26 March 2009
BEIRUT: Diversity is the only option available to manage uncertainty in fuel prices in both absolute and relative terms, Energy and Water Minister Alain Tabourian said Wednesday. Unfortunately this is not being practiced today, he said. "We need a power generation strategy that enables us to work cost effectively with all common combustibles which are oil, natural gas and Coal-Petcoke," he added.
These remarks came during a conference held at the Chamber of Commerce, Industry and Agriculture in Beirut organized by the Association of Lebanese Industrialists to discuss the power generation sector strategy proposed by Tabourian.
"What was most common in Lebanon during the past 15 years was the availability of projects only and not strategies which is leading us to a disaster," said Tabourian, adding that EDL was asked to prepare a master generation plan and, the study produced was based on building plants that work on gas, which is not available in Lebanon. "EDL finally dared to announce that they have been waiting for gas for 20 years and that this project should be stopped because it is useless," Tabourian said.
According to a study by Decon Deutsche Energie-Consult, the electricity sector in Lebanon faces severe challenges because tariffs do not cover operating costs and plants are in poor conditions. It said electricity is generated from some relatively modern plants using gasoil at high cost while the old plants burning heavy fuel oil have high specific consumptions and are also costly. It added that estimates of the cost to the Lebanese economy from deficiencies in power supply range from $500 million a year to maybe $1billion a year at present. The study mentions that without rapid action the condition of the system can only deteriorate possibly to the point of catastrophic failure.
Tabourian said the sector is fully dependent on oil derived fossil fuels, often on the most expensive derivative such as gasoil. He stressed that gas turbines operating on gasoil and old steam plants operating on heavy fuel oil, combined with technical losses of 15 percent on the transmission and distribution networks, results in a KWh cost that is double what it should be, on heavy fuel oil, if proper and adequate investments had been made.
"While it was possible to get away with this in the late 1990s when oil was $15-20 per barrel, this clearly was not a sound long-term strategy," he said.
Tabourian invoked the example of the Deir al-Amar and Zahrani plants which work on gasoil, saying it is twice as expensive as heavy fuel oil. "The cost to the Lebanese economy of running the Combined Cycle Gas Turbines plants on gas oil instead of heavy fuel oil has been over $2billion since the inception of these power plants," he said.
He explained that Coal and Petroleum Coke is the best solution because they can be imported from a lot of places in the world and the plant needs 5 years to be built while natural gas is not available. "Even if it [gas] becomes available there is no security of supply because other countries such as Egypt, Jordan and Syria use it so they will only give Lebanon the rest quantity," he said.
Some "70-80 percent of EDL's financial deficit is due to high generation and distribution cost," he added.
Tabourian said that if the situation remains the same with no addition to power-generation capacity, the deficit will reach 1,200 MW in 2011 equivalent to 11.1 hours per day. It will also reach, he said, 1,700 MW of deficit in 2014 equivalent to 13.8 hours a day.
The Decon Deutsche Energie-Consult study says that the peak demand of electricity in Lebanon is estimated to be about 2,200 MW but at a 3 percent per annum growth in demand, this figure will be 2,550 MW in five years. It said that the minimum reserve required for adequate reliability is 20 percent and therefore, in five years time, Lebanon needs at least 3000 MW of generating capacity. It added that there is 1500 MW of operating capacity on the grid at present so an addition of up to 1500 MW is needed in the next five years.
Asked about privatization, he said that in many developed markets where electricity has been fully privatized, costs have gone up for consumers. "However, it is probably too early to draw conclusions, the models and regulations are not yet mature enough, it is a work that is still in progress," he said.
Copyright The Daily Star 2009.
