Would Lebanon finally benefit from the chronic delays in resolving its Electricity Dilemma?

MTV interview

Lebanon has a unique position in the world where it may have the highest fleet of diesel generators distributed in almost every residential quartier in Lebanon that along the Electricity Du Liban (EDL) supply manage to supply our homes, commercial and institutional spaces with continuous electricity with nuisance and temporary disruption. The generated power of EDL is estimated at 20.000 GWh or around 4,000 kWh per capita per year and estimated 50% of that amount is supplied by diesel generated power based on an estimated at 2,000 kWh per capita per year.

The immediate solution for the deficit of Electricity Du Liban (EDL) that should not be linked to any future solution is increasing the electric tariff to match the cost and add the value added tax on top of the bill to increase the badly needed government income. The social impact is hard but badly needed. The estimate if the residential sector consumes 40% of the total energy use estimated at 20,000 GWh per year is an increase from US $ 10 to US $ 15 / capita per month.

This heavy social impact can be mitigated by the current effort to regulate generated diesel power that fluctuate from US$ 0.15 to 0.3 per kWh with an average of US $ 0.25 / kWh. Currently the average cost of generated diesel power per capita per month is assumed at 40% or 800 kWh per year per capita is US $ 23 / month. The fair price of generated power where every Liter of Diesel approximately produce 3.5 kW of power should be linked to diesel pricing currently standing at US $ 0.5 to 0.55 / Liter which translate to US $ 0.14 to 0.16 / kWh and add to that cost US $ 0.03 for operation, maintenance and depreciation and US $ 0.03 as gross profit to cover the cost of metering, losses and overhead of the generated power which will end up with a fair price of diesel generated power of US $ 0.20 to 0.21 / kWh and hence this would reduce the cost from US $ 10 / capita per month to US $ 11 / capita per month absorbing most of the EDL increased tariff and hence pacifying the social impact.

Most of the discussion of resolving the Electricity crisis in Lebanon is antiquated in a rapidly changing market and the problem is not limited to Lebanon but most of the world country leaders and city mayors are not educated enough or have the proper expert advise for a highly sophisticated and rapidly changing sector such as electricity.

The disruption technologies came from renewable energy where the cost of solar and wind energy today has dropped to as low as US $ 0.02 / kWh much cheaper than any traditional power source that led to our current revolution of renewable energy dominance of new power plant generation reaching over 60% of newly installed power generation capacity and planned to increase further.

This has deteriorated Siemens and General Electric market size in the traditional combined cycle power plants which use natural gas as energy source and a gas turbine followed by heat recovery that generates high pressure steam and operate a steam turbine. This led to major reduction of combined cycle power plant cost from US$ 1,200 / kW to as low as US $ 400 / KW. That means a 2,400 MW power plant that used to cost around US $ 3.0 Billion few years back now cost US $ 0.96 Billion!

The above is valid for the large capacity 600 MW combined cycle turbines that optimize cost, foot print and efficiency. The current discussion in Lebanon is for smaller turbines and smaller power plants that cost more time and money to resolve the power crisis.

Another Disruption came from increase production of Shale Gas in North America bringing the cost down to less than US $ 2 / Million BTU in gas pipeline supply, leading to major sift of power generation from the high polluting coal to natural gas.

The current corona virus crisis led to reduced demand of liquefied natural Gas (LNG) in the world leading to unprecedented decrease in prices below US $ 3 / Million BTU particularly in East Asia. To put that in perspective a barrel of Oil contains 5.8 Million Btu of energy and hence at US $ 35 for Brent Crude oil price would translate to US $ 6.03 / Million BTU.

Hence the difference between expensive oil and cheap LNG is reducing and the outlook is that they might equate with increase demand on LNG and faltering demand of oil.

The third disruption is the major change from stable and base load power plants such as nuclear, coal and combined cycle to intermittent and highly fluctuating renewable energy which led to major research in energy storage. Today most energy storage is using reversal pumping of water to the water damns when there is extra renewable energy followed by large utility battery scale and later the production of hydrogen is capturing attention.

The fourth disruption is a new movement gaining momentum where over 1,600 cities has committed to carbon Neutrality by 2050 where Copenhagen will be the first major city to achieve that by 2025. That also led to diminishing trust of people with central utilities that led to over hundred cities and town to municipalize their city or town utility. Municipalization is the opposite of privatization that flourished during Margaret Thatcher Era and where the city is buying back its utilities such as power and water networks, sewage and district heating and cooling networks. The largest city to do so recently is the city of Hamburg.

All that what does it mean to Lebanon?

Lebanon can now build highly efficient combined cycle power plant using the largest turbines of 4 x 600 MW modules or 2,400 MW in a single location at a mere cost of US $ 0.96 billion. In Addition, a floating storage and regasification unit (FSRU) would cost an additional US $ 300 Million and if it is done stationary on shore it would cost as low as US $ 150 Million. A US $ 100 Million would be required to connect to the 220 KV network. The resulting total cost today is US $ 1.21 Billion to resolve Lebanon Electricity Problem. Lebanon Delays in building its power plants could be have a bright side and the country could benefit from the power plant cost reduction and improved efficiencies.

I have proposed 2,400 MW only with possibility to expand that to 3,000 MW as other sources of electricity will be discussed. The cost of the new and highly efficient power plant (> 60%) would reduce production cost to less than US $ 0.05 / kWh including LNG cost, O&M cost and equipment depreciation a major reduction in current production cost that would allow the Government to go back to the current electricity pricing. The timing of such project is less than 2 years to complete where the Gas Turbine portion was executed in neighboring Egypt in less than 8 months while the heat recovery and steam turbine can be added in less than one additional year.

 The new power plant would require less land due the high capacity and small footprint and would require less than 200,000 m2 and does not need to immediately at the shore line but may require a small tongue to house the LNG terminal and the sea water pumping station required for cooling the steam and gasify the gas. The location shall consider the future natural gas (NG) that will be extracted from the sea to minimize the undersea pipeline length and possibly drive the option to rent FSRU until the local NG can be extracted and used which will lower the production cost of electricity further due to lower cost NG.

 The second solution must come from the way electricity is sold and distributed. EDL should shift from selling end users directly to selling Municipalities of cities and towns and villages, It is then the Municipality would decide on how much it should buy from EDL and how much it will produce from local Generated sourced being solar PV, wind turbines or diesel engines with waste heat recovery from exhaust and radiator that can be used to heat or cool our homes. Furthermore, the municipality can use waste to energy to resolve the current waste problem and that can be done from incinerator or waste sorting where plastic waste is transformed to bio diesel in cheap process that merely cost US $ 6 million while the rest of waste is recycled, and the bio waste transformed to fertilizer.

The diesel generated power or renewable or waste to energy falls under the category of distributed power generation and it should be distributed over all municipalities. This would generate an internal competition to generate renewable and resolve the waste problem at innovative municipal level and will generate new income source for Municipalities that will enable them to speed up local development.

Today it is estimated that the Lebanese national Grid suffers 15% technical losses and 25% non technical losses attributed to theft or non payment of bills. The technical losses could be reduced to less than 10% while the non technical losses will be fully resolved through municipalization.

The smaller power plants (500 to 800 MW) in discussion today require the same or more land acquisition initiatives and classification for industrial area, the same nuisance approval in the Government and parliament, the same sourcing for natural gas, and much higher construction and operating cost. If one want to solve a problem he or she would rather solve it in one go rather in agonizing four or five steps!

The third source of solution is building the new power plant in a strategic location that can be Chekka or Deir Ammar or Jiyeh that will be studied by independent expert away from our politician influence.

After building the plant the current Zouk power plant badly located spoiling one of Lebanon best beach front and polluting heavily populated area can be demolished and the demolished concrete can be used to expand the current plot estimated at 300,000 m2 to 400,000 m2 and a top touristic resort can be build in its place. The Immediate Government benefit is a plot of Land worth US $ 1 to 1.2 Billion with laws and presidential degree that can give it long beaches, touristic marina and allowable build up area reaching 800,000 m2 that includes an 80,000 m2 five star hotel of 500 rooms and conference center .

This will attract international developer such as Emaar Dubai based, or Lend Lease Australia based or others to partner with the Lebanese Government in addition to public offering to Lebanese public to develop a resort at additional investment of US $ 1.2 Billion and have market value of US $ 3.0 to 3.5 Billion.

Two new major resorts have failed to pull off due to lack of financial capacity in Keserwan region and a Government project backed by international renowned real estate developer could attract trust and create thousands of jobs as well as new touristic attraction.

This would also add major beautification to the Zouk – Jounieh coastal line.