Lebanon is witnessing a rapid deployment of decentralized renewable energy. However, this movement is driven by fear of a total black-out and is happening in the absence of policy, regulatory and financial incentives. This leaves the booming market in total chaos and requires several measures to attenuate its effects, starting with better awareness.
The world is increasingly moving towards decentralized energy generation. This was bound to pick up in Lebanon for different drivers than the global movement. These drivers could be summarized by: 1) a total policy failure leading to more power outages, and 2) an eventual hike in electricity tariffs leading consumers to seek alternatives. The first is being witnessed across the country and the word on the street is that the second is on its way. In all cases, the decentralized energy movement has taken off.
Lebanon’s economic, financial, and political crises are taking a toll on the power sector. The foreign currency reserves necessary for fuel imports are shrinking amid complete inaction from the succeeding governments. Protesters are demanding power stations transmit the limited power supply into their regions, thus negatively impacting the grid and power quality. This results in drastic power outages from both the national utility side and the informal private diesel generators that have proliferated across the country since the early 1990s.
The political class has chronically used the electricity sector for vested interests, including corruption and power. Electricity provision has historically been unequitable, characterized by regional disparities in terms of length and quality of power supply. Some political parties are currently using their influence on the sector to win constituents ahead of the 2022 elections by providing higher electricity supply hours to their areas of dominance. Before the crisis, the farther a consumer had been located from the administrative part of the capital Beirut, the longer the outages and the weaker the voltage. This had led to a bigger reliance on diesel generators outside Beirut. As power outages increased earlier this year, the capital found itself with a power supply nearing only 2-3 hours a day at some periods, similar to the case in other regions.
Democratizing decentralization
Whereas in the past a neighborhood diesel generator would “fix” this national utility outage problem at a significant cost, shrinking foreign currency reserves mean that even the private generator owners have limited access to diesel to power those generators. In addition, generators are designed to provide back-up power supply and are not intended for continuous operation. Therefore, the growing hours of outages from the utility side result in growing outages from the generators’ side as well, along with higher replacement, operation, and maintenance costs of the generators. This cost would also be passed from the operator to the consumer. In most cities and villages, the consumer is now paying a tremendous bill without receiving a continuous, reliable power supply in return, and is therefore seeking refuge in alternatives, mostly rooftop solar photovoltaic systems.
The global drivers for decentralized renewable energy have included the existence of policy interventions and enacted legislation, and the availability of feed-in tariffs, price guarantees, and financing mechanisms. By contrast, Lebanese residents, who have lost access to their savings and bank accounts, are having to pay an elevated cost in hard currency due to the mostly imported renewable energy system components, amid a continuing devaluation of the local currency.
Consumer unawareness
But that’s not the biggest problem. Consumers paying a hefty cost for a system and being completely oblivious to the specifications and quality of their system, is a major concern, and is driven by the lack of awareness and regulation. The critical factor for most consumers in purchasing a system is of course the capital expenditure. But the capital expenditure depends on system size, technology type, components quality, standards, certifications, lifespan, and prospects for operation and replacement of components.
There are different technology types and specifications per system component, and their impact on the system lifespan and the interconnection with the grid, or lack thereof, is significant. Add to that, a booming market attracts plenty of new players. Dozens of companies are now operating in the field, many with poor or no track record. In these conditions, assuming the consumer would do the homework and learn complex technical details to make a sound purchase decision is unrealistic.
The result is a chaotic market with a wide range of technology types and grid implications, and product quality ranging from mediocre to high-end, in addition to the dissemination of under-sized systems and overpromised outputs. This creates a risk for the grid and the systems’ performance and a hazard for the safety of the consumers, especially when dealing with electrochemical materials such as batteries.
1 tbsp. education, 1 tbsp. regulation, 1 cup financing
Where do we go from here? Ideally, there should be an awareness campaign, a regulatory body, a comprehensive law, and a financing facility.
The awareness campaign should be straightforward and should include details on system sizing and operation and components technologies, types, and specifications, documentation, standards, and maintenance and operation requirements, what to look up for and what to consider in pricing (see UNDP checklist).
A comprehensive decentralized renewable energy law is more complex. Yet, a corresponding draft law has already been prepared and the relevant parliamentarian committee should be discussing it as soon as the Ministry of Energy and Water approves it (see Christina Abi Haidar’s story). There are two major risks in legislations in Lebanon however; the first is that laws often get diluted, enacted as a couple of articles which would be open to future interpretation, and the second is that many laws do not get implemented. Thus, ensuring there is a full-fledged comprehensive law that details different models and incentives for distributed energy generation is needed, and advocating for its implementation is a must.
More complex in terms of implementation is the regulatory body for decentralized power distribution. The power sector lacks a regulator and the country is beset with patronage and bureaucracy. Any attempt to govern and regulate decentralized renewable energy systems without a credible, independent, and strong regulator backed by strong institutions with clear mandates will end up swept under the rug of bureaucratic maneuvering and favoritism.
Financing mechanisms at this stage are obviously dependent on a sound financial solution and package for the country. But 19-months since the default on eurobonds, the prospects of this are decreasing with each passing day of inaction. However, establishing a Green Investment Facility is within the Lebanese Government Financial Recovery Plan. The facility could be designed as a revolving fund or blended finance and capitalized through the Special Drawing Rights allocation from the International Monetary Fund, aid for energy projects through international donors, and private sector.
The biggest opportunity for Lebanon presented by decentralized renewable energy in its various forms from mini-grids and hybrid systems to rooftop solar is that these systems bypass the political bottlenecks that have inhibited reforms in the power sector for decades. Yet, ensuring the rights of consumers are protected, while safeguarding the grid operation and offering just opportunities for the private sector are major requirements for building a healthy market and overall sector.
