To say that energy was a problematic sector from beginning of the Lebanese post-conflict reconstruction in 1992 to the end of the financial inflows-fueled, corrupt cronyism system in the country, is more than an understatement. The sector can be described as a detrimentally subsidized sinkhole of state funds, catastrophically mismanaged public utility, and theme of one internationally flagged need and sabotaged development strategy after the other. The underdeveloped energy sector, dilapidated systems of electricity generation and transmission, and dysfunctional monopoly utility Electricite du Liban combined into the moraine of policy debris obstructed economic potentials and resulted in widespread energy poverty in Lebanon. In Executive’s investigation of damages, needs, and potentials of economic sectors with members of the Lebanese Private Sector Network, we sat down with Joseph Assad, Lebanese and regional energy expert and dean of the engineering department at USEK. He took us on a perforce tour of personal insights that are based on his advisory experiences at the Lebanese Center for Energy Conservation (LCEC) and the Ministry of Energy and Water (MoEW) from 2010 to 2017 and his consulting work with international agencies on energy policies and projects in more than a dozen countries.
Can we have hope for energy sovereignty after all the years of stuttering and delayed adoption of renewables and attempted electricity solutions within a regionally integrated power framework – or is energy sovereignty today still a pipedream, more than three years after the severe electricity crisis that was part of the economic meltdown of Lebanon?
JA: You need to look at this issue from several points of view. On the policy level, we are still at the same position. De facto, however, many things have changed due to the [economic] crisis. The boom of solar [photovoltaic] systems has happened in Lebanon because of the crisis. Whether this boom led to [installation of] 1,200 or 800 or 1,500 megawatts, that is a big share of solar PV in Lebanon. A big share of electricity is now being generated locally, and this contributes to what we call energy security. Another factor that has contributed to the energy security is on the demand side [of the equation].
How so?
Demand dropped because of three reasons, the first being the most obvious in the increase of electricity prices. People now have to account for the electricity bill at the end of the month and thus are looking more and more into how to save energy. The second thing is that some people cannot afford electricity anymore. They have been cutting down on their vital electricity needs. The third one is the [drop in power consumption] because of the blackouts that we witnessed in the previous period and that are disappearing more and more right now. I am talking about the total blackouts when electricity needs were covered neither by generators nor by EDL.
The third [demand reduction element] has disappeared, the second one should disappear [as people’s access to vital energy] should return with the adjustment of the economy. But the first one will remain, because it is an awareness change and behavioral change reducing electricity demand. What does this mean? We are demanding less electricity and are producing more electricity locally, which means that we are increasing our energy security and energy sovereignty.
What else is required to actually have energy sovereignty? Is it correct to say that energy security could be improved by acquisition of electricity and the resources to produce it from outside the country while energy sovereignty requires local production?
On that level of energy sovereignty, it means that we need natural gas resources. Hopefully when we tap into our gas resources, if any [viable ones are found], we will have full energy sovereignty. Renewables and hydro, which are the only [domestic] sources that we have today, cannot provide full energy sovereignty. Otherwise we need to import fuel, which makes us face two problems, one is the weight on our national debt [that will be imposed by fuel payments] and our sensitivity to the fluctuations in international oil prices, and secondly the political dimension of importing oil.
As to the factors contributing to the reduction of energy demand, did improvement of energy efficiencies play a role that was in addition to behavior changes because of higher cost?
That happened automatically. On the policy level, I was personally responsible for drafting the chapter in the NEEAP II (four-year National Energy Efficiency Action Plan published in March 2016) for Lebanon where I produced a chapter on energy efficiency measures in the [Engineering, Procurement, and Construction] sector. I was personally involved in drafting this chapter of the energy efficiency law. It was not implemented due to the crisis. Within the NEEAP we had chapters addressing energy efficiency in all sectors. But what we lack in Lebanon is not policy but implementation. For the last three or four years there has been a law pending in the Lebanese parliament, the energy efficiency law.
And yet I have encountered inefficient electricity installations in some public buildings, where I saw over-sized and non-divisible power generation facilities in state-owned venues in Beirut.
The private sector is for sure far ahead of the public sector in the area of energy efficiency. They main problem in the public sector is funds. I know from my work that after the Beirut blast there has been a large package of funds to solarize public institutions, for example a World Bank program for the Lebanese University and initiatives with [German] agencies KFW and GTZ and also with other institutions from Japan. Public hospitals, public schools, Lebanese University, Lebanese Armed Forces, and also at different ministries, in all of them you will find a very good solarization rate that has been installed. In the coming year there will be projects for the Palaces of Justice and the administrative buildings of governorates, implemented by UNDP with what I think is EU funding.
There is, however, a huge problem of [doing things] the Lebanese way where “bigger is better” where I will get a two or three times larger generator when I need one of 100 kWh capacity. This is knowing that underloading a generator will consume more fuel and that a bigger generator will consume more fuel than a small one. So in 95 percent of institutions in Lebanon, you find that their diesel generator is over-seized, because they took a bigger generator under considerations that they would grow. [Before], there would be many Lebanese people who would prefer to have a larger generator just in order to have the peace of mind of always have enough power, rather than making savings on fuel. Today it is different. Today we need to consider energy efficiency as we are back to financial reality. There are many examples for low cost, no cost operational efficiency measures.
Is this rational trend toward higher energy efficiency progressing in the best possible way, or is the country still in a worst-possible scenario of implementation?
The [reality] is something in-between but I think if it is institutionalized and legalized, it will be much better. Now it makes sense financially and it is the best time to implement energy efficiency in Lebanon.
But are there government incentives such as tax holidays or investment support for energy efficiency measures?
No need to go there. I am quoting one of my two German energy gurus who used to say that the cleanest and cheapest kilowatt-hour that you can produce, is the one that you do not consume. Let us begin there and then we can discuss other issues.
There have been ideas and proposals of utility scale solar farms that were born in the 2010s and tendered later in the past decade but then stopped still before the implementation stage in 2019 and 20. When I recently searched the website of LCEC for information relating to these solar farm tenders, I encountered a stakeholder assessment document by the World Bank. It seemed to imply a need to engage in further consultations with stakeholders from municipalities and civil society in communities in the Bekaa that were recently in the news not for their agricultural or other economic capacities. What is the state of developing utility-scale solar PV and power purchase agreements (PPAs)?
I will update you on this but let me first remark that the private sector in Lebanon has demanded its own energy sovereignty from the government. This was one of the main drivers of the solar boom. On one side there was the residential aspect that was driven both by desire for energy security and, later on, also by energy efficiency. But when you look at the demand from the industrial and commercial, or C&I sector, it was pure energy sovereignty where a lot of people were saying, ‘we do not want to wait for the government anymore but take things into our own hands’. And I was just notified that six out of 11 PPAs were already sold to private sector partners. There is a big appetite from private sector players who want to invest on their own, and the only issue today why we are not implementing the 11 PPA contracts that were signed, is the financing.
In this regard, the Stakeholder Assessment document by the World Bank said that you must complete the stakeholder assessment process before you can receive finance.
That applies if you aim for international financing. But what we are seeing now in Lebanon is that [private sector entrepreneurs] are not going for any external financing. They are people who are going for the PPAs because they want to themselves invest in solar farms. So what we are seeing today is an internal appetite of the private sector to invest in the public sector. This is a good sign: the private sector is coming back and taking part in the solution for the public sector.
What you say now reminds me of civil society actions in some areas of Beirut when private initiatives started in late 2021 connecting streetlights to generators in neighborhoods or even people’s buildings, so that all people in the neighborhood could walk in more light and thus greater safety.
And now those types of initiatives are going to the next level. Now they are going to the level of, let’s say, 15 megawatts of solar farms that will be feeding into the grid, as part of the private sector investing into the public sector.
Would that require the issuance of very clear further regulations as far as provision and pricing, public private partnerships (PPP), and all that?
The price [for electricity purchases from private providers by the state utility] was set within the PPA and it is very competitive, I think, when you compare it to the cost of production in Lebanon and taking into consideration all the risks. I am not a legal expert on the matters of PPP and PPAs. From my understanding from the legal experts, the only issue is in the financing. If you have the financing, you can start the works and it is no secret that several PPAs were bought – [purchase of two contracts by shipping giant] CMA-CGM is already public and they have stated that they will start implementing. I think there is something pending with Total [Energies and QatarEnergy]. However, I know that there also are others.
Are there fully Lebanese investors that have acquired PPA contracts? If so, does the Lebanese Private sector network have a stake or function in such initiatives?
Yes, that is the case and many of the people, or at least a couple of them, who are holding PPAs, are members of LPSN.
What about the requirement of stakeholder assessments or other political barriers that might stand in the way of international finance, such as through World Bank packages, when we talk about municipalities where allegiances have been with the political Hezbollah?
I cannot talk for the World Bank but on the Lebanese level, the only requirement would be the social and environmental impact assessment, which has its own criteria and could be run through local authorities and municipalities but also through local NGOs and local representation. I do not know if the World Bank has other requirements which would apply if the World Bank is financing, which, however is not the case in the moment. I think since we have appetite from the private sector in financing that size of solar relays, I would keep the World Bank off those projects and focus on having that aspect of sovereignty within the financing of those PPAs and bring in the World Bank for the larger ones where you might need all the processes and procedures that the World Bank applies.
Do you have any information on the damages on the energy sector from the two months of open war?
I know that there was a huge impact in the south – and I know less from the Bekaa – on the solar systems that were specifically installed for solar[-powered] pumping. These systems, which were already financed by international donors, will have to be restored and we will need a lot of support to rebuild them. As we do not have access to all the regions yet, it is too early to undertake a formal assessment of damages.
As far as economic losses in electricity and renewable operations over the past months, could these be of lower significance? It seems that operational provision and access to electricity in 2024 was, despite the war better than in 2023 or 22?
This is for the simple reason of having parts of the country that were totally depopulated, which meant that we had less electrical load and it was moved to other regions that felt a slight amelioration because they had more hours of electricity. We will not have any international financing in the sector without a macroeconomic solution, except for those small PPAs where you can find a private investor that can invest 6, 7, or 8 million USD to build a solar farm. However, if we talk about large scale farms and projects of $100 or 150 million, we need external finance from international financial institutions, and those will not come without a macroeconomic solution, which was delayed by the war.
So in your analysis, new financing will be delayed because of the conflict?
Yes, war is the enemy of attracting investments. However, we have seen resilience within the Lebanese population – but is that resilience enough to attract direct buyers? But on a brighter side, what we hope for, even if I am not sure that this can be said about any war, is that this war will be a start of a new era of ending conflicts and seeing less conflicts within the region. From that point of view, we maybe getting closer to having the IFIs and external investors return to Lebanon. If on the other hand [the next phase in the Lebanese situation] is a remake of what happened in 2006, it will be delaying much. Under the more optimistic view, one of the points that we need to discuss when we talk about the role of the private sector, is the decentralized renewable energy (DRE) law.
Is the DRE law’s power wheeling part working, meaning the ability of private producers of electricity to transport the power over the grid from where they can conveniently produce it to where they need it, under the law that was adopted in Parliament at the end of 2023?
No, power wheeling is not working. However, what is working, are private to private power purchase agreements and I am happy to announce that we signed the fist PPA at USEK with a company of the private sector in Lebanon, which will be investing in installing a solar system on the roof of our parking [area]. We will have a contract where we [as USEK] buy electricity for ten years and after ten years, the system will become ours. This model can represent a very important opportunity for the private sector to invest locally. It is an investment opportunity and I know that there are companies working on that aspect. I know of one or two that are the most mature, but I cannot name.
Any industrialist whom you approach in Lebanon and ask him what the first pain in the neck is to him, he will say energy. If you them tell them ‘do not invest yourself in installing a solar farm but leave this to us and we will sell you electricity cheaper than what it costs you on your generator while you invest in your own business’, they will be very happy.
In areas of renewable energy usage other than operating manufacturing plants and processing plants, is it feasible for a transportation provider to have a solar array powering a central charging station for battery-energized buses or delivery vehicles?
Why not. We can think about a lot. However, for the public transportation sector I have cleaner models. From my point of view, hydrogen is much better for the buses when compared with installing solar farms to charge the buses and all that.
When Executive talked to the largest Lebanon-based solar PV and renewable energy companies back in 2021, they were doing most or almost all of their profits outside of Lebanon, in Middle Eastern and African markets. Are these companies involved in the PPA deals that you mentioned?
It is a point of pride for the energy sector in Lebanon that companies that were groomed in Lebanon are working in the whole region. But these are not the same companies that we are talking about here. It is about project financing. We are talking about companies that are being created to finance those people that install solar for third-party private sector companies. It is the private [sector] financing the private to install for the private.
But do we have the needed companies with enough capacities to serve this demand?
Yes, and much more. Having worked with them from different perspective, [namely] from the public and the private sector perspective and now as customer representative for my university, I can say that the renewable energy [Engineering, Procurement, and Construction] EPC companies in Lebanon are very competitive and have the right know-how to install the systems, especially when we are talking private to private sector projects of below 1.5 megawatt, which cover 90 percent of the needs in Lebanon. For those system sizes, we have the world’s best companies to install them.
As you mentioned, gas reserves and also using fossil resources is crucial for energy sovereignty of Lebanon. We have had many speculations, rumors, and political expectations throughout the 2010s and even after the crash of the local subsidies. Is this debate of resources more rational today?
Once we have proven resources – and as I scientist I cannot state my conviction but I can say that we have a very good probability for those reserves, putting it into a more scientific framework, it will be a game changer for the energy sector. I think the Lebanese private sector will have a huge role to play on that level, not only on level of license holders but also in the huge marker of services that need to be provided to those companies.
Will the world around us let us explore our resources in peace?
At the start of my course in each semester, I present a slide of proven energy resources in the world and another slide where I present the political tensions in the world. And when I overlay these two maps, there usually is 80 to 85 percent accuracy of overlay. In previous times it was water and today one of the main reasons of war are energy resources. However, I am personally optimistic because I know that our country will survive because it has already survived many similar, bigger and smaller conflicts and turmoil as we are facing now.
Another chapter that we need to address is hydrogen. Hydrogen is now being pumped to Europe from North Africa. But there is also a big potential for hydrogen production elsewhere in the region, especially places with natural gas pipelines passing through. Because you can mix.
Would the hydrogen production be utilizing solar-thermal?
There are several ways. What is called green hydrogen is produced by using renewable energy and electrolysis of water but there is also potential for blue hydrogen where there are oil reserves. Natural gas from oil reserves can be used to produce blue hydrogen instead of flaring it. It can also be pumped. Hydrogen is the energy vector of tomorrow. It is a vector, not a source because it can be used to shift energy from point a to point b in geography but also from point a to point b in time.
Is Lebanon politically and technically cognizant of this opportunity?
Lebanon is one of the first countries to have a hydrogen strategy. I myself developed that strategy on behalf of GIZ. So I think we are well positioned, but we are not ready yet. We are on the right track but need to accelerate and this acceleration would depend on [collaboration].
The LPSN has stipulated the need for an internationally financed, Marshall-type plan for Lebanon. Should there be a budget allocation to energy in a Marshall type plan and how much in percentage terms of a plan should be dedicated to energy sector development?
I cannot give you a number but I think that energy should be the main focus of any future plans within Lebanon, because it is at the same time one of the main enablers of the Lebanese economy and also in itself is becoming a sector of the economy. I don’t know how many sectors were producing $5 billion per year during the last period. This was the private power generation sector that was achieving a turnover of four to five billion dollars per year. If this sector is institutionalized and opened to private sector, you open an economical sector that will be running billions – nobody has the exact numbers – at the same time as the billions of EDL. The energy sector should not only be an enabler but also a producer and economic sector in itself.
