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G
WORKIN
Published by the Issam Fares Institute for Public Policy and International Affairs,
American University of Beirut.
This report can be obtained from the Issam Fares Institute for Public Policy and
International Affairs office at the American University of Beirut or can be downloaded
from the following website: www.aub.edu.lb/ifi.
The views expressed in this document are solely those of the authors, and do not
reflect the views of the Issam Fares Institute for Public Policy and International Affairs
or the American University of Beirut.
CONTENTS
04 05 06
ABSTRACT 1. INTRODUCTION 2. ELECTRICITY
11
3. DISTRIBUTED
SECTOR SOLAR POWER:
IN LEBANON CASE STUDY OF
BEIRUT
2.1 Indicators and
Governance 6 3.1 Method 11
2.2 Renewable Energy 3.2 Results and
Policies in Lebanon 8 Discussion 12
2.3 Current Status of
Solar Energy 9
14 17 22
4. UTILITY- 5. DISCUSSION 6. CONCLUSION
23
REFERENCES
SCALE SOLAR AND POLICY
PV 5.1 Potential RECOMMENDATIONS
Locations for
4.1 Daily Solar PV Farms in
Load 14 Lebanon 17
4.2 Resources and 5.2 Future Cost
Feasibility 15 Reductions 18
5.3 Financing
Solar PV Farms in
Lebanon 19
5.4 Dealing with
Intermittency 20
5.5 Political
Stability and
Governance 21
4 / Working Paper
ABSTRACT
1. INTRODUCTION
If you ever lived in or visited Lebanon, chances are In this working paper, we attempt to answer the
you have experienced daily electricity outages. With question of whether the Lebanese government
an increasing demand for electricity, induced by underestimates the potential of solar power. Starting
population growth that is partly due to the large influx from the answer of this question, the paper then
of refugees in recent years, Electricité du Liban (EDL) proposes deployment scenarios that would accelerate
continues to fall short of meeting demand with an Lebanon’s transition towards higher RE generation.
average supply of 15h per day. The deficit, which was Section 2 provides background information about
estimated to be 33 percent in 2014, is covered by the electricity sector in Lebanon, the current policy
private diesel generators. framework in support of solar energy, and the current
status of this technology. Section 3 estimates the
Electricity generation in Lebanon is almost completely
potential of rooftop PV installations in the capital
covered by imported petroleum products, consuming
Beirut, as a case study, while Section 4 examines the
around 50 percent of Lebanon’s imports of fossil fuels
potential of deploying utility-scale solar PV power
(Ibrahim et al., 2013). On the other hand, renewable
plants in Lebanon. Section 5 discusses the potential
energy (RE) constitutes only 4 percent of the total
locations for solar farms, the future cost reductions
power production, mainly via hydropower with a tiny
and financing mechanisms, the issue of intermittency,
contribution from other forms of renewable energy
and the political stability in Lebanon affecting the
(Amine and Rizk, 2016).
governance of the sector.
To improve electricity supply, diversify energy sources
and reduce carbon emissions, Lebanon has pledged
to cover 12 percent of its electricity demand using
renewable energy sources by 2020 and signed to
join the International Renewable Energy Agency
(IRENA) in the same year (Hauge, 2011). This target
has been further asserted in the Electricity Sector
Policy Paper in 2010 (Bassil, 2010), the National
Energy Efficiency Action Plan (NEEAP) 2010-2015 and
the National Renewable Energy Action Plan (NREAP)
2016-2020. The Intended Nationally Determined
Contributions (INDC) submitted to the COP21 climage
change conference1 in Paris in 2016 (Republic of
Lebanon, 2015) also committed an unconditional
target of 15 percent of RE generation and a 3 percent
reduction in power demand through energy efficiency
(EE) improvements by 2030. These targets could be
further improved to reach 20 percent and 10 percent
respectively, if additional international support is
provided.
2. ELECTRICITY
IN LEBANON
2.1 Indicators and Governance
Currently, seven thermal power plants, six Electricity
Electricity Demand
Electricity
Demand and Supply
Demand
and Supply (TWh)(TWh)
and Supply
(TWh)
hydroelectric plants, and two power ships are 20
20 20 17.6
17.6 17.6
operating in Lebanon, in addition to the diesel 16.3
16.3 16.3
15.1
15.1 15.1
generators that are used to compensate for the 14
15
15 1511.8 12.5
12.5 13.2 13.214
13.2
12.5
14
deficit in supply (BlomInvest Bank, 2015). The actual 11.8 11.8
electricity generation capacity by EDL in 2015 was
10
10 10
1983 MW, divided into diesel-fired Combined Cycle 11.9
11.9 11.9
10.7 10.6
10.7 10.7
10.6 10.69.5 10.6
10.6 10.6
Gas Turbine (1051 MW), Heavy Fuel Oil (HFO)-fired 9.6 9.610.1
9.6 10.1 10.1 9.5 9.5
steam turbines (525 MW), HFO-fired barges (367 MW) 5
5 5
and hydropower (40 MW), in addition to generation
from solar PV accounting for 9.45 MW (Amine and 0
0 0
Rizk, 2016). Transmission and distribution losses are 2008 2009 2010 2011 2012 2013 2014
20082008
20092009
20102010
20112011
20122012
20132013
20142014
estimated at around 12 percent for 2010 (RCREEE,
2013). Production
Production Volume
Production
Volume
Volume Demand
Demand Volume
Demand
Volume
Volume
The total energy produced, excluding private Figure 2
generators, from 2009 until 2013 is shown in Figure
The mismatch between electricity demand and supply in
1. Prior to 2013, some electricity was imported from
Lebanon (adapted from BlomInvest Bank, 2015)
Egypt and Syria. This has reduced significantly due to
the political instabilities in both countries and was
compensated by power ships.
Figure 1. Energy production by EDL in 2009-2013 (Bassil, 2010; CAS, 2014; LCEC, 2016a) Residential, 40%
Tertiary, 18%
Figure 1
Electricity production by EDL in 2009-2013 (Bassil, 2010;
CAS, 2014; LCEC, 2016a)
CO2 Emissions
CO2
Electricity Emissions(tCO 2/capita)
(tCO2/capita)
Consumption (kWh/GDP USD) CO2 Emissions (kg CO2/GDP USD)
CO2 Emissions (kg CO2/GDP USD)
20
0.60 1.2 CO2 Emissions (tCO2/capita)
0.50 1
15 20
0.40 0.8
10
0.30 15
0.6
0.20 0.4
5 10
0.10 0.2
0
0.00 50
Figure 4
Electricity and emissions indicators (World Bank, 2016)
CO2 Emissions (tCO2/capita)
20
15
10
5
8 / Working Paper
The cost of electricity generation by EDL reached The LCEC has developed the first NEEAP for 2010-
22.73 USC/kWh in 2014 (BlomInvest Bank, 2015), 2015 in accordance with the policy paper. It was
while for instance, energy for residences is charged adopted by the Council of Ministers in November
for 2.33 to 13.33 USC/kWh (Bassil, 2010). The 2011 and included 14 initiatives. Lebanon was in
levies from subscribers thus cannot cover the costs fact the first Arab country to officially adopt such a
of generation and constitute only 22.8 percent of plan (LCEC, 2016a). The initiatives include promoting
EDL’s financial resources in 2013, not to mention SWHs for residential use and employing wind and
energy theft, meter tempering, and uncollected bills solar technologies for energy generation while
(BlomInvest Bank, 2015). encouraging decentralized power generation. These
initiatives and others were only partly completed,
The electricity sector is governed by the Ministry of
achieving only 18.6 GWh/year of energy savings from
Energy and Water (MoEW) as mandated by Law 462,
a target of 2087.6 GWh/year (Jouni et al., 2016).
which also includes provisions for privatization,
The key barriers to the complete implementation of
liberalization, and unbundling of the electricity
the NEEAP were lack of resources and coordination
sector (Bassil, 2010). However, the law is not yet fully
between stakeholders, lack of public engagement
implemented; thus, the ministry still operates on
and robust data, and subsidized cheap electricity
the pre-law structure, namely decrees 16878/1964
(Mortada, 2015). The most important achievements
and 4517/1972 which give EDL exclusive authority
in solar energy were installing 350,000 m2 of SWHs
for generation, transmission, and distribution.
with a subsidy of $200 per user by 2012 (RCREEE,
Hydropower is an exception in addition to some
2013), establishing performance standards and
private concessions in the areas of Zahle, Jbeil, Alley,
labels, and implementing solar street lighting across
and Bhamdoun (Farajalla et al., 2016).
many regions (Ruble and Nader, 2011). Moreover,
The Lebanese Centre for Energy Conservation (LCEC) building solar farms, namely the first stages of the
is another body affiliated to the MoEW that develops Beirut River Solar Snake (BRSS) and the Zahrani
and implements RE and EE policies and projects. power plant with an installed capacity of 1 MW
Other major supporters are the UNDP and EU- each, were key achievements. The BRSS project
funded projects, namely the CEDRO project that has aims to provide electricity for 10,000 houses with
implemented many EE and RE projects mainly in large a final capacity of 10 MW and a cost of $40 million
institutions such as municipalities, hospitals, and (Abdel Karim et al., 2014). The second NEEAP for
schools. 2016-2020 includes initiatives for EE measures only,
while RE initiatives are separately discussed in the
2.2 Renewable Energy Policies in Lebanon
NREAP 2016-2020. The NREAP includes a detailed
The Electricity Sector Policy Paper (Bassil, 2010) which
pathway to achieve the announced target for 2020
was endorsed by the Council of Ministers in 2010
and estimations for 2030, employing wind, solar PV,
presents several technical options for EE and RE in
CSP, and SWH technologies, in addition to biomass
addition to legislative recommendations. The actions
and waste-to-energy (LCEC, 2016b). It also discusses
revolve around launching the NEEAP, supporting the
the policies and tools required to reach these targets,
use of solar water heaters (SWHs), and establishing
such as legislations, awareness raising, financing
a national financial mechanism for green energy
schemes, and a grid code (LCEC, 2016b).
projects. The policy paper also calls for introducing
the Independent Power Producers (IPP) model in A major support for the expansion of solar energy in
collaboration with the private sector, mainly for wind Lebanon is the net-metering policy which has been
farms, supported by new laws that promote green adopted by EDL since 2011. Net-metering allows the
energy. Law 462 does not include any articles on RE and flow of electricity in two directions: from the grid to the
its support; however, it allows private generation for customer in case energy demand exceeds production,
personal use up to 1.5 MW. Beyond that, it requires a and from the customer’s RE facility to the grid in case
permit or a license from the Energy Regulatory Authority of excess production, using a bi-directional meter. Its
(ERA) (LCEC, 2016b). Clearly, this is an obstacle to advantages include legal and technical simplicity, in
the development of RE, particularly in the absence addition to the free installation of the meter by EDL
of the ERA, which is yet to be established. Currently, (Hayek, 2011). The bill at the end of the month will be
laws 288/2014 and 54/2015 allows the MoEW and the difference between the electrical energy consumed
the Ministry of Finance to grant permits and licenses from the grid and the energy injected into the grid. Any
to IPPs temporarily and until the ERA is formed (LCEC, surplus will be carried to the next month and subtracted
2016b). The LCEC aims to keep these permits exclusive from the consequent bill. However, at the end of each
to RE technologies, in line with the national targets (El year, the excess remaining will be cancelled (Melhem
Khoury, 2016). and Mougharbel, 2014). On the other hand, Feed-in-
Assessing Solar PV’s Potential in Lebanon / 9
Generation (MWh)
Capacity (MWp)
6 10,000
5 8,000
3.8
4 6,000
5520
3
1.75 4,000
2
2704
0.78 2,000
1 0.32 0.45
1231
515 719
0 0
2010 2011 2012 2013 2014 2015
Capacity Generation
Figure 1. Solar PV installed capacity and total generation from 2010-2015 (Amine and Rizk, 2016)
Figure 5
Solar PV installed capacity and total generation from 2010-
2015 (Amine and Rizk, 2016)
The number of new solar PV projects increased from The Beirut Governorate stands second in terms of
18 in 2011 to 259 in 2015, with the average size of solar PV installations amongst other governorates
each project also increasing from 5 kWp in 2010 to 21 in Lebanon with 25 percent, following Mount
kWp in 2015. The total investments in these projects Lebanon. Being the capital of Lebanon and the
reached $30.52M in 2015 (Amine and Rizk, 2016). center of its economic activities, Beirut consumes
One can contribute the reason behind the increase in about 12 percent of the total electricity produced,
the rate of installing PV systems to the decrease in the while its area is just 0.2 percent of the total country
price of these systems, where it fell by more than 60 area (BEF, 2015). Moreover, the distribution of
percent in just six years, from 7,178 $/kWp in 2010 electricity consumption in Beirut by sector, shows
to 2,675 $/kWp in 2015. Electricity generation from that the tertiary sector (comprising commercial,
solar PV has led to an estimated cumulative monetary public, hotels and hospitals) consumes 71 percent
saving and emissions reduction of $7,400,000 and of the energy provided by EDL, while the residential
17,855 tCO2 until 2015 respectively (Amine and Rizk, sector consumes 27 percent of it (BEF, 2015). This,
2016). compared to the fact that the commercial and
residential sector are leading all around Lebanon
in terms of implementing solar projects, indicates a
significant potential for expanding the adoption of
this technology in Beirut, within these sectors.
Assessing Solar PV’s Potential in Lebanon / 11
Since the actual number of subscribers per building Na,k is not available, Nk will serve as an
approximation of the potential number of subscribers that can make use of solar power in a
ulations to compute the cumulative
building. The total number of potential subscribers making use of solar power in Beirut
fraction based on the work of Sfeir
𝑁𝑁𝑡𝑡 = ∑𝑘𝑘 𝑁𝑁𝑘𝑘 , was also computed and compared with the total number of subscribers Ns.
hat mapped out the global horizontal
Similarly, we calculated Nk and Nt corresponding to the direct normal irradiation 𝐼𝐼𝑘𝑘𝑑𝑑 .
software used for statistical analysis,
ϯ͘Ϯ ZĞƐƵůƚƐĂŶĚŝƐĐƵƐƐŝŽŶ
he interactive solar map (Figure 6).
popup message appears containing
Using the
adiation Solar
𝐼𝐼 ℎ , the Analyst
average of ArcGIS,
daily direct we ran monthly simulations to compute the cumulative
𝑘𝑘
yearly irradiation Beirut receives by varying its diffuse fraction based on the work of Sfeir
(1981). The results were retrieved in the form of rasters that mapped out the global horizontal
as well as the direct normal irradiations, read in RStudio, a software used for statistical analysis,
and overlaid on top of the buildings' shapefile, to create the interactive
12 solar map (Figure 6).
12
When a building's polygon is clicked on the map, a popup message appears containing
arinformation
Map, aboutavailable
the average dailyat global horizontal irradiation 𝐼𝐼𝑘𝑘 , the average daily direct
ℎ
normal irradiation 𝑑𝑑
, andproduced
their corresponding Nk1 12
ngram/Mapzen map 𝐼𝐼𝑘𝑘was
ducational purposes, and is available
Figure 6
/35.4947.
The Beirut Solar Map available online at:
http://beirutsolarmap.cnrs.edu.lb/beirutsolarmap/
1
Together with the Beirut Solar Map, available at
http://beirutsolarmap.cnrs.edu.lb/BeirutSolarMap/, a Tangram/Mapzen map was produced
showing an animation of the buildings’ shadow dance for educational purposes, and is available
2 Together with the Beirut Solar Map, available at http://
at http://s-najem.github.io/Beirut-Solar-Map/#15/33.8913/35.4947.
beirutsolarmap.cnrs.edu.lb/BeirutSolarMap/, a Tangram/Mapzen map
was produced showing an animation of the buildings’ shadow dance
for educational purposes, and is available at http://s-najem.github.io/
Beirut-Solar-Map/#15/33.8913/35.4947.
11
Assessing Solar PV’s Potential in Lebanon / 13
1500
Electricity Consumption in GWh
1450
1400
1350
1300
1250
1200
1150
1100
1050
Figure 7
1000 Variation in Beirut’s electricity
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 consumption
Year
Training/Cross-Validated Predicted
The number of subscribers predicted for 2016 using EXPECTED POTENTIAL REDUCTION IN CO2 EMISSIONS FROM
PV INSTALLATIONS IN 2016 (TCO2 )
Equation 2, is Ns=172,114 and the corresponding
Figure 6 The Beirut Solar Map
average energy use is estimated to be U=8,432 kWh/ Єk fk= 0.3 fk= 0.8
The expected
year. total solar
Subsequently, power
Nk for from thewas
each building yearly global horizontal irradiations Sh is (4153 × 𝜖𝜖𝑘𝑘 )
computed
and added to the interactive map. Nt is then computed 10 74,048 212,888
GWh, where 𝜖𝜖𝑘𝑘 is
for different andtaken
fk andto be 10-15
compared percent.
to N s. These powers are calculated as follows: 𝑆𝑆ℎ =
15 120,328 314,704
∑𝑘𝑘Our
𝐴𝐴𝑘𝑘 𝐼𝐼𝑘𝑘simulation
ℎ shows
𝜖𝜖𝑘𝑘 . In order that solar these
to evaluate energyfindings,
can coverwe compare it to the total predicted electricity
8-34 percent of Beirut’s energy demand and be
consumption inthe
accessible to Beirut,
samegiven by theofmaximum
percentage likelihood model (Equation 1) shown in Figure
subscribers,
depending on the rooftop free-area and the panel
7. The blue line
efficiency. is the fitthe
Accordingly, of yearly
the maximum
monetarylikelihood
savings model that minimizes the test error.
could range from around $9 M to nearly $40 M,
and the consequent CO2 emissions saving could
range from 74,048 tCO2 to 322,660 tCO2. The
rather conservative lower bound of 8 percent can
accordingly contribute 71 percent of the target to
generate 160 GWh from distributed solar PV by 2020,
while the upper bound of 34 percent can exceed the
target by 3 times.
14 / Working Paper
4. UTILITY-SCALE SOLAR PV
In the previous section, we have discussed the We are interested in the peak demand during daylight
potential of distributed solar PV through results time. This time is around 10 hours in January from 7am
generated by the Beirut Solar Map. In this section, we until 5pm, while it is around 14 hours in June from
examine the potential for large, utility-scale solar PV 6am until 8pm (Comair, 2009). Therefore, the peak
farms. The NREAP for 2016-2020 draws a pathway to load is the area under the curve between the daylight
achieve the announced target of 12 percent of RE by times for the respective curves, minus the base load
2020. This includes a target of installing 150 MW of between these times. Results are shown in Table 2.
large centralized solar PV systems. These are defined
as having capacities of 1 MW or more and not being
Table 2
connected for local consumption but exported to the
national grid (LCEC, 2016b). The LCEC considers this Daily day loads in 2016 (in MWh)
target to be realistic however, in this section we show
that this target underestimates the true potential for DAY TOTAL DAY BASE DAY PEAK
LOAD LOAD LOAD
such plans and could be improved. First, ignoring the
January 34,073 23,900 10,173
possibility of storage, we aim to identify the amount
of resources required to cover the daily peak load in June 46,887 33,776 13,111
both the winter and summer seasons in Lebanon, and
compare it to the national targets.
4.1 Daily Load Therefore, our target is to cover 10,000-13,000 MWh of
The latest daily load curve data available is from daily peak load during the day. On the other hand, the
2006, showing a typical day in January and another official targets estimate the energy output subsequent
in June (World Bank, 2009). We manipulated this of implementing 150 MW of solar PV to be 252,228
data accounting for the energy demand growth rate MWh/year, which is equivalent to an average of 691.2
from 2006 until 2016, assuming the daily trend of MWh/day. This is only between 5 and 7 percent of the
consumption is similar. The average annual growth day peak load. Covering the daily peak load using solar
rate between 2008 and 2014 is estimated to be PV would supply around 14 percent of the total energy
around 8 percent (see Figure 2). The resulting load demand by 2020, compared to the national target of
curve for 2016 is shown in Figure 8. 12 percent using all sorts of RE technologies. It is true
that solar PV is only one part of the plan described in
the NREAP. However, it has the lowest LCOE and the
shortest payback period among other RE technologies
(LCEC, 2016b).
4000
3900
3800
3700
3600
3500
3400
3300
3200
3100
(MW)
3000
2900
2800
2700
2600
2500
2400
2300
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hours
June January
Figure 8
Daily load curve for Lebanon in 2016
een 5 and 7 percent of the day peak load. By covering daily peak-load using
upply around 14 percent of the total energy demand by 2020, compared to the
12 percent using all sorts of RE technologies. It is true that solar PV is only Assessing Solar PV’s Potential in Lebanon / 15
n described in the NREAP. However, it has the lowest LCOE and the shortest
mong other RE technologies (LCEC, 2016b).
ƵƌĐĞƐĂŶĚ&ĞĂƐŝďŝůŝƚLJ
4.2 Resources and Feasibility Table 4
The two factors that are the most important and critical
that are the in
most Area requirements for installing solar PV farms
the important and critical
case of Lebanon for theindeployment
the case ofofLebanon
large- for the
ge-scale solarscale solar are
PV farms PV farms are land availability
land availability and cost. and cost. PARAMETERS JANUARY JUNE
To estimate land requirements, the following formula
requirements,isthe following formula Energy Yield (MWh) 10,173 13,119
used (CEDRO, 2016):is used (CEDRO, 2016):
GHI (kWh/m2/day) 2.4485 7.2034
𝐸𝐸 = 𝐴𝐴 × 𝜀𝜀 × 𝐼𝐼 × 𝑃𝑃𝑃𝑃 (4) (4)
Performance Ratio 0.85 0.85
2
tual energy yield
Where(MWh), A isactual
E is the the PVenergy
activeyield
area (m ), 𝜀𝜀 isAthe
(MWh), PV conversionEfficiency
is the 0.16 0.16
PV active area (m 2
), Є is the PV conversion efficiency
2
is the average daily horizontal solar irradiation (MWh/m ), and PR is theArea (km2)
(percent), I is the average daily horizontal solar 30.55 13.38
o accounting for losses and
irradiation deviation
(MWh/m 2 fromPR
), and standard testing conditions.
is the performance ratio
accounting for losses and deviation from standard
testing conditions.
f daily total horizontal solar insolation for the months of January and June in Assuming installed plants have efficiency of 21percent,
the required area would significantly decrease to 25.7
in Lebanon are Average
shown values
in tableof3 daily
belowtotal horizontal
(UNDP, 2005).solar
The insolation
different regions
km2 in January and 11.26 km2 for June, for the same
for the months of January and June in different regions
ues of insolation. Accordingly, an average value of the(UNDP,
different regions wasenergy yield.
in Lebanon are shown in Table 3 below 2005).
ations. The different regions show similar values of insolation. The required capacity of the solar farm is calculated
Accordingly, an average value of the different regions by dividing the actual energy yield by the number of
was
tal insolation values for used in the calculations.
Lebanon daylight hours. To cover the winter day peak load, the
day Beirut TheBayssour required capacity is 1,018 MW, while that of summer
efficiencyQartaba Zahleto beCedars
factor is taken 16 percentAverage
as the
2,388 average
2,504 2,472 2,522crystalline
2,357 solar 2,449 time is around 937 MW. Since the capacity needed
value of commercial panels,
for the winter case is greater, it will be considered
which have the highest global market share with
as the target for the following discussion. Therefore,
around 90 percent (IEA, 2014). However, efficiency is
this capacity can cover even more than the day peak
expected to further improve and contribute in a major
load during summer and contribute to the base load
way to less prices and more yield per area (Gielen et
generation. This is approximately an excess of 1,133
al., 2016). The16
best achieved commercial efficiency of
MWh, which is enough to cover around 3 percent of the
crystalline solar panels currently exceeds 21 percent
baseload during the day in June.
(IEA, 2014), while its global average is expected
to reach 21 percent by 2025 (Gielen et al., 2016).
According to IEA (2014), a well-designed PV plant
can achieve a yearly average PR of 80 to 90 percent.
Therefore, we will assume a yearly average of 85
percent. This is in line with the tested value reported
by LCEC (2016b) for the BRSS plant during the month
of April, which is 88 percent. Parameters and results
for 2016 are given in Table 4.
Table 3
Global horizontal insolation values for Lebanon (Wh/m2/day)
5. DISCUSSION
Figure 9
Filtered potential
land areas for solar
PV farms in Lebanon
18 / Working Paper
In this context, Assi et al. (2016) propose integrating (Figure 10) with a recent example from the United Arab
solar PV panels with existing thermal power plants, Emirates with a record bid of 2.42 USC/kWh submitted
which has already been implemented in the Zahrani to build a 365 MW plant in Abu Dhabi (Bloomberg,
power plant, while taking as case studies the Zouk 2016a).
and Jiyeh power plants. This would lead to increased
The LCOE for solar PV systems has already reached
generating capacity, greener power plants, cheap
below retail electricity prices in several countries such
unused land made available for use, and downsized
as Australia, Denmark, Italy and Spain, providing
storage cost (Assi et al., 2016).
additional incentives for consumers to build
5.2 Future Cost Reductions decentralized systems and consume the electricity
Solar systems have encountered a big revolution in the they generate (IEA, 2014). The cost of solar PV is
past years with the global installed capacity increasing getting closer to the cost of electricity generation
from 40 GW in 2010 to 227 GW in 2015 (Gielen et al., from traditional sources, particularly due to the
2016). This is mainly due to the plummeting costs strict air pollution standards on new coal plants, the
of these systems. These costs have reduced by more increasing safety standards on new nuclear plants,
than half in the past years, with instances reaching and the varying prices of natural gas for new gas
as low as 1200 USD/kW in India, and are further plants (IEA, 2014). Comparing to coal and gas-fired
expected to fall in the coming few years by more than power plants, its global weighted average LCOE range
50 percent. The projected decline can be attributed is between 5 and 10 USC/kWh (Gielen et al., 2016).
to a combination of technological innovation driven For instance, the previous record low bid of 2.99 USC/
by global competition, economies of scale, and the kWh in Dubai is even a third less than the cost of
learning curve (IEA, 2014). Moreover, solar systems electricity generation by a coal plant commissioned
accounted for 20 percent of the total installed capacity recently there (Bloomberg, 2016b). Therefore, with the
built in 2015 with a typical cost ranging between 6 projected price fall of solar PV for 2025, it is expected
and 10 USC/kWh, while the weighted average LCOE to become the cheapest form of power generation.
for solar PV was 13 USC/kWh in 2015 (Gielen et al.,
2016). However, further lower prices can be found
Figure 10 Subsidized Price (USC per kWh) Unsubsidized Price (USC per kWh)
5.3 Financing Solar PV Farms in Lebanon al., 2015). The latter system is the most favorable
Looking at the economics of solar PV, project costs system as it encourages competition resulting in cost
are not the only variable, but it also depends on reduction via market-based pricing. However, the risk
the business model for financing and recovering emerges with unsustainable price bids. PPA is part of
the revenues. Despite the decreasing cost of solar any BOT, BOO or BOOT model for power generation
PV systems, financial incentives are still needed to projects to be implemented by an IPP (Beshara, 2012).
support the deployment of this technology, not only Long-term PPAs have a key role in making RE projects
because it is capital intensive, but also because successful in terms of financing and profitability, as
it is more sensitive to investment risks due to the it secures long-term revenue stream for a BOT or a
technology and resource uncertainties and the lack concession project for an IPP from the sale of energy
of a long-term price visibility (Abdmouleh et al., produced, and provides guarantees that this energy
2015; IEA, 2014). The risk is highlighted by the high is needed by the purchaser (Beshara, 2012). In
discount rate which can overburden investments practical terms, if RE projects are to be done through
unnecessarily as it may not reflect the actual project competitive bidding, the request for proposals should
risk (Sgouridis et al., 2016). Also, comparing to include a PPA model as proposed by the purchaser
conventional methods of energy generation, RE (Beshara, 2012).
projects are usually smaller in scale thus could not
Looking at countries around Lebanon, the model
always benefit from economies of scale (Abdmouleh
frequently used for building utility-scale solar
et al., 2015). However, models such as build-operate-
plants is a partnership between the public and
transfer (BOT) or build-own-operate (BOO) can
private sectors. PPAs with tendering process is
decrease the chosen discount rate to reflect the true
employed for privately-owned plants, in addition to
project risk at the utility scale (Sgouridis et al., 2016).
international loans or grants for state-owned plants
Funding can be obtained either from the public and decentralized systems. For instance, the latest
sector or the private sector. Public sector funds projects in the UAE were based on long-term PPAs
are provided by the governments to invest in RE (Bloomberg, 2016b), while low borrowing costs
projects either through grants or low-interest loans. supported the low record bid (Bloomberg, 2016a).
The main facilitators of investments in solar PV Jordan, with its ambitious targets for renewables,
are governments providing low-interest loans and is also expanding its RE capacity by PPAs through
available lands. Private sector funds, on the other IPP tendering which is receiving low bids. By
hand, are provided from banks or other financial September 2014, the Jordan Ministry of Energy and
institutions. These play an important role in the long- Mineral Resources has signed 12 agreements to
term commercialization of RE. develop solar power projects (Calabrese, 2015). For
instance, the largest solar plant in Jordan, Shams
A common model used for rooftop applications is
Ma’an, is a privately developed and owned plant,
leasing where households can install the systems
which has signed a 20-year PPA with the Jordanian
without upfront costs, but are required to pay a
electricity authority (ShamsMaan, 2016). Accordingly,
monthly fee cheaper than the electricity tariff of the
Jordan has received loans from the European
grid (Gielen et al., 2016). However, this model is losing
Bank for Reconstruction and Development (EBRD),
ground to long-term loans (Gielen et al., 2016). Other
which has financed 4 out of 12 solar PV plants in
incentives include the widespread policies of FiT and
Jordan (Zgheib, 2016). Other funders include the
net-metering, which are currently being scrutinized
International Finance Corporation (IFC), the Dutch
upon the reduced costs and increased deployment of
Development Bank, and the Europe Arab Bank (IFC,
PV systems (IEA, 2014).
2016). Jordan has also implemented the net-metering
For utility-scale RE projects, the most common model policy to incentivize rooftop applications, and has
is the power purchase agreement (PPA). A PPA is a received funds from the French Development Agency
legal contract between two parties, a power purchaser, to support the transmission capacity (MESIA, 2016).
often a state-owned utility, and a selling privately- In Morocco, the largest solar power plant in the
owned electricity producer, usually lasting between 15 world under construction, has received funding from
and 30 years (Beshara, 2012). The agreement includes the African Development Bank, Climate Investment
provisions for start and termination dates, capacity Fund, and the World Bank (Calabrese, 2015) for
and output, operations and metering, and the rates for building CSP facilities reaching 510 MW in 3 stages,
electricity (Beshara, 2012). Mechanisms to regulate while it initiated an IPP-based program for PV
this can be done mainly through FiT or a tendering facilities totaling 170 MW (MESIA, 2016). Egypt, on
process, i.e., competitive bidding (Abdmouleh et the other hand, has resorted to the FiT mechanism
20 / Working Paper
to support RE projects, while also receiving funds Technically, there are several solutions for managing
from multilateral financial institutions including the the intermittency of solar power and other variable
IFC, the EBRD, and the Overseas Private Investment renewable energies. These include the creation
Corporation (OPIC) (MESIA, 2016). of flexible mix for electricity generation, grid
interconnections, demand-side management,
The legal framework in Lebanon, including the
electricity storage, oversizing generation capacity,
Electricity Sector Policy Paper and law 462 and its
forecasting the weather, and using non-variable
amendments, supports the inclusion of the private
energy sources such as hydropower to fill temporary
sector through the IPP and PPA models. This allows
gaps in supply. Reliable daily and seasonal weather
Lebanon to be ready for public-private partnerships to
forecasting can reduce the cost of operating solar PV
increase the solar power capacity through utility-scale
by $0.01-0.02/kWh (Delucchi and Jacobson, 2011),
projects. However, no permits for IPPs have been given
providing an opportunity to optimize the energy
by the government yet to build utility-scale projects,
system (Abdullah et al., 2015). Interconnections of
as per the process described earlier. More recently
geographically dispersed facilities allow smoothing
though, a call for expression of interest was launched
out the effects of variability of solar PV over large
by the MoEW to build several solar farms by the private
areas due to passing clouds, thus enabling flexible
sector with a total of 120 to 180 MW, in addition to
sharing of power generation (Delucchi and Jacobson,
rooftop systems on ten public buildings (El Khoury,
2011). It is also important to avoid setting up high
2016). Moreover, in support of decentralized PV
solar PV capacities in areas with low power demand
projects, NEEREA loans are offered by most commercial
and relatively weak distribution grids where variability
banks in collaboration with BDL covering 100 percent
may cause voltage problems, create reverse power
of the proposed system price with low interest rate
flows, and lead to large grid congestions (IEA,
for up to 14 years. However, a lack of awareness of
2014). Therefore, in addition to interconnections, a
the existence of such supporting schemes and of the
smart grid and grid codes would help drive inverters
falling prices of PV systems is evident as per a survey
to automatically provide voltage control and
by Greenpeace (2016), showing that more than 65
frequency regulation (IEA, 2014). The network grid
percent of respondents do not know of the existence of
in Lebanon already lacks grid codes and sufficient
the NEEREA scheme and the net-metering policy, while
interconnections, but there are current works
60 percent attributed their unwillingness to install PV
and plans to implement it in scope of expanding
systems to their high cost.
renewable energy generation (LCEC, 2016b). Grid
5.4 Dealing with Intermittency proximity was also considered when setting up the
Our analysis considers generation during daylight potential locations map in Figure 9, making these
hours which aims to cover the energy peak load during locations close to urban settlements and electricity
these times, and therefore does not include the substations and in line with the existing grid network
possibility of storage for night generation. However, to reduce the transportation cost and keep the
even during the day and throughout the seasons, possibility for storage.
solar energy may still encounter intermittency due to
The MENA region provides an advantage for employing
weather conditions such as cloud cover or snow. In our
solar PV to supply the peak load given the natural
analysis, we presented estimations for the required
overlap of power demand for cooling and the solar
capacity for both winter and summer seasons, hence
power supply when the sun is out (Abdullah et al.,
accounting for different solar irradiation levels and
2015). The complementary nature of renewable
total peak load required. Accordingly, we considered
energy sources is another advantage which can be
the maximum of these two, i.e., the capacity required
considered. For instance, when the sun is not shining,
to cover the load in the winter. In addition, EDL
the wind is often blowing, and vice versa. Therefore,
currently provides less than 70 percent of the energy
solar PV plants can be complemented with existing
demand with blackouts reaching 8 hours on average.
hydropower and wind power facilities set to be
Thus, any additional source of generation would be
implemented in Lebanon.
considered a plus at the moment, even with prospects
of intermittency and variability, rather than being a
waste or a destabilizer.
Assessing Solar PV’s Potential in Lebanon / 21
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24 / Working Paper
ABOUT
THE PROGRAM
Energy Policy and Security in the Middle East Program
The Energy Policy and Security in the Middle East Program at the Issam Fares Institute
for Public Policy and International Affairs was launched in 2016 as a Middle East-based,
interdisciplinary, platform to examine, inform and impact energy and security policies,
regionally and globally. The Program closely monitors the challenges and opportunities of
the shift towards alternative energy sources with focus on nuclear power and the Middle East.
The Program has been established with a seed grant support from the John D. and Catherine
T. MacArthur Foundation.
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