The Lebanese Electricity Woes: An Estimation of the Economical Costs of Power Interruptions
This paper contributes to the political and scientific debate surrounding the economic costs entailed by the regular power cuts in Lebanon. Examining the data on electricity consumption that was produced by onshore and offshore power plants, this paper estimates the economical costs of power interruptions in Lebanon over the period 2009-2014. Based on 700 USD/MWh, representing the average value of lost load (VOLL) in that period, results indicate that electricity shortages continue to render
... ntinue to render significant transfers of wealth to the detriment of economy and society as a whole. Over the period 2009-2014, the total losses for the Lebanese economy reached 23.23 billion USD. Just as importantly, some evidence suggests a sharp decline in the economical costs of power interruptions with the inception of the two floating power plants in 2013. The results are crucial for the decision makers to identify the economic efficiency of alternative measures to enhance the security of the Lebanese electricity supply. Energies 2016, 9, 583 2 of 12 and Perez-Donsion ). In particular, this estimation can be used to make decisions about maintenance and investments that reduce the probability of supply cuts. Prior studies, however, have provided very limited information on the economic cost of power interruptions in Lebanon. In this regard, the calculation of the value of lost load (VOLL) has proved a major challenge and a prerequisite step in the estimation of the cost of power interruptions. In addition, Electricite du Liban (EDL), the sole official provider of electricity in Lebanon, and private generators have long co-existed, making the Lebanese case an interesting field of research. Since the early 1990s, private back-up generators started spreading across the country offering their electricity output for neighborhoods during chronic power interruptions. Clearly, the rising cost of electricity bills on private generators is putting a strain on household budgets. More recently, the use of floating power plants to generate electricity has added to the particularity of the local electricity sector. A detailed review of the recent literature shows that numerous studies attempted to deal with the electricity problem in Lebanon. Some of these studies proposed reform plans and useful insights for the sustainability of the electric sector, while others contained recommendations and policy suggestions for the usage of renewable energy sources. Chedid and Ghajar  examined the merits of implementing energy efficiency policies in the building sector in Lebanon and provided recommendations to remove the major barriers hindering the penetration of energy efficiency options in the Lebanese market. El-Fadel, Hammond, Harajli, Jones, Kabakian, and Winnett  focused on the evaluation of the local electricity sector in terms of its sustainability. Dagher and Ruble  constructed scenarios for Lebanon's electricity sector. The authors examined the shift toward natural gas in one scenario and toward renewable energy sources in another scenario. Fardoun, Ibrahim, Younes, and Louahila-Gualous  summarized the technical problems at the level of electricity generation, transmission and distribution, as well as the administrative and financial states, and presented some interesting suggestions. Hamdan, Ghajar, and Chedid  focused on the electrical energy policy for Lebanon, which was proposed by the Ministry of Energy and Water (MEW) in 2010 (Bassil ). The authors assessed the impact of policy implementation on energy production, overall cost, technical/commercial losses and reliability. Kinad and Elkhoury  presented an overview of the current renewable energy status in Lebanon. The authors focused on barriers hindering improvements and proposed relevant solutions. Najjar, Ghoulam, and Fares  assessed the feasibility and reliability of implementing hybrid-renewable distributed energy systems. Ibrahim, Fardoun, Younes, Louahila-Gualous, and Ghandour  presented a review of the energy status, conventional and renewable, and illustrated their problems with the suggested recommendations. However, none of the aforementioned studies have explicitly attempted to estimate the cost of power interruptions, and considered for the role of floating power plants. Recently, the employment of power ship plants to fulfill electricity shortages in some developing countries has gained a lot of attention from policy makers because a power ship is appreciated for its low cost-to-power ratio and for its high flexibility. To fill this literature gap, this paper focuses on the implications of electricity interruptions for Lebanese consumers and the local economy by estimating the economic cost of power interruptions. In particular, the need for this study arose from the fact that in the past few years, the Lebanese authorities have been struggling to deliver a reliable and continuous supply of electric energy to the end users. No estimations of this kind have been published in recent years. More interestingly, the analyses quantify the economical consequences of power interruptions monetarily by comprising the volume of electricity generated by the two Turkish power ships. Considering the literature review in Section 3, and coping with existing data limitations in Lebanon, this paper adopted a mathematical model along the general lines of Coll-Mayor, Pardob, and Perez-Donsion  to estimate the economic cost of power interruptions. The flexibility and easy to apply features make this model, which is based on the production function-based approach, the most suitable one to estimate the economic cost of power interruptions in Lebanon.