Lebanon has been witnessing a deep economic, fiscal, and monetary crisis that has impacted the major vital sectors of the country, including the power sector. The World Bank has described the situation as one of the world&rsquo;s worst economic crises since the mid-1800s (World Bank, 2021). Annual inflation reached 206% in April 2022 (The National News, 2022), while real GDP is estimated to have declined by 10.5% in 2021, on the back of a 21.4% contraction in 2020.
As a result, the country has been relying since 2020 on shrinking imports of expensive heavy fuel oil and gas oil, and a deteriorating grid with high technical and non-technical losses. This has led to increasing reliance on the network of private generators running on diesel; since the removal of fuel subsidies, electricity has become expensive and unaffordable for most Lebanese families. Consequently, citizens started experimenting with renewable energy, particularly solar, as a means of energy security to avoid complete blackouts. Yet, the expansion of the solar sector has faced many challenges.
In order to shed light on these challenges, as well as on citizen-led initiatives driving the energy transition during this time of crisis, the Issam Fares Institute for Public Policy and International Affairs (IFI) at the American University of Beirut (AUB) and the Natural Resources Governance Institute (NRGI) have produced Chasing the Sun, a documentary aimed to contribute to an advocacy and awareness campaign to help citizens understand and implement best practices when it comes to the development of solar systems, as well as decision-makers to adopt the necessary regulations for this sector to grow. It draws lessons both from a series of interviews in Lebanon, as well as the recent experience of Jordan and Yemen.
<h3>The Experience of Lebanon</h3>
The solar energy market in Lebanon experienced unprecedented growth in demand since the summer of 2020, as the electricity supply across the country steadily worsened due to acute fuel shortages. Citizens able to afford the cost, with access to cash and/or fresh funds rushed to install solar energy systems. According to the Ministry of Energy and Water (MoEW)&rsquo;s latest numbers, Lebanon went from almost no solar energy projects in 2010 to around a thousand in 2020, with a combined capacity of about 100 Megawatts (MW). Another 100 MW were installed in 2021 alone, and officials expect around 250 MW to be installed in 2022, raising the total decentralized renewable energy (RE) potential at the national level to 450 MW (Chasing the Sun, 2022).
A series of government measures has been accompanying this growth, including capacity building for engineers and technicians, raising awareness within local communities on the importance of RE, and improving the required specifications for imported solar products to ensure high quality. The government has also set ambitious RE targets for 2020 (12%) and 2030 (30%), although the 2019 share of renewables in total annual electricity generation stood at only 7.83% (combining solar photovoltaics (PV), hydropower, and waste incineration) (LCEC, 2021).&nbsp; However, it is clear that the main driver for the growth of RE in Lebanon has been the economic crisis and not government policy.
Therefore, an adequate regulatory framework for RE is still needed. A draft law for Distributed Renewable Energy generation (DRE Law) was approved by the Council of Ministers (CoM) in March 2022 and is pending parliament ratification. This draft law is expected to provide the basis for establishing distributed projects of up to 10 MW. It also promotes net-metering in all its forms, trading through direct power purchase agreements (PPAs), as well as power wheeling. Similarly, the draft Energy Efficiency Law, which was also endorsed by the CoM, aims to promote behavioral changes and the use of more efficient appliances and equipment through a combination of economic policies and incentives (Ayat et al., 2021). These are expected to complement the Regulation of the Electricity Sector Law 462/2002, which allows the production of renewable and clean energy for personal use up to a maximum capacity of 1.5 MW, without the need for a license.
Apart from regulations, the biggest bottleneck with the onset of the economic crisis has become the inability to secure funds to carry out ongoing, as well as new projects. Around USD 125.83 million were paid between 2011 and 2019 on financing renewable energy projects, 54% of which were funded by NEEREA, the National Energy Efficiency and Renewable Energy Action (NEEREA) (LCEC, 2021, which was a national financing mechanism that allowed private sector entities to get subsidized loans for any type of energy efficiency and renewable energy project. Yet, available current funds are tight, despite the momentum to create new sources of funding through commercial banks.
At the community level, several communities are currently exploring mini-grids, based on a series of pilot projects that have been funded by international organizations, NGOs or individuals over the past years. Yet, a more sustainable funding mechanism is needed.
<h3>Learning from Regional Experience</h3>
In order to assess Lebanon&rsquo;s path towards renewable energy development, a comparison can be made with two countries of the Arab world that have witnessed similar situations: Jordan and Yemen.
Jordan has built a reputation as a regional leader in the field of renewable energy. The shift to solar and wind resources was a reaction to the regional and global energy supply crisis that hit the country in 2008 and 2010. Jordan used a centralized approach to massively boost solar photovoltaic (PV). Key to success has been a good regulatory framework, drawing on international capital, allowing flexibility e.g., through net metering and wheeling, continuous support from international lenders and financiers, and engagement of both the private sector and consumers.
In terms of installed capacity, 1521 MW of solar PV was installed by 2021, representing around 25% of the country&rsquo;s generation capacity (Chasing the Sun, 2022). To contextualize, peak demand recorded in early 2022 reached 4000 MW (NEPCO, 2022). The swift transition to renewables in Jordan was supported by solid legal foundations. The Renewable Energy and Energy Efficiency Law 13/2012 established renewable energy systems in two parallel streams. The first stream allowed the government to tender large-scale projects under direct proposals. The second stream targeted net metering, giving end-users the right to install solar systems to cover their own demand.
On the other hand, Yemen experienced an explosion of solar PV due to the collapse in electricity provision resulting from the war. In 2015, the war in Yemen caused a complete collapse of the public power grid and severe shortages in fossil fuels. Total electricity generation in the capital Sana&rsquo;a was estimated to have declined from 500 MW pre-war to around 280-350 MW in 2021, due to a combination of small capacity solar PV and a network of diesel-based micro-grids (McCulloch et al., 2021). This was driven by the government&rsquo;s hands off approach allowing private actors to supply electricity at commercial prices, as well as the removal of fuel subsidies, and the full liberalization of the electricity sector, including tariffs.
As a result of the energy crisis, solar PV system sales and installation experienced massive growth in Yemen (Alsaqqaf, 2017). These conditions led to an estimated household penetration rate of solar PV systems of 75% in urban areas, and 50% in rural areas, as reported by the Regional Centre for Renewable Energy and Energy Efficiency (RECREEE) which estimated that around USD 1 billion was spent on solar energy systems from 2014-2017 by citizens and communities (RECREEE, 2017). These were geographically concentrated in the northern parts of the country, particularly in areas under Houthi control (most of the north and mid-western regions). This was partly driven by the fact that these areas were now disconnected from the national grid because of the destruction of transmission infrastructure due to the war, the difficulty of maintaining generation and distribution infrastructure, and the fact that the exchange rate has been more stable in these areas to install solar PV. Despite this progress, technical, financial, and political challenges remain (Mahmoud, et al., 2017).
<h3>Way Forward</h3>
Several lessons can be drawn for Lebanon from the experience of Jordan and Yemen.&nbsp; These could constitute the basis for the much-needed policy reforms in the case of Lebanon. The experience of Jordan shows that:
<ol>
<li style="text-align: justify;">Legal and regulatory frameworks serve as the foundation for renewable energy growth</li>
<li style="text-align: justify;">Government support in the form of guarantees and purchase agreements is essential for bankable projects that attract the private sector and international donors</li>
<li style="text-align: justify;">End users play an important role in driving the energy transition when suitable schemes are implemented, including net metering</li>
<li style="text-align: justify;">Strategic holistic planning of the energy sector is essential to ensure a smooth transition to green technologies</li>
</ol>
The diffusion of Solar PV in Yemen and Lebanon shares several characteristics. In both cases, the uptake of Solar PV was the outcome of an energy crisis coupled with economic and political instability. Sales were led by household demand with minimum government intervention. Remittances as a way to finance solar energy is also believed to have been an important factor in both countries, particularly in the early stages (Shabaka, 2021).
A key factor influencing the pace and quality of solar PV diffusion in all three countries has been the political context. Jordan has a reasonably stable and efficient political system that allows the government to function, take decisions, and make progress when it comes to RE developments. This is not the case in Yemen. Solar PV development in Houthi-controlled areas increased because electricity was priced as a commercial commodity and private actors were allowed to supply it. However, effective diffusion of solar PV across the country requires a negotiated peace process building on the existing ceasefire that has been recently reached in the country.
The case of Lebanon resembles the experience of Yemen much more than Jordan. While not being at war, Lebanon faces a deep-rooted political and financial crisis,&nbsp; and was already in desperate need of electricity reforms, which were stalled due to lack of political consensus. Although the example of Yemen shows that some progress can be made based on individual RE initiatives, ultimately a functional electricity system requires an effective state to provide the framework and security for investments in renewable energy.
<hr>
References:
Alsaqqaf, O. (2017) The use of Solar energy in Yemen.
Ayat, C., Obeid, J., Haytayan, L. &amp; Ayoub, M., 2021. Keeping the Lights On: A Short-term action plan for Lebanon&rsquo;s electricity sector. [pdf] Beirut: AUB-IFI/KAS/NRGI. Available &nbsp;at: <a href="https://www.aub.edu.lb/ifi/Documents/publications/Other%20Publications/2021-2022/202103_Keeping_the_Lights_on_paper.pdf">https://www.aub.edu.lb/ifi/Documents/publications/Other%20Publications/2021-2022/202103_Keeping_the_Lights_on_paper.pdf </a>[Accessed 16 August 2022].&nbsp;
Chasing the Sun &ndash; بحثاً عن الشمس, AUB-IFI/NRGI Documentary, Available at <a href="https://www.youtube.com/watch?v=sCW_zVfaCe8">https://www.youtube.com/watch?v=sCW_zVfaCe8</a> &nbsp;
Derhally, M. A., 2022. Hyperinflation in Lebanon hovers at 206% in April. The National News. [Online] May 24. Available at: <a href="https://www.thenationalnews.com/business/economy/2022/05/24/hyperinflation-in-lebanon-hovers-at-206-in-april/">https://www.thenationalnews.com/business/economy/2022/05/24/hyperinflation-in-lebanon-hovers-at-206-in-april/</a> [Accessed 16 August 2022].
IRENA, 2022. Renewable Capacity Statistics 2022. [pdf] Abu Dhabi: IRENA.&nbsp;Available at: <a href="https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2022/Apr/IRENA_RE_Capacity_Statistics_2022.pdf">https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2022/Apr/IRENA_RE_Capacity_Statistics_2022.pdf</a> [Accessed 16 August 2022].
LCEC, 2021. The 2019 Solar PV Status Report for Lebanon. [pdf] Beirut: LCEC. Available at:<a href="https://lcec.org.lb/sites/default/files/2021-04/LCEC1.pdf"> https://lcec.org.lb/sites/default/files/2021-04/LCEC1.pdf</a> [Accessed 16 August 2022].
McCulloch, N. et al. (2021) &lsquo;Improving Electricity Services in Yemen: Priorities and Options&rsquo;. Available at <a href="https://www.theigc.org/wp-content/uploads/2021/11/Improving-electricity-services-in-Yemen_Final-report.pdf">https://www.theigc.org/wp-content/uploads/2021/11/Improving-electricity-services-in-Yemen_Final-report.pdf</a>&nbsp;
Mahmoud, M. et al., 2017. Assessment of the status of solar PV in Yemen. [pdf] Cairo: RCREEE. Available at: <a href="https://documents1.worldbank.org/curated/ar/284461511876486207/pdf/121707-WP-PUBLIC-P158449-WB-RCREEE-Solar-PV-in-Yemen-Report-002.pdf">https://documents1.worldbank.org/curated/ar/284461511876486207/pdf/121707-WP-PUBLIC-P158449-WB-RCREEE-Solar-PV-in-Yemen-Report-002.pdf</a> [Accessed 16 August 2022].
Shabaka, 2021. Diaspora Engagment in Times of Crisis. [pdf] Brussels: ICMPD. Available at: <a href="https://diasporafordevelopment.eu/wp-content/uploads/2021/06/Diaspora-Case-Study-Crisis_EN-v.10.pdf">https://diasporafordevelopment.eu/wp-content/uploads/2021/06/Diaspora-Case-Study-Crisis_EN-v.10.pdf</a> [Accessed 16 August 2022].
RECREEE, 2017. Assessment of the status of solar PV in Yemen. Available at <a href="https://documents1.worldbank.org/curated/ar/284461511876486207/pdf/121707-WP-PUBLIC-P158449-WB-RCREEE-Solar-PV-in-Yemen-Report-002.pdf">https://documents1.worldbank.org/curated/ar/284461511876486207/pdf/121707-WP-PUBLIC-P158449-WB-RCREEE-Solar-PV-in-Yemen-Report-002.pdf</a>&nbsp;
World Bank, 2021. Lebanon Sinking into One of the Most Severe Global Crises Episodes, amidst Deliberate Inaction. [Online] Beirut: World Bank. Available at: <a href="https://www.worldbank.org/en/news/press-release/2021/05/01/lebanon-sinking-into-one-of-the-most-severe-global-crises-episodes">https://www.worldbank.org/en/news/press-release/2021/05/01/lebanon-sinking-into-one-of-the-most-severe-global-crises-episodes</a> [Accessed 16 August 2022].

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