From dysfunctional to functional corruption: The politics of reform in Lebanon’s electricity sector

Dynamics of Change Theme Paper Abstract: In Lebanon, the electricity sector’s dysfunction and inefficiency mask deeper political economy challenges, including rampant rent-seeking, captured institutions and a fractured state. The state utility – Électricité du Liban (EDL) – covers only 63% of electricity demand, which results in rotating outages. These last longer as one moves away from Beirut’s central district, thus widening social and developmental inequalities. There are also high technical and non-technical losses in power, together amounting to a third of EDL’s total generation. Tariffs have not been adjusted since 1994, and consequently EDL makes huge losses – more than half of all of Lebanon’s national debt stems from losses accrued by EDL. One consequence of this dysfunction has been the emergence of tens of thousands of private diesel generators which provide power to households and businesses when EDL power is not available. Amidst this poor general state of the sector, one area of Lebanon has managed to operate a private utility that provides a reliable and high-quality electricity service – Électricité de Zahlé (EDZ) – which covers the city of Zahle and 16 surrounding villages. EDZ’s technical losses stand at only 5%; it collects 100% of bills and is profitable while providing electricity at an overall cost no higher than that paid by households reliant on private generators to back up EDL’s supply. In addition, EDZ has been much more receptive to the incorporation of renewable energy into its operations, since local generated renewable power directly reduces the cost of EDZ’s diesel generation when EDL is not supplying electricity. As a consequence, EDZ has encouraged the development of solar power and has installed significant net-metering technology, reaching around 8 MW of solar photovoltaics (PV) capacity connected to its grid in June 2020 - around 10% of EDZ total installed capacity. On the national level, around 56 MW have been installed since 2010, which accounts for around 3-4% of the installed capacity. This paper explores how it was possible to establish EDZ’s functional, but problematic, service provision within the complex sectarian political context of Lebanon. It draws on a framework provided by Khan et al. (2019) to understand the rents and types of corruption in the sector and how the changes implemented by EDZ have been consistent with the nature of Lebanon’s political settlement. It also looks at the mechanisms of policy change that allowed it to happen, as well as the mobilization and engagement of the people of Zahle, most of whom do not believe that the state institutions have the capability (or even the intention) to provide the same level of service provision as that of EDZ. The paper will provide, as part of the dynamics of change theme, a deeper understanding of how the dynamic interplay of policy processes influence the political conditions under which sustainable energy provision, including renewable energy, can take place.