In a developing country like Lebanon where citizens suffer from constant electricity outages, the prosumers movement has been taking up momentum in hopes of tackling energy security at the residential and commercial levels. Prosumerism has the potential of alleviating pressures on the grid, improving energy security in urban and rural communities, and responding to the Syrian refugee crisis. While all of this sounds promising, reality strikes with obstacles. This article highlights the contrast between this valuable potential, and the institutional and legal barriers that prosumerism encounters in Lebanon.
With an economy mainly based on services, and a population exceeding 6 million, in addition to over one million registered Syrian refugees (with an additional consumption estimated at 500 MW), energy demand in Lebanon has been growing at a rate of approximately 3 % annually. To meet this growing need, the government relies heavily on thermal plants operating on imported oil and hydroelectric power plants to generate electricity (91% and 9% respectively in 2013). Nonetheless, the energy sector in Lebanon has been struggling for decades. In a nutshell, Electricité Du Liban (EDL), Lebanon’s public electricity utility, faces technical, financial and other non-technical challenges resulting in a huge financial deficit, an unstable grid that covers less than two-thirds of the demand (in summer), and daily constant power outages (3-12 hours). To compensate for this issue, citizens rely on private diesel generators which are poorly regulated, and therefore end up paying two bills at the end of the month: one for the public utility, and one for the private generator to which they are subscribed to in their area of residency.
Local struggles aside, Lebanon is committed to reducing its CO2 emissions in light of the global fight against climate change. The government has been active in setting targets for the improvement of the country’s energy efficiency (EE) and RE capacity through the National Energy Efficiency Action Plan (NEEAP) and the National Renewable Energy Action Plan (NREAP), respectively. In 2009, NREAP pledged to increase renewable energy technology adoption in Lebanon to reach 12% of all energy demand by 2020, focusing on wind, PV and biomass. This percentage was then ramped up to an ambitious 30% by 2030 in 2018, which is in line with the country’s conditional target by 2030 under the Paris Agreement.
Opportunities for prosumers
Renewable energy can truly contribute to solving some of the challenges of the Lebanese electricity system. This is where producers-consumers of decentralized energy applications come in.
Lebanon is endowed with high solar irradiance levels, and market trends show an increasing interest in solar PV, which contributes significantly to the uptake of decentralization of power supply. PV power systems are mostly being deployed at the micro level and for specific applications like street lighting, small decentralized residential installations and other municipal uses. More than 700 small-scale PV projects and 8,000 public street lighting systems were installed in 2013 by the government, local municipalities and internationally funded projects such as the Country Energy Efficiency and Renewable Energy Demonstration Project (CEDRO) and UNDP Small Decentralized Renewable Energy Power Generation Project (DREG) projects managed by the United Nations Development Programme (UNDP). Solar water heating technology is also already a mature technology in Lebanon and its market is witnessing a steady growth.
Other financial schemes were put in place to incentivize decentralized energy installations in urban and rural areas. The National Energy Efficiency & Renewable Energy Action (NEEREA) is a scheme launched by the Central Bank of Lebanon and the Lebanese Centre for Energy Conservation (LCEC) in 2012 to finance projects like small-scale renewable energy applications. It offers low interest loans (0.6%) to renewable energy and energy efficiency projects for a period up to 14 years with a grace period. In 2016, NEEREA investments amounted to $14.01 million in renewable energy with a focus on solar PV. The NEEREA scheme has been particularly helpful in ensuring energy justice by allowing low-middle income individuals to afford such technologies. Other non-NEEREA investments contributed to $9.83 million.
Challenges: create a stable regulatory framework and independent regulatory authority
Unfortunately, and despite all these efforts, the potential for renewable energy prosumers to bloom further in Lebanon is still hampered by the absence of a legal framework to enable them to sell electricity to the grid. It would perhaps be helpful to take a step back and examine the overarching framework for renewable energies in the country more generally.
There are two key challenges facing the deployment of renewable energy in Lebanon: the lack of a stable legal framework, accompanied by the absence of an independent regulatory body for renewable energy development. Generally, Law 462/2002 covers electricity production for all energy sources. The government called for amendments to allow private generation, yet kept the minimum threshold of electricity production at 10 MW, which is inadequate for small-scale renewable energy applications. More specifically, the updated policy paper published earlier this year by the Ministry of Energy & Water (MoEW) focused largely on extending the grid, reducing the utility’s financial deficit by increasing tariffs (from 9 USc/kWh to 14 USc/kWh as of 2020), and increasing the installed capacity by installing large-scale solar plants and wind farms. Yet, prosumers of small-scale renewable energy applications received no attention. On the other hand, studies by UN organizations continue to recognize the potential key role of prosumerism in Lebanon’s future energy system, and call for further knowledge exchange and financing support to empower prosumers and accelerate this momentum.
Net Metering: a way forward for prosumers in Lebanon?
Net-metering was launched by the MoEW in 2011 to incentivize the deployment of decentralized energy, despite the absence of a robust legal framework. This electricity payment scheme would allow the electricity delivered from the consumer’s distributed generation facility to the utility’s distribution grid to offset the electricity demanded from the utility during a year, for so long as the prosumer has a legal contract for the supply of electricity by EDL. Surplus is however transferred onto the grid without any commercial purpose since there is no feed-in-tariff system in place. Instead, excess electricity generated by the prosumer is credited to the following billing period (1 credit = 1 kWh). Energy credits can be carried over from one billing period to the other for up to a year. In this case, taxes or fixed charges for maintenance of the distribution grid apply. If, on the other hand, EDL supplies more electricity than what is fed into the grid by the prosumer plus any additional credits from the previous billing period, the prosumer is charged this difference according to the applicable tariff per kWh. At the end of the net-metering period, EDL resets the counter to zero to start all over.
While this scheme may incentivize the development of small-scale decentralized energy applications and benefits private customers to a certain extent, reality strikes again with challenges. Although the mechanism was launched in 2011, it is only now being rolled-out across the country mainly due to technical difficulties caused by the unstable grid, and the lack of political will to prioritize the issue over the years. Prosumers wishing to connect their decentralized installation to the grid to benefit from net-metering credits must also undergo a bureaucratic process that could be lengthy and tedious. The prosumer must meet a set of technical standards and safety requirements, and submit a set of documents for the application to be considered. In principle, the process should take up to three months. Yet, given the speed and potential inefficiency of bureaucratic processes in Lebanon, this matter could take more time. Additionally, prosumers may be discouraged at the end of the year since any accumulated credit cannot be transferred to the new cycle nor be financially remunerated – and is therefore lost. The net-metering scheme is therefore rendered ineffective due to limited human and technical resources at the institutional level.
Addressing the wasted potential
Although the Lebanese government acknowledges the rise of prosumers and relies on international and local funding to promote decentralized energy, it still lacks the appropriate robust legal framework to act as a backbone to this movement. This insufficiency ought to be mitigated in order to unleash the untapped potential of prosumers in the country.
The LCEC and IRENA are currently drafting recommendations to the MoEW to address challenges facing the renewable energy sector, including the establishment of an electricity regulatory authority to facilitate the engagement of the private sector with electricity sector. Future plans also engulf peer-to-peer contracts via direct Power Purchase Agreements (PPA) to allow the prosumer to sell electricity directly to the grid. The official document is yet to be published, but it offers hope for an improved framework for prosumers of decentralized energy.
Once an enabling regulatory framework is clearly defined, policy-makers could also explore other opportunities to support prosumers, like digitalization and optimizing the usage of infrastructure and resources, e.g. by incorporating blockchain technology. This would allow decentralized prosumers to safely buy and sell electricity between each other at negligible marginal costs, but further investigations on ICT and business models must be performed, as well as a detailed legal study to fully understand the implementation of this de-regulation model in Lebanon. In other words, the solutions are many, but they all require a systemic approach that harmonizes all economic, technical and social dimensions with a comprehensive legal framework to nurture decentralized applications and ultimately pave the way for a successful socio-technical energy transition story in this country.
EDL. (2011). Net Metering Document. Electricité Du Liban http://www.edl.gov.lb/media/docs/NetMetering.pdf
EDL. (n.d). The net metering process and application. Electricité Du Liban http://www.edlnetmetering.com/#collapse5
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LCEC. (2014). The National Renewable Energy Action Plan for the Republic of Lebanon 2016-2020. Lebanese Center for Energy Conservation. http://lcec.org.lb/Content/uploads/LCECOther/161214021429307~NREAP_DEC14.pdf
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MoEW. (2019). Updated Policy Paper for the Electricity Sector. Ministry of Energy & Water. https://energyandwater.gov.lb/mediafiles/articles/doc-100515-2019_06_16_07_56_39.pdf
UNDP. (n.d). Renewable Energy Sector in Lebanon: Value Chain Assessment and Analysis (Executive Summary and Recommendations). UNDP https://data2.unhcr.org/en/documents/download/68102
UNDP-CEDRO. (2017). Guidelines on Net Metering: The Case of Lebanon. UNDP-CEDRO. https://data2.unhcr.org/en/documents/download/65011
UNDP-CEDRO. (2018). Sustainable Energy for Lebanese Villages and Communities: The Village 24 Initiative. UNDP-CEDRO http://www.cedro-undp.org/content/uploads/publication/181001031403231~KabrikhaReport.pdf