The war in the Strait of Hormuz and the resulting disruption to global supply chains has raised concerns in Lebanon over potential fuel import bottlenecks and their impact on domestic electricity supply.

LIMS argues, however, that Lebanon is not directly exposed to these disruptions, as the bulk of its fuel imports originate from the Mediterranean basin rather than the Strait of Hormuz. As such, access to international fuel markets remains intact. The risk to electricity supply instead stems not from physical shortages of fuel, but from the inability of Électricité du Liban (EDL) to finance imports.

According to LIMS, the sector’s financial imbalance reflects two structural weaknesses: an outdated pricing regime and persistently weak collection rates. Tariffs, at around 27 cents per kilowatt-hour, were previously closer to cost recovery but have become increasingly misaligned with global oil price increase. This has left EDL effectively selling electricity below cost, generating chronic operating losses and limiting its ability to finance fuel purchases. At the same time, more than 40 per cent of electricity generated is not collected, further eroding revenues and deepening the financing gap. Together, underpricing and weak collection have created a structural deficit that cannot be addressed within the current institutional framework.

LIMS therefore calls for a coordinated reform package. The first element would be the introduction of a flexible pricing mechanism indexed to international oil prices, broadly modelled on domestic fuel pricing formulas. The second would sell electricity wholesale to private distribution entities. These entities would then be required to resell electricity at retail level and assume the risk of non-collection, thereby strengthening their incentive to reduce losses. Alongside this shift in incentives, greater scope should be given to partnerships with alternative collectors, such as diesel generators, in hard-to-collect areas. Together, these measures would reduce the risk of further supply interruptions.

Beyond financial constraints, however, EDL also faces a structural capacity shortfall and is unable to meet national demand. LIMS argues that expanding EDL generation capacity is neither feasible nor efficient, given that conventional projects can take up to seven years to complete and fiscal resources are limited. Instead, Lebanon should formalise existing decentralised arrangements and strengthen the Electricity Regulatory Authority with the resources and staffing required to license new entrants outside EDL, starting with the regularisation of decent, yet informal operators.

Lebanon’s electricity crisis is not fundamentally logistical, but structural in nature, rooted in pricing distortions, weak revenue collection and institutional fragmentation. Reform efforts, hinge on restoring cost-reflective and flexible tariffs, improving collection, and empowering an independent regulator to oversee transparent and rules-based market entry in the power sector.