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Electricity: What does Nada Boustani’s plan entail?

Focus
26/03/2019

At a press conference on Thursday, Nada Boustani, Lebanon’s Minister of Energy and Water, presented the outline of her plans to reform the electricity sector, of which L'Orient-Le Jour was able to obtain a partial copy. The plans were discussed the same day in the Council of Ministers, which decided to form a ministerial committee to study the plan before submitting its report within a week.


EDL tariffs hike expected in early 2020
Boustani’s plan provides for a 180 percent increase in Electricity du Liban's (EDL) tariffs by early 2020, the tariffs have been frozen and subsidized since 1994. The plan also stipulates an increase in power generation and therefore electricity output (see below) in the same year. This would, therefore, eliminate private generator bills for consumers. For the first (lowest) tariff category, which includes 375,690 users consuming an average of 510 kWh / month, EDL's monthly bill will average at around 110,744 Lebanese Pounds (approximately US $74) in 2020, meaning a 14.5% decrease compared to their current total bill (including costs relating to private generators). For the fifth category (the top consumers), which includes 38,843 users consuming an average of 2,150 kWh / month, EDL's monthly bill will average at 466,863 Lebanese Pounds (about $310) in 2020, a drop of 10.7% compared to their current total bill.

EDL’s deficit in 2018 was estimated at US $1.8 billion, with an accumulated deficit of $30 billion. The rise in tariffs should have a direct positive impact on EDL’s deficit and consequently on public finances, as the Treasury’s financial transfers to EDL to cover this deficit are the third largest public expenditure in the budget. Lowering the fiscal deficit is one of the main commitments made by Lebanon at the CEDRE conference in return for $11 billion in soft loans promised by the international community.

However, before implementing the tariff hike, a reduction of EDL's deficit could be achieved as early as 2019, as the plan provides for improving the collection of bills (EDL expects to eventually recover almost $2 billion in unpaid bills) and the installation of smart meters starting in 2019. Non-technical losses (theft and illegal connections) are estimated to account for 21% of EDL’s output. The modernization and extension of the transmission and distribution network, also covered by the plan, would make it possible to address the technical losses which waste 16% of the output.


An increase in production

Boustani’s plan also provides for the launch of a new call for tenders for long-term power purchase agreements. Interested companies will have to propose a solution to increase output by an additional 1,450 MW (megawatts) in the short-term (i.e. before EDL's tariff increase comes into effect and until 2025) in addition to a long-term solution, through the construction of new sustainable plants at Selaata (550 MW in 2023), Zahrani 2 (550 MW in 2023) and Hraiche (300 MW in 2024). Based on our information, one alternative route (instead of leasing an additional power barge, an option which remains on the table) in order to ensure additional production in the short term would be the installation of 14 to 16 small butane gas-fired power generation units (180 MW each) in several regions in Lebanon.

The installation process for these facilities should require between three and six months. This temporary solution has been recommended by the World Bank and will probably be given preference in the potential applications by GE or Siemens, the companies have already begun discussions with the Ministry of Energy.

The plan also foresees the rehabilitation of the Deir Ammar 2 plant in 2019 so that it would be partially functional by 2021 and reach its full capacity by 2022; the construction and commissioning of the new Zouk 2 plants (550 MW in 2025) and Jiyé 2 (550 MW in 2026); and the development of solar power farms (300 MW in 2022) and wind farms (400 MW in 2023). The three liquefied gas storage and processing units (FSRUs) in the Deir Ammar 2, Selaata, and Zahrani 2 plants will be commissioned by 2021. In parallel, the plan foresees the dismantling of the former Hraiche, Zouk, and Jiyé power plants, with the first projected to be dismantled in 2020, and the other two in 2022. In addition, the two power barges currently producing 370 MW will no longer be used.


(This article was originally published in French in L'Orient-Le Jour on the 26th of March)


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