The Dual Problem of Energy Security and Rupee Depreciation


BY Eng. Parakrama Jayasinghe
Bio Energy Association of Sri Lanka
E Mail:

The suppliers of emergency power, now euphemistically called supplementary power, must be rubbing their hands in glee. At the recent budget debate Minster of Power and Renewable Energy announced that he would not allow any increase in the consumer tariff rates. One wonders how the additional cost of generation from the thermal power would be met by the CEB. Even though it is not reflected in the monthly electricity bill such additional expenditure has to be paid for by the public.

The Future Energy Policy

Sri Lanka is supposed to have embarked on a policy to increase the contribution of renewable and indigenous energy in the coming years and our signing and ratification of the Paris Agreement of the UNFCCC is a further commitment to follow this policy. Even though we achieved the first target of 10% contribution by non-conventional renewable energy (NCRE) ahead of time in 2015. However, the drive towards achieving the next target of 20% contribution by NCRE sources by 2020 has been stalled due to some ambiguities in the Sri Lanka Electricity Act No 20 of 2013, which has been pounced upon by the Ceylon Electricity Board to stifle the development of renewable energy based power generation since December 2015. This did not hinder the progress of the development of the renewable energy sector until end of December 2015 .. The right thinking engineers of the CEB who understood the value of the RE development for the country, did not pose any problems based on this issue. These were, based on a pre-declared technology based cost reflective tariff structure, published by a cabinet approved committee of experts including the CEB. The country saved over US $ 200 Million annually by the implementation of these projects by the private sector without any burden on the Treasury. (See table 1)

Citing a minor lacunae in the Electricity Act, interpreted in a most narrow minded manner, without any consideration of the broader national interests, has been used by the CEB to refuse the signing of new SPPAs for Bio Mass, Mini Hydro and waste to energy projects since this date. The possible lack of clarity in the relevant clauses in the Electricity Act which is used to support such arguments has been recognized and the Ministry of Power and Renewable Energy has decided to amend the Act and pass such amendment through the parliament. But this process is yet to bear fruit with no sense of urgency, without any regard for its importance on both the economy and the environment..

The singular lack of success of Solar and Wind Tenders

The attempt to adopt the tender procedure for development of the wind and solar parks have been singularly ineffective. Only a few projects have been initiated in the wind sector. A tender for 60 solar parks of 1 MW each called for over two years ago has resulted in only a few projects even being initiated. A subsequent tender calling for 90 projects of 1 MW attracted many investors. But there is no evidence of any been commenced to date due to the un-viability of the lowest prices quoted due to changes in the party rate in the time lost due to inaction by CEB in making the award, and none appears to have been awarded.

The wind and solar parks are possible sectors where a properly constituted tender process with due recognition of the many challenges facing Sri Lanka, including the very volatile parity rate, could prove successful as demonstrated in many countries. However, the lack of recognition of the viable pricing and essential willing support and facilitation by the CEB to assist the selected developers, appears to be a major drawback for the implementation of a proper tender process. A clear understanding of the viable bottom price should be declared at the tender stage, as much as the acceptable ceiling price. Any offers below which are quite suspect, both on the viability and the bona fides of the tenderer, and should never be awarded. Due to the significant time gap between the time of tender and the time required for the developer to import the essential equipment, some adjustment of tariff should be allowed on the tariff offered recognizing the impact of the parity rate on initial capital cost largely based on imported components. This is a reality which cannot be ignored, if the tender process is to prove successful, in the absence of a dollar rated component in the Feed in Tariff.

It is also felt that the scale of 1 MW, which may attract many potential tenders, may not be the viable size for the solar projects , as the procedural and approval process is quite complex, irrespective of the size of the project. The offers invited for development of solar parks of capacity 2- 5 MW initiated by the former Minster of Power and Renewable Energy attracted many developers. But nothing has happened over the last four years even though the SLSEA charged substantial amounts of money from the developers. Considering the urgency of the present energy needs, a few larger projects which can be fast tracked with proper facilitation, such as the confirmed grid connection and well constituted tender process is the need of the day. The hugely successful Surya Bala Sangraamaya" is the means by which the smaller solar projects can be developed, viability of which is well proven. Better facilitation by the CEB can ensure doubling or trebling the rate of growth of this vibrant sector in a short time. The target of 1000 MW of Roof Top solar by 2025 can easily be achieved by 2020 if such visible and committed facilitation is provided by the CEB. However, the undeniable differences between the roof top PV sector and the Solar Parks, must be clearly understood. The essential difference is that the Roof Top PV projects are funded and developed by the consumers themselves and the financial imperatives are distinctly different.

However, the progress of this sector which is the only means by which additional energy has been pumped in to the grid is in imminent danger of collapse. The Minister no doubt misled by the CEB is determined to lower the fixed tariff offered for the roof top solar sector. We can only hope that saner council will prevail with the current crisis. Which can be mitigated to some extent only by the roof top solar projects in the short term. In the mean while the following scenario needs close scrutiny if we are to hope for some measure of relief in the coming years.

It is unnecessary to repeat that no coal plants can be implemented for many years, even if the horrendous environmental and health disaster at Norochchcolai is ignored. The much talked about LNG plant if implemented would only cause greater losses to the CEB and the country as there is no evidence of the supply of the LNG is still in doubt.

The Projects Blocked

However, over the past four years many projects have been stalled at various stages of development and Sri Lanka has not only fallen behind its declared target of the contribution by NCRE , but also incurred considerable expenditure by not implementing many projects which were already in the pipeline of the approval process. The estimated loss of savings of FE is shown in table 2­.

Note * Based on current 5 MW per month growth rate.

Note ** including the tenders called for 150 Nos 1 MW solar parks by The CEB which do not seem to be moving

Source : SLSEA

The continuing pressure on the Sri Lanka Rupee and drastic depreciation is has emerged as the most pressing problem to be solved urgently. At the same time there is the worry about the country’s ability to meet the emerging energy demands in the coming years without further deterioration of this situation by continued dependence on imported fossil fuels, to prevent any hindrance on the development plans.

Urgent Steps Needed

As such the Ministry should issue instructions to the CEB to proceed with the approvals of those NCRE projects already approved or in the process of being approved, pending the concurrence of the CEB, until such time the proposed amendment to the Electricity Act is passed by the parliament . In this regards the three solid waste based waste to energy projects have been allowed to proceed based on declared tariff approved by the cabinet.

The same procedure can be adopted in the case of other NCRE technologies where open tendering is not practically possible, such as Bio Mass and Mini Hydro projects , as they are not based on any publicly owned resources.

Demand Side Management Nega Watts Vs Mega Watts

A well proven and most economical means of meeting the increasing demand for electrical energy is the Energy Efficiency and Conservation measures or the Demand Side Management also called "Nega Watts"

Nega Watts is a better proposition than Mega Watts. An investment on DSM of 1-2 % of the cost of generation is estimated to yield a 25 % reduction in consumption The capital required for instituting such measures which can be implemented by the consumers themselves , is only a minor fraction of the cost of installing the additional power generation of equivalent scale , by any technology. The efficacy of this proposition has been well proven by the Sri Lanka Sustainable Energy Authority by the promotion of the adoption of CFL bulbs to replace the Incandescent bulbs some years ago. Their records show that with Sri Lanka achieving 65 % penetration of CFL bulbs the CEN saved 450 GWH of energy and the need for 300 MW of generation capacity.

While the use of CFL bulbs is now wide spread , the advent of the LED bulbs which a vey much more energy efficient and much less harmful environmentally could provide the means of achieving further reductions of similar scale. The potential saving in the industries by the use of motors of higher efficiencies and other energy savings could be much more significant,

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