Is Lebanon's new approach to electricity distribution viable?

The government’s electricity sector policy, approved in July 2026, proposes a new model that would divide Lebanon into several distribution zones, each managed by a private operator under long-term contracts while the distribution network itself remains publicly owned. Rather than privatizing Electricité du Liban (EDL), the proposal envisions a public-private partnership in which private companies would operate, maintain, invest in, and collect revenues from the network under the supervision of the Electricity Regulatory Authority.

Speaking to The Beiruter, Jessica Obeid, Founding Partner of New Energy Consult, said the proposal represents an important opportunity to move beyond the temporary fixes that have characterized Lebanon’s electricity sector for more than three decades. However, she stressed that the model’s success will depend on sound market design, regulatory reform, and realistic technical planning.

Moving beyond temporary solutions

According to Obeid, Lebanon has spent years relying on short-term measures instead of implementing a sustainable electricity strategy. From private generators to emergency fuel arrangements and the rapid expansion of decentralized rooftop solar systems, many solutions have helped alleviate immediate shortages but have not resolved the structural weaknesses of the sector.

She argued that the country now requires a long-term framework capable of attracting investment while improving operational efficiency. At the same time, Lebanon continues to face major obstacles, including its prolonged financial crisis, regional security risks, and the limited appetite of international investors to commit capital in an unstable market.

The challenge is attracting investment in a market facing repeated instability.

These realities, she noted, mean that any reform proposal must be commercially viable as well as technically feasible if it is to succeed.

Distribution reform is different from decentralizing generation

Obeid drew a clear distinction between decentralizing electricity distribution and fragmenting electricity generation.

She explained that assigning private operators to manage regional distribution networks could be workable if properly designed. However, extending the same regional approach to electricity generation would create significant technical and financial challenges.

Lebanon’s relatively small electricity market, she said, cannot efficiently support numerous independent generating systems across different regions. Instead, she argued that the country would ultimately be better served by a limited number of large-scale generation companies capable of supplying the national grid.

Regional electricity generation is not technically or financially viable for Lebanon.

In her assessment, Lebanon could sustainably accommodate a maximum of two to three electricity generation companies and approximately three to five distribution companies, providing enough market competition while maintaining commercial viability for investors.

Why the Zahle model cannot simply be replicated

The proposed distribution framework has frequently been compared to the experience of Electricity of Zahle, which became known for providing nearly continuous electricity supply within its concession area. Obeid cautioned against assuming that the Zahle experience can simply be replicated nationwide.

She explained that the model succeeded under a unique combination of circumstances, including access to a large backup generator, strong political support, and relatively inexpensive electricity purchased from EDL. These conditions allowed the company to maintain 24-hour electricity supply in ways that may not be easily reproduced elsewhere.

We can learn from Zahle, but we cannot simply replicate it nationwide.

While elements of the operational model, such as assigning a single operator responsibility for distribution, maintenance, investment, and revenue collection, may offer useful lessons, she stressed that they should not be viewed as a comprehensive blueprint for reforming Lebanon’s entire electricity sector.

Public ownership with private management

Obeid also distinguished between privatization and public-private partnerships (PPP), arguing that the two concepts are often confused in public debate.

She explained that full privatization generally involves selling state-owned assets to private companies, an approach that has not necessarily improved electricity services in countries suffering from weak governance or corruption.

Privatization does not automatically mean better service.

Instead, she argued that Lebanon should preserve public ownership of electricity assets while allowing private companies to operate specific parts of the sector through transparent, competitive contracts.

Under such a model, different companies could be responsible for electricity generation and distribution, reducing concentration of market power. She stressed that contractual safeguards should prevent the same company from controlling both activities in ways that could create monopolistic practices.

Strong regulatory oversight, she added, remains essential to ensure accountability, protect consumers, and maintain service quality.

The state should regulate, while the private sector operates efficiently.

Preparing for the future energy mix

Looking ahead, Obeid said Lebanon must also prepare for a gradual transition away from heavy fuel oil and diesel, which remain among the most expensive and environmentally damaging fuels used for electricity generation.

The country needs to transition toward cleaner energy sources.

Although natural gas currently faces price volatility due to international market conditions, she said it remains the dominant fuel for electricity generation globally and should eventually become Lebanon’s primary fuel source.

This transition further reinforces the need for a limited number of larger generation facilities rather than numerous small regional power plants, which would be difficult to supply with natural gas infrastructure.

At the same time, she believed municipalities that already operate generators should rapidly deploy solar-powered mini-grids integrated with existing systems. Such projects could significantly reduce diesel consumption, lower electricity costs for consumers, and provide a cleaner transitional solution while broader sector reforms are implemented.

According to Obeid, these smaller renewable energy projects can be developed within months rather than years and should therefore receive immediate government attention. “We do not need to wait years for renewable solutions,” she asserted.

Reform package extends beyond distribution

The proposed distribution model forms part of a broader restructuring of Lebanon’s electricity sector.

Under the government’s policy, EDL would eventually be reorganized by separating electricity generation, transmission, and distribution activities. Transmission infrastructure would remain fully owned by the state because of its strategic importance, while electricity generation would gradually open to independent power producers operating under long-term contracts.

Meanwhile, the government and the Electricity Regulatory Authority (ERA) are preparing the tender documents, defining distribution zones, and establishing the contractual framework for private operators. The preparatory phase is expected to last six months before tenders are launched, followed by another six months to bring the new operational model into effect.

The proposed system would require operators to assume responsibility for maintenance, investment, technical and non-technical losses, billing, customer service, and network performance, while the state retains ownership of the assets and oversees implementation through regulatory supervision and measurable performance indicators.

Nevertheless, lasting investment ultimately depends on broader financial recovery, consistent regulation, institutional reforms, and a stable investment environment capable of giving both domestic and international investors confidence in Lebanon’s electricity future.