; food, shelter, clean water, education, physical security and essential utilities such as electricity.
As it should be obvious, based on the above brief list the Lebanese state has not been able to deliver on most of what is expected of it but especially electricity. Although this problem of electric power shortages has plagued the Lebanese society for over two decades the current outlook is for greater rationing and for no end to to what has arguably become a symbol of the incompetence of the Lebanese authorities to deal with what arguably appears to be a rather simple problem to overcome.
It is rather ironic that the Lebanese authorities who are obsessed with the idea of promoting Lebanon as a major tourist destination have failed to undertake any significant effort to supply the electric power needed to run the air conditioners in the luxury apartment buildings that can be seen all across the capital, Beirut and its environs. That is similar to selling internal combustion engines although one cannot deliver the petrol needed to have these engines run.
To make things even worse than what they are the Lebanese state saddles its citizens with the triple burdens of (1)electric rationing (2) high cost and highly polluting private electric supplemental power and (3) a subsidy of 5% of the GDP to an inefficient badly run and managed electricity producing and delivery sector.
A solution to what ails this sector in Lebanon must take the following points into consideration:
A. The overall capacity of about 2200 MW is not sufficient even if it was to be devoted only to residential demand. On the surface it might appear that 2200 MW are adequate but that does not take into consideration the single most important fact about electric generation: Capacity Factor. Fossil fuel plants, when properly run and maintained do not operate above 75% of their capacity and so my guess is that the Lebanese fossil fuel generators barely achieve 60% of capacity. This would automatically reduce the availability of electricity to about 1300 MW.
B. Each 100MW at 60% Load Factor produces about 5.2 Billion KWH/annum. If it is assumed that each Household requires 1200KWH/month then the maximum number of units that can be served would be 800,000 homes. If we are further to assume that the 4.5 million Lebanese live in 800,000 homes then who is to provide electric power to industry and municipalities to light the streets?
But what does the rather severe restriction on capacity have to do with a subsidy of around $1.2 billion a year? A public utility, in most countries of the world, either breaks even or makes a profit so why this huge annual deficit generated by the EDL, Electricity of Lebanon.? The answer to the above is a combination of inability to collect the revenues that are due but most importantly it is due to the antiquated and archaic rates structure that is in use. The present fee schedule for residential demand is the following:
First 100 KWH……o.o23 dollars
Next 200KWH……o.o36 dollars
Next 100 KWH…..0.053 dollars
Next 100 KWH…..o.080 dollars
Over 500 KWH….0.133 dollars
This schedule was established in the early 1990’s when the price of oil was less than a quarter of its current price. No wonder EDL runs at a huge deficit of over $100 million each month.
The Lebanese government is under the obligation to fix this hugely important sector ASAP. Some steps that would move the country significantly in that direction are the following:
(i) A 5-10 cents increase per KWH must be phased in. This measure will lead to a more efficient use of the available electricity and would reduce or even eliminate the subsidy of 5% of GDP.
(ii) Institute an efficient collection system from all customers.
(iii) Transform the current production facilities to run on natural gas. This will reduce CO2 emissions and will result in greater efficiencies.
(iv) Construct an additional 1000-1500MW capacity
(v) Encourage conservation through demand management, and through promoting clean renewable energy.
(vi) Allow private electric production companies who will distribute through EDL but phase out the small scale inefficient and highly polluting private generators.