At night, central Beirut is shrouded in darkness, with a few pinpricks of light emanating from apartment windows amidst the constant hum of diesel generators. Lebanon’s power sector is disintegrating. Some hope to revive the existing system, built around a centralized and fossil-fueled grid run by the parastatal Electricité du Liban (EDL), with natural gas imported from Egypt or the Mediterranean. Others see an opportunity to leapfrog over fossil fuels to a decentralized renewable grid. But as the political class, international donors, and energy experts debate what should come next, the ongoing scramble for fuel, electricity, and profit is creating entrenched interests that are reshaping the country’s power sector and political economy.
There is a widely held view that electricity is key to understanding Lebanon’s crisis, and will be central to any attempt to resolve or mitigate this crisis. Human Rights Watch recently argued that electricity is a human right that Lebanon’s population has been denied. International aid diplomacy has focused squarely on the grid.
The sector’s importance to Lebanese and international actors is also evidenced by its place in the reform program of the government of Najib Mikati, its inclusion in the Staff-Level Agreement between Lebanon and the International Monetary Fund, and the devotion of the administration of Joe Biden to securing World Bank backing and guaranteeing sanctions exemptions for a plan to revive the Egypt-to-Lebanon Arab Gas Pipeline to supply Lebanon’s power plants with fuel. This focus on the grid makes sense, given the centrality of a functional power sector to economic recovery and given that the sector has historically been a major drain on public finances.
But any serious policy toward Lebanon’s power sector must move beyond strictly technical considerations and take into account how its ongoing evolution is reshaping the distribution of wealth and political power. Beyond the Lebanese political class and its interlocutors in the international institutions and foreign governments with whom it is negotiating, multiple constituencies are filling the gaps left by the state and defining the contours of Lebanon’s electricity transition.
Three of these constituencies deserve special focus: the fuel importers who provide diesel for Lebanon’s private power generators; the “mafias” who own those generators; and the individuals and communities that are capable of organizing power provision for themselves. Whatever technocratic solution is worked out between Lebanon and international donors, these groups will continue to influence the form that the post-crisis grid actually takes—likely in ways that contradict the goal of universal and equitable access to electricity.
Fuel Barons
A small group of fuel-importing companies dominates Lebanon’s fuel supply. Thirteen of these companies have formed an informal cartel, coordinating in the importation of the majority of Lebanon’s fuel—including the diesel used by private generators. Their control over the country’s fuel supply guarantees privileged access to foreign currency via the central bank, and, until 2021, their sales were buoyed by government fuel subsidies that helped bankrupt the country. One company, called Coral Oil, has used its privileged access to foreign currency to secure around 80 percent of the country’s fuel imports, which it then distributes to other companies involved in this cartel. Such arrangements allow these companies to stifle competition, dominate the market, and raise their profit margins. Major fuel importers are also associated with political bosses (plural zu’ama, singular za’im) who profit from these companies while protecting their control over the market.
Any serious policy toward Lebanon’s power sector must consider how its evolution is reshaping the distribution of wealth and political power.
These same companies control the majority of Lebanon’s fuel storage, transportation, and distribution. According to a report by a Lebanese think tank called Triangle, Lebanon’s thirteen main importing companies own 53 percent of the country’s fuel storage infrastructure, 68 percent of its tanker trucks, and 55 percent of its fuel stations. At the peak of Lebanon’s fuel crisis in the summer of 2021, this control allowed the companies to manipulate the market by hoarding fuel to create artificial scarcity and to capture higher profits as the government slowly and reluctantly raised fuel prices.
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Early in the crisis, EDL and the Lebanese Ministry of Energy and Water established a tendering process to import 30 percent of the country’s fuel supply with the purported aim of introducing competition into the market. A company called ZR Energy won fuel importation contracts in a bidding process that was widely perceived as corrupt, under terms that allowed the company to capture excess profits. ZR Energy and its co-owners, the brothers Raymond and Teddy Rahme, reportedly enjoy connections to the leadership of the political parties Amal, the Lebanese Forces, and the Marada. ZR Energy and the Rahme brothers were recently sanctioned by the U.S. Treasury.
The Generator Mafia
Most electricity is provided by privately owned diesel generators whose noise and fumes blanket Beirut twenty-four hours a day. The country’s generator owners, estimated at between 3,000 and 3,500 individuals, have become critically important actors in the country’s political economy. Before the crisis, residents of Beirut received twenty-one hours of state-provided electricity per day, and relied on privately owned diesel generators to provide three hours of power to fill in the gaps. Now, those numbers are reversed: the state provides less than three hours of electricity per day, forcing people to find alternative sources of electricity for the remainder.
Private generator operators have moved quickly to fill in the gaps, selling electricity to those who can afford it. Only the wealthiest actually purchase enough electricity to power their homes twenty-four hours a day; most make do with much less, and overall electricity production has fallen by one-half since 2019. But new business, which can be very roughly estimated from the increase in consumption of the diesel used to provide electricity, has enriched generator owners. In 2017, Lebanon imported around $900 million worth of diesel for use in power generators. By 2021, that figure had increased to over $1.2 billion, and by 2022, it had reached nearly $1.9 billion—more than double the amount imported five years previously.
Private generators, like the one shown in this picture taken in October 2021 in Beirut, provide vital backup to Lebanon’s decrepit power grid. Source: Marwan Tahtah/Getty Images.
This small group also wields significant political and monopoly power. Many neighborhoods and buildings depend on a single generator for their power supply, giving its owner an effective monopoly over people living in that area. Owners negotiate control over turf with one another, preventing competition. Despite state attempts to regulate the profit rate for these illegal operations, generator owners can still extract rents from their control over these effectively unregulated micro-monopolies. Much like the fuel importers’ cartel, generator owners coordinate through a syndicate and reportedly maintain relationships with powerful elements within the political class, giving them additional clout and preventing more serious government interventions in their operations.
Generator owners could use their growing wealth and power to shape the further evolution of the Lebanese grid. They could, for instance, use their political connections and control over the power supply to act as spoilers, or force carve-outs for their operations, in any attempt to substantively rebuild or reform the sector. Such an outcome would deepen the existing predatory and highly unequal system, in which the poorest quintile of the population spends an average of 88 percent of its income on electricity to receive about thirteen hours of power per day. It would also lock in the dramatically worsened air quality that has overtaken Beirut since diesel generators began running twenty-four hours seven days a week.
Electrical Secessionism
Under these dire conditions, some communities and households have charted their own way. Whereas the country as a whole has been coping with state failure and contending with the cartels that have filled in the gaps, a few municipalities have long managed their own power supplies and serve as tempting models for localities that aim to do the same. Electricité du Zahlé (EDZ), for example, managed to provide twenty-four-hour electricity to the city of Zahlé from 2015 until the fuel crisis of the summer of 2021. Electricité du Jbeil (EDJ) has also fared much better than EDL, but has had to ration electricity amidst periodic disruptions in the supply of diesel. Such entities remain dependent upon fossil fuels but provide electricity more reliably than the national grid and more cheaply than the private generators do.
Local and international organizations and think tanks have recently begun promoting community-scale solar projects. Such projects benefit from economies of scale, making them more cost-effective than household-level systems, and have the capacity to supplant both the collapsing state grid and predatory generator operators for those lucky enough to live near them. Such solutions are clearly preferable for those communities and households that can afford them, and will almost certainly form the basis of any progress that Lebanon is likely to make on the transition away from fossil fuels.
These new local arrangements, understandable as they are, risk accelerating the country’s disintegration.
The wealthiest have access to personal or building generators, insulating them from dependency on the national grid and the generator mafia. Those with the resources to do so have also been importing massive numbers of solar panels, giving them variable but virtually free electricity; and batteries, allowing them to store free solar power or cheap grid electricity for later use. The number of household solar photovoltaic systems installed in Lebanon has expanded exponentially since the onset of the crisis. One recent study suggests that Lebanon’s supply of solar energy grew by almost seven times between 2020 and 2022, and its share in the country’s dwindling overall electricity supply grew from less than 1 percent to more than 10 percent across the same period. Such systems reportedly cost around $10,000 to install, a prohibitive amount for the vast majority of households.
But those with access to community and household-level power supplies have less of a stake in a functional and equitable grid. They therefore may not be a reliable constituency for ensuring universal access to electricity. These new local arrangements, understandable as they are from a pragmatic perspective, risk exacerbating the breakdown of solidarity among Lebanese and accelerating the country’s disintegration into atomized fiefs. Moreover, visions of a fully decentralized grid unfortunately resonate with fantasies of political secession that have plagued Lebanon since its formation. These new arrangements also further entrench already extreme economic inequality, and any formally decentralized grid could well be as unequal as the informally decentralized system that currently exists.
What Comes Next?
Any effort to ensure universal access to electricity in Lebanon will have to contend with the interest groups that have formed in its prolonged absence. Century International will be mapping these emerging groups and their role in Lebanon’s rapidly transforming political economy, with a view to assisting those interested in building an equitable grid.
The vast majority of the population resides somewhere between the faltering state grid, the predatory fuel and generator cartels, and the individuals and localities that have escaped dependency on them. All these residents of Lebanon must scrape by to secure the electricity they need to work and live. Lebanon’s collapsing, evolving electricity sector both reflects and shapes the country’s political and economic trajectory.
The quagmire embodies Lebanon’s present conditions, as well as the possible futures that coexist for the country: the state is rotting, but there are interest groups who benefit from its collapse and coordinate to keep the population divided and dependent. And forms of decentralization that seem to promise communal or individual independence risk deepening the country’s fragmentation. Lebanon’s winding path to normalcy—for its power grid and for just about everything else—must contend with such dangerous double binds.
Header image: Zouk power plant in Keserwan, Lebanon. Source: Sami Sarkis, Getty Images.
Lebanon’s Grid Has Collapsed. What Comes Next?
At night, central Beirut is shrouded in darkness, with a few pinpricks of light emanating from apartment windows amidst the constant hum of diesel generators. Lebanon’s power sector is disintegrating. Some hope to revive the existing system, built around a centralized and fossil-fueled grid run by the parastatal Electricité du Liban (EDL), with natural gas imported from Egypt or the Mediterranean. Others see an opportunity to leapfrog over fossil fuels to a decentralized renewable grid. But as the political class, international donors, and energy experts debate what should come next, the ongoing scramble for fuel, electricity, and profit is creating entrenched interests that are reshaping the country’s power sector and political economy.
There is a widely held view that electricity is key to understanding Lebanon’s crisis, and will be central to any attempt to resolve or mitigate this crisis. Human Rights Watch recently argued that electricity is a human right that Lebanon’s population has been denied. International aid diplomacy has focused squarely on the grid.
The sector’s importance to Lebanese and international actors is also evidenced by its place in the reform program of the government of Najib Mikati, its inclusion in the Staff-Level Agreement between Lebanon and the International Monetary Fund, and the devotion of the administration of Joe Biden to securing World Bank backing and guaranteeing sanctions exemptions for a plan to revive the Egypt-to-Lebanon Arab Gas Pipeline to supply Lebanon’s power plants with fuel. This focus on the grid makes sense, given the centrality of a functional power sector to economic recovery and given that the sector has historically been a major drain on public finances.
But any serious policy toward Lebanon’s power sector must move beyond strictly technical considerations and take into account how its ongoing evolution is reshaping the distribution of wealth and political power. Beyond the Lebanese political class and its interlocutors in the international institutions and foreign governments with whom it is negotiating, multiple constituencies are filling the gaps left by the state and defining the contours of Lebanon’s electricity transition.
Three of these constituencies deserve special focus: the fuel importers who provide diesel for Lebanon’s private power generators; the “mafias” who own those generators; and the individuals and communities that are capable of organizing power provision for themselves. Whatever technocratic solution is worked out between Lebanon and international donors, these groups will continue to influence the form that the post-crisis grid actually takes—likely in ways that contradict the goal of universal and equitable access to electricity.
Fuel Barons
A small group of fuel-importing companies dominates Lebanon’s fuel supply. Thirteen of these companies have formed an informal cartel, coordinating in the importation of the majority of Lebanon’s fuel—including the diesel used by private generators. Their control over the country’s fuel supply guarantees privileged access to foreign currency via the central bank, and, until 2021, their sales were buoyed by government fuel subsidies that helped bankrupt the country. One company, called Coral Oil, has used its privileged access to foreign currency to secure around 80 percent of the country’s fuel imports, which it then distributes to other companies involved in this cartel. Such arrangements allow these companies to stifle competition, dominate the market, and raise their profit margins. Major fuel importers are also associated with political bosses (plural zu’ama, singular za’im) who profit from these companies while protecting their control over the market.
These same companies control the majority of Lebanon’s fuel storage, transportation, and distribution. According to a report by a Lebanese think tank called Triangle, Lebanon’s thirteen main importing companies own 53 percent of the country’s fuel storage infrastructure, 68 percent of its tanker trucks, and 55 percent of its fuel stations. At the peak of Lebanon’s fuel crisis in the summer of 2021, this control allowed the companies to manipulate the market by hoarding fuel to create artificial scarcity and to capture higher profits as the government slowly and reluctantly raised fuel prices.
Learn More About Century International
Early in the crisis, EDL and the Lebanese Ministry of Energy and Water established a tendering process to import 30 percent of the country’s fuel supply with the purported aim of introducing competition into the market. A company called ZR Energy won fuel importation contracts in a bidding process that was widely perceived as corrupt, under terms that allowed the company to capture excess profits. ZR Energy and its co-owners, the brothers Raymond and Teddy Rahme, reportedly enjoy connections to the leadership of the political parties Amal, the Lebanese Forces, and the Marada. ZR Energy and the Rahme brothers were recently sanctioned by the U.S. Treasury.
The Generator Mafia
Most electricity is provided by privately owned diesel generators whose noise and fumes blanket Beirut twenty-four hours a day. The country’s generator owners, estimated at between 3,000 and 3,500 individuals, have become critically important actors in the country’s political economy. Before the crisis, residents of Beirut received twenty-one hours of state-provided electricity per day, and relied on privately owned diesel generators to provide three hours of power to fill in the gaps. Now, those numbers are reversed: the state provides less than three hours of electricity per day, forcing people to find alternative sources of electricity for the remainder.
Private generator operators have moved quickly to fill in the gaps, selling electricity to those who can afford it. Only the wealthiest actually purchase enough electricity to power their homes twenty-four hours a day; most make do with much less, and overall electricity production has fallen by one-half since 2019. But new business, which can be very roughly estimated from the increase in consumption of the diesel used to provide electricity, has enriched generator owners. In 2017, Lebanon imported around $900 million worth of diesel for use in power generators. By 2021, that figure had increased to over $1.2 billion, and by 2022, it had reached nearly $1.9 billion—more than double the amount imported five years previously.
This small group also wields significant political and monopoly power. Many neighborhoods and buildings depend on a single generator for their power supply, giving its owner an effective monopoly over people living in that area. Owners negotiate control over turf with one another, preventing competition. Despite state attempts to regulate the profit rate for these illegal operations, generator owners can still extract rents from their control over these effectively unregulated micro-monopolies. Much like the fuel importers’ cartel, generator owners coordinate through a syndicate and reportedly maintain relationships with powerful elements within the political class, giving them additional clout and preventing more serious government interventions in their operations.
Generator owners could use their growing wealth and power to shape the further evolution of the Lebanese grid. They could, for instance, use their political connections and control over the power supply to act as spoilers, or force carve-outs for their operations, in any attempt to substantively rebuild or reform the sector. Such an outcome would deepen the existing predatory and highly unequal system, in which the poorest quintile of the population spends an average of 88 percent of its income on electricity to receive about thirteen hours of power per day. It would also lock in the dramatically worsened air quality that has overtaken Beirut since diesel generators began running twenty-four hours seven days a week.
Electrical Secessionism
Under these dire conditions, some communities and households have charted their own way. Whereas the country as a whole has been coping with state failure and contending with the cartels that have filled in the gaps, a few municipalities have long managed their own power supplies and serve as tempting models for localities that aim to do the same. Electricité du Zahlé (EDZ), for example, managed to provide twenty-four-hour electricity to the city of Zahlé from 2015 until the fuel crisis of the summer of 2021. Electricité du Jbeil (EDJ) has also fared much better than EDL, but has had to ration electricity amidst periodic disruptions in the supply of diesel. Such entities remain dependent upon fossil fuels but provide electricity more reliably than the national grid and more cheaply than the private generators do.
Local and international organizations and think tanks have recently begun promoting community-scale solar projects. Such projects benefit from economies of scale, making them more cost-effective than household-level systems, and have the capacity to supplant both the collapsing state grid and predatory generator operators for those lucky enough to live near them. Such solutions are clearly preferable for those communities and households that can afford them, and will almost certainly form the basis of any progress that Lebanon is likely to make on the transition away from fossil fuels.
The wealthiest have access to personal or building generators, insulating them from dependency on the national grid and the generator mafia. Those with the resources to do so have also been importing massive numbers of solar panels, giving them variable but virtually free electricity; and batteries, allowing them to store free solar power or cheap grid electricity for later use. The number of household solar photovoltaic systems installed in Lebanon has expanded exponentially since the onset of the crisis. One recent study suggests that Lebanon’s supply of solar energy grew by almost seven times between 2020 and 2022, and its share in the country’s dwindling overall electricity supply grew from less than 1 percent to more than 10 percent across the same period. Such systems reportedly cost around $10,000 to install, a prohibitive amount for the vast majority of households.
But those with access to community and household-level power supplies have less of a stake in a functional and equitable grid. They therefore may not be a reliable constituency for ensuring universal access to electricity. These new local arrangements, understandable as they are from a pragmatic perspective, risk exacerbating the breakdown of solidarity among Lebanese and accelerating the country’s disintegration into atomized fiefs. Moreover, visions of a fully decentralized grid unfortunately resonate with fantasies of political secession that have plagued Lebanon since its formation. These new arrangements also further entrench already extreme economic inequality, and any formally decentralized grid could well be as unequal as the informally decentralized system that currently exists.
What Comes Next?
Any effort to ensure universal access to electricity in Lebanon will have to contend with the interest groups that have formed in its prolonged absence. Century International will be mapping these emerging groups and their role in Lebanon’s rapidly transforming political economy, with a view to assisting those interested in building an equitable grid.
The vast majority of the population resides somewhere between the faltering state grid, the predatory fuel and generator cartels, and the individuals and localities that have escaped dependency on them. All these residents of Lebanon must scrape by to secure the electricity they need to work and live. Lebanon’s collapsing, evolving electricity sector both reflects and shapes the country’s political and economic trajectory.
The quagmire embodies Lebanon’s present conditions, as well as the possible futures that coexist for the country: the state is rotting, but there are interest groups who benefit from its collapse and coordinate to keep the population divided and dependent. And forms of decentralization that seem to promise communal or individual independence risk deepening the country’s fragmentation. Lebanon’s winding path to normalcy—for its power grid and for just about everything else—must contend with such dangerous double binds.
Header image: Zouk power plant in Keserwan, Lebanon. Source: Sami Sarkis, Getty Images.
Tags: lebanon, century international