212 J. OBEID
addition to the high reliance on fossil fuel imports, the electricity sector
in Lebanon and Jordan is dominated by subsidies, which have negatively impacted the national security and economy, accruing high debts
and fiscal deficits in these low-revenue states and threatening to trigger
economic collapse, along with an increased vulnerability to politics and
regional turmoil.
The electricity sector is at high risk of supply disruption and fuel
price volatility. In Jordan, crude oil and products constituted 54% of the
primary energy consumption in 2018, followed by natural gas with 35%. 3
In Lebanon, imported oil is the main source of electricity generation, with
approximately 91%. 4 Lebanon’s most dominant power generation fuels
are expensive and polluting heavy fuel oil and diesel oil, which have also
displaced natural gas in power generation in Jordan at different periods
due to supply disruptions. 92% of Palestine’s power comes from electricity
imports from Israel.
Electricity and fuel subsidies have prevailed for decades and have
chronically strained states’ budgets. Citizens have perceived subsidized
utilities to be a service. Any hike in electricity tariff or elimination of
energy subsidies would require a new social contract, the absence of which
could result in political unrest. The more the institutions and entities
governing the state were perceived as illegitimate and operating against
the national interest, the more citizens were inclined to cheat the system
and refuse to pay for services such as electricity. In such environments,
non-technical losses, such as non-billing, non-collection, and electricity
theft, also became a characteristic of the power sector. This is especially
true for Lebanon where non-technical losses are estimated at 26% versus
17% technical losses, 5 and to a lesser extent, Palestine.
Lebanon is a highly indebted economy with a debt to GDP ratio
surpassing 150%. The power sector is accountable for 43% of the public
debt or the equivalent of $40 billion for the period between the years
1992 and 2019. 6 This is mainly due to the high cost of generation
driven by inefficient power plants operating on heavy fuel oil and diesel
oil, subsidized electricity tariff and elevated technical and non-technical
losses. Despite many plans to switch to the use of natural gas, no infrastructure or gas agreements are yet in place. The electricity tariff has not
been adjusted since it was initially set back in 1994, based on the thenoil price of approximately $20 per barrel, and averages $0.095 per kWh.
In contrast, the cost of generation has ranged between $0.16 and $0.23
per kWh, depending on fuel prices. The fiscal deficit resulting from the
addition to the high reliance on fossil fuel imports, the electricity sector
in Lebanon and Jordan is dominated by subsidies, which have negatively impacted the national security and economy, accruing high debts
and fiscal deficits in these low-revenue states and threatening to trigger
economic collapse, along with an increased vulnerability to politics and
regional turmoil.
The electricity sector is at high risk of supply disruption and fuel
price volatility. In Jordan, crude oil and products constituted 54% of the
primary energy consumption in 2018, followed by natural gas with 35%. 3
In Lebanon, imported oil is the main source of electricity generation, with
approximately 91%. 4 Lebanon’s most dominant power generation fuels
are expensive and polluting heavy fuel oil and diesel oil, which have also
displaced natural gas in power generation in Jordan at different periods
due to supply disruptions. 92% of Palestine’s power comes from electricity
imports from Israel.
Electricity and fuel subsidies have prevailed for decades and have
chronically strained states’ budgets. Citizens have perceived subsidized
utilities to be a service. Any hike in electricity tariff or elimination of
energy subsidies would require a new social contract, the absence of which
could result in political unrest. The more the institutions and entities
governing the state were perceived as illegitimate and operating against
the national interest, the more citizens were inclined to cheat the system
and refuse to pay for services such as electricity. In such environments,
non-technical losses, such as non-billing, non-collection, and electricity
theft, also became a characteristic of the power sector. This is especially
true for Lebanon where non-technical losses are estimated at 26% versus
17% technical losses, 5 and to a lesser extent, Palestine.
Lebanon is a highly indebted economy with a debt to GDP ratio
surpassing 150%. The power sector is accountable for 43% of the public
debt or the equivalent of $40 billion for the period between the years
1992 and 2019. 6 This is mainly due to the high cost of generation
driven by inefficient power plants operating on heavy fuel oil and diesel
oil, subsidized electricity tariff and elevated technical and non-technical
losses. Despite many plans to switch to the use of natural gas, no infrastructure or gas agreements are yet in place. The electricity tariff has not
been adjusted since it was initially set back in 1994, based on the thenoil price of approximately $20 per barrel, and averages $0.095 per kWh.
In contrast, the cost of generation has ranged between $0.16 and $0.23
per kWh, depending on fuel prices. The fiscal deficit resulting from the