Topic: BusinessIndustry

Last updated: November 19, 2019

The electricity sector’s substantial yearly energy bill equivalent to 11% of the country’s GDP, or 3.83 billion USD, in addition to the sector being the greatest contributor to climate change on Lebanon’s behalf is without a doubt a good enough reason to bring energetic restructuring back to the forefront of the national agenda. This type of reform agenda must reduce Lebanon’s dependency on hydrocarbon imports (which is currently at 95%) and sensitivity to oscillation of international oil prices. The gateway to achieving these goals is by implementing a medium sized solar panel farm as well as a complementary battery farm similar to the project carried out by Tesla in Australia.

According to researchers, switching from fossil-fuel burning power plants to solar cells, air pollution would be cut by roughly 90%. As such, carrying out this type of project is in fact a mitigation strategy aimed to reduce Lebanon’s GHG emissions into the environment. This type of project is directly contributing to the country’s INDCs by tackling climate change at its source. The amount of contribution from solar energy cannot be easily calculated; however, Lebanon has made it clear that it conditionally (with the help of international support such as the GCF) aims to reduce GHG emissions by 30% by the end of 2030. Moreover, the project falls under the NAMA, or Nationally Appropriate Mitigation Actions, because of its active contribution in reducing emissions. The project aims to bolster the Lebanese economy by slashing the deficit in the Lebanese treasury which coincides with NAMA’s objectives of economic development and the eradication of poverty (28.

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5% of Lebanon’s population is considered to be poor by the UNDP in 2016). Also, it is easy applicable in Lebanon since it is country that is characterized by long, sunny months; especially in the Baalback region where the area is similar to a dessert. The main barriers to the implementation of the project are related to Lebanon’s lack of financial funds, rampant corruption in governmental institutions, political instability, and regulatory framework; therefore, these barriers fall under fiscal, corruption, political, and regulatory barriers. In terms of fiscal barriers, the Lebanese government has been incapable of issuing a bill on governmental expenditure since the year of 2005 under the guise of political instability. Only recently have they managed to issue a draft which covers governmental spending for the year of 2018.

This stands as a clear problem since the money aimed at setting up a solar farm can be easily mismanaged and ultimately end up in the wrong pockets. Moreover, the fact that that Lebanon could not issue a clear budget on governmental spending greatly undermines the country’s capability in managing a big project such as a solar farm. A subcategory of fiscal difficulties lies in the financial state of the country. Most notably, Lebanon has the third highest debt-to-GDP ratio in the world sitting at a staggering 139.1%, or 71.65 billion USD.

If the country keeps going in this direction, economic bankruptcy seems imminent. Another problem which is eating up a big percentage of Lebanon’s economic growth is corruption. Unfortunately, over the years through which Lebanon did not officially have a cap on government expenditure, corruption has seeped into every governmental institution in the country.

As such, it is hard to believe that this trend would completely shift in 2018 with the enactment of a bill of expenditure. Moreover, local political deadlock which has destroyed Lebanon is one of the greatest issues to consider. One can only reference the lack of governmental action to the supposed oil and gas reserves across Lebanon’s coastal areas to understand that the political figures of this country cannot agree for the benefit of this country. Moreover, Israel’s constant violations of Lebanese sovereignty in addition to its threats to destroy Lebanese infrastructure in case of war piles up a lot of pressure on international companies to carry out such a project. In terms of regulatory framework, under current public procurement law, contracts are awarded purely by reference to price as legislation fails to specify non-price criteria, something that is deeply concerning as the faces of corruption can emerge by accepting a less costly solar farm at the cost of extremely poor quality; something that the electricity sector has faced time and time again.In a bid to tackle the barriers mentioned, the project carried out must be handled by the private sector and sell the electricity produced to the public sector. This will easily solve the predicament arising from lack of public funds as the project would be funded by international organizations such as the UNDP who are more readily inclined to transfer funds to the private sector than to the public sector; especially considering the Lebanese authorities’ history in handling assets.

However, certain detrimental conditions must be dictated on the Lebanese government before giving the green light in funding any type of project on Lebanese territory. First and foremost, pressure must be exerted on the Lebanese ministry of finance to issue a bill on governmental expenditure that includes how governmental funds will be allocated. This will ensure that a certain sum of money is put aside to cover the costs of buying electricity from the private sector. As such, the government will not fall behind on paying its dues. Secondly, the management of such a project by the private sector greatly reduces the risk associated with poor management and thus prevents the recurrence of a pitiful situation similar to that of EDL. Furthermore, in the long run once the electricity sector is capable of satisfying peak demand due to the implementation of various energy projects, the money that was being spent to fix EDL’s short coming that amounted to 11% of the country’s GDP could be transferred into other projects thus greatly boosting the country’s capability in funding its own projects. In terms of overcoming obstacles related to rampant corruption in Lebanese institutions, international financers must make sure that the funds given are funneled into the right hands.

As such, only entrepreneurs with a high level of expertise in the energy industry with clear objectives and a detailed road map must be given the right to implement the project as to avoid unintended costs and maximize transparency and quality. Therefore it is the job of international financers to make sure that their money does not go to waste and fall into corrupt hands. As for dealing with issues arising from political instability, as mentioned above international pressure must be exerted on Lebanese politicians to avoid “politicizing” the energy sector as it is a national priority, not to mention a well-established basic human right. Such pressure can fall under cutting funds to key projects unrelated to the energy sector so that the people in power set aside their differences and take decisive action to reduce the rising public debt to avoid catastrophic consequences on Lebanese economy. It is unfortunate that such measures must be taken to remind Lebanese politicians that repaying the debt is a national priority. On the other hand, action must be taken against Israel in order to curb its efforts in terrorizing the region which has pushed away foreign investments into the country.

Such actions can follow the likes of avoiding economic partnership with companies based in Israel (like what we have seen with European Union members in the case of the occupied West Bank) going as further as implementing an arms embargo on the Zionist state to lessen the extent of its threats on stabilization in the region. In terms of strengthening the legal framework surrounding the implementation of the project, international investors must witness clear and sincere action taken by the Lebanese government to ensure the equity of choosing which projects the Lebanese authorities seek to carry out. As such, new legislation must be put in place prioritizing not only the cost but also the quality and transparency of companies willing to participate in the bidding process.The project is intended to accomplish a number of goals:(i) Considerably reduce greenhouse gas emissions arising from the energy industry (ii) Substantially improve the supply of electricity to the Lebanese population(iii) Slash the huge deficit in the Lebanese treasury(iv) Generate employment opportunities for the Lebanese population Project components and related activities are summarized below:Component 1: Considerably reduce greenhouse gas emissions arising from the energy industry• Activity 1.1: Install a 10 MW photovoltaic solar farm on Lebanese territory which has been proven to reduce GHG emissions by up to 90% when compared to energy generation using conventional methods. It must be noted that 10 MW is the initial stepping stone to a full-fledged plan aiming to switch to the use of renewable energy.• Activity 1.2: Switch from the burning of fossil fuels (which is highly susceptible to fluctuations in price) as a primary source of energy to solar energyComponent 2: Substantially improve the supply of electricity of the Lebanese population• Activity 2.

1: Installation of a battery farm similar to that carried out by Tesla in Australia in order to store energy before distribution. This must be done since the Lebanese electricity network is unreliable at times with 15% of generated electricity being lost due to poor transmission maintenance.• Activity 2.2: Maintenance of the transmission network that is being supplied by the solar-battery farm to satisfy customers and avoid energy leaks that go to waste.Component 3: Slash the huge deficit in the Lebanese treasury• Activity 3.1: The completion of the project will indirectly redirect money intended to fix the electricity sector’s shortcomings (which has proven to be unfruitful) into projects that are destined to achieve economic growth.• Activity 3.2: Give incentive to other companies to invest in Lebanese infrastructure thus funneling money from international communities into the countryComponent 4: Generate employment opportunities for the Lebanese population • Activity 4.

1: Installation of a solar and battery farm will naturally create jobs which will be given to Lebanese citizens with high priority. This is due to the fact that the unemployment rate among Lebanese youth has surged in the last decade due to socio-political conflictsIn addition to the above outputs and impacts, there comes a multitude of long term benefits. Firstly, it will raise awareness to the importance of switching over to renewable energy.

Once Lebanese citizens are enjoying a full twenty-four hours of electricity, they can attribute this to the installment of renewable energy which will push them to learn more about this type of industry. Moreover, the country will not be reliant on fossil fuels and the pressure associated with the dependence on this type of fuel. Instead, renewable energy will pave the way to energy independence. As solar and battery farms spread throughout the country, this will inherently solve the problem with the maintenance of transmission networks as the transmission networks in the vicinity of each solar/battery farm shall be up to par with the farm’s supply output. As the number of infrastructure projects increases within Lebanon, a lot of public money previously needed to maintain infrastructure can be freed up to be used for other services. Moreover, international company’s confidence in Lebanese economy will growth thus attracting large amounts of investment further bolstering growth. This project conforms with the laws issued by the Lebanese authorities. In particular, it is compliant to Law 462 issued on September 2, 2005.

This law provides the legal framework of establishing a company with the purpose of producing and distributing electricity. Another law further enhancing the ability to produce electricity is Law 288 issued on April 30, 2014 and Law 54 issued on 2015 (which is an extension of Law 288). Law 288 dictates that the council of ministers can grant temporary permits and licenses to produce electricity upon the proposal of the Minister of Energy and Water as well as the Minister of Finance for a maximum of 2 years. In that time, the National Electricity Regulatory Authority (NERA) would have been established which shall oversee activities related to energy production. Before the establishment of Law 54/2015, no permits were issued thus raising fear that the Lebanese government is not serious in tis tenure to fix the electricity problem.

Following recent events, delegates from the European Union, Arab League, United Nations Development Program, the World Bank, and the International Monetary Fund (IMF) have met in Paris in what is being dubbed as Cedar Conference. During this conference, these entities pledged to lend Lebanon billions of dollars to boost economic reform and fix problems related to water, transport, and electricity sector. Around 60% of the investment program is expected to be funded by grants and soft loans through the IMF’s Compensatory Financing Facility (CFF), with an interest rate set as less than 1.5% over a period of 20 to 30 years, in addition to a grace period of five to ten years. As such, the accredited entity who shall oversee the funding of this project is the none other than the IMF since this project falls under the goals intended by the Cedar Conference.


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