Disclaimer: The Lebanon sections of this article are based on data collected from October 2023 to July 2024, reflecting the MSME landscape and stakeholder perspectives up to that time. The Sudan sections are based on data collected between October 2023 and January 2024 and historical data on the energy sector. The information contained in this article does not fully reflect the impact of recent conflict-related destruction and displacement in both countries.

Lebanon and Sudan are both unprepared to face the potential negative impacts of climate change, lacking the necessary institutional structures and financial resources to adapt. ​​Both countries’ contribution to global greenhouse gas emissions is negligible and, on a per capita basis, both emit significantly less than the global and regional average.

Amid the urgency to decrease emissions and combat climate change, renewable energy presents a major economic and social opportunity, particularly in a region that is endowed with significant wind and solar potential. Lebanon and Sudan have recently witnessed an increase in renewable energy adoption, however in both cases it was driven more by necessity than deliberate policy decisions. As both countries are net importers of energy, renewable energy could offer several positive contributions to their economies.

Energy in the Context of Crises

Lebanon’s already ailing power sector deteriorated as the 2019 financial crisis progressed. EDL, the national utility, has always suffered from high production costs owing to the use of cost inefficient and highly polluting heavy fuel oil (HFO). The country’s power sector is characterized by a high level of non-technical losses resulting from electricity theft, in addition to unpaid and uncollected bills, according to Ayat (2021). 

Furthermore, Lebanon’s power sector is undermined by poor governance, mismanagement, and corruption. These have contributed to a dysfunctional electricity sector characterized by political capture and low reliability.

An informal distributed generator sector has emerged from the supply gap left by the state-owned utility. Commercial generator owners exert influence through forging strong connections with local authorities. According to Ahmad (2020), vested interests in Lebanon’s lucrative generator and fuel economy contribute to entrenching Lebanon’s oil dependency, whereby fuel importers have political leverage at the national level.

At the regulatory level, projects with a generation capacity higher than 1.5 MW must be vetted by the Minister of Energy and Water and voted on by the Council of Ministers.  Despite the signing of several Power Purchase Agreements (PPAs) by the Ministry of Electricity and Water (MoEW), the financial and political crises have lengthened the tendering process and raised doubts about the PPA’s bankability.

In Sudan, the secession of South Sudan in 2011 introduced a balance of payments crisis, a severe trade deficit, and an economic recession. Sudan’s electricity sector is characterized by limited access, with clear historical and regional differences in grid coverage, and reliability issues.

To encourage private sector participation in infrastructure development, the government introduced the National Investment Act in 2013 and initiated a Public-Private Partnerships Act in 2015. Despite these efforts, the sector remains highly dependent on budget allocations from the Ministry of Finance and Economic Planning for investments, maintenance, and grid expansion according to Usui, K. et al (2019).

Investment in the power sector is almost non-existent due to the ambiguity of the procedures for private sector participation, the lack of a clear structure to govern PPAs, and volatilities in the macro economy. In some areas, Sudan’s power sector performs well, with a 90% bill collection rate due to the use of prepayment meters. Transmission and distribution losses are relatively low and generally in line with regional averages.

Transition as a Consequence of Crises

In Lebanon, the removal of subsidies in September 2021 led to increases in fuel prices for electricity generation, which increased the cost of electricity produced from diesel generators. As a consequence, households and businesses resorted to solar energy to salvage their energy security.

In the absence of bank loans or governmental support, many enterprise owners relied on personal resources to finance these projects. According to a USAID solar market assessment, the solar energy sector saw a 70% increase in employment in 2022 compared to 2020. In December 2023, a law on distributed renewable energy was ratified by Parliament.

The law provides opportunities for private sector investment in renewable energy, allowing the sale of electricity directly to creditworthy clients using Power Purchase Agreements. However, failure to appoint members of the National Electricity Regulatory Authority (NERA) remains one of the main obstacles to the successful implementation of the law.

Key informant interviews conducted as part of this research showed that international organizations and donors have played a prominent role in Lebanon’s reactive transition through setting aside funds for expanding the deployment of renewable energy technologies and working with the Lebanese University and Technical and Vocational Education and Training (TVET) institutions to update their curricula according to the latest solar PV standards.

Furthermore, municipalities have emerged as key players in Lebanon’s decentralized energy transition. Municipal governments acquired funding for their renewable energy projects through donations from their diaspora, as well as grants from international donors.

In Sudan, the limited coverage of the national grid has pushed local populations and international development organizations to explore alternative options, according to an interview conducted with an energy expert. Development funding directed towards agricultural development includes solar-powered pumps and off-grid solar systems for food processing.

Moreover, the solar PV sector boomed after the policy changes instituted by the transitional government in 2020, particularly fossil fuel subsidy reform. Enterprises operating in the solar PV sector saw an increase in sales, particularly in urban areas, where many households were looking for a safer, longer-term, and perhaps cheaper, alternatives to diesel generators.

Despite the rise in solar adoption, it did not significantly benefit low-income households or lead to a substantial increase in large off-grid systems, as envisioned in the government's 2031 development plan, according to an interview conducted with an energy expert.

Conclusion

The high dependence on imported fuel for power generation in both Lebanon and Sudan, whether for distributed or centralized systems, has increased vulnerability to fluctuations in global energy prices, negatively impacting energy security.

While both Lebanon and Sudan experienced a spontaneous transition in response to compounded crises, a long-term, sustainable, and equitable transition can only take place through deliberate government policy. According to the World Bank’s Lebanon Country Climate and Development Report, reforming the energy sector is crucial for the recovery process.

An adequate regulatory framework and functional grid are necessary requirements in order to take advantage of the energy transition underway in both countries. This would need to be supplemented by broader reforms and interventions, particularly regarding the labor market, affordable finance for renewable energy projects, and conducive regulations for broader uptake.