Power problems

To an exasperated public it sometimes feels that plans and policies are made in Sri Lanka only to be broken. Perhaps the best example of this is the power sector where the regulator believes failure to implement generation plans has cost the Government over Rs. 50 billion and remains one of the biggest challenges to attracting investment and developing the economy overall.

In its latest report the Public Utilities Commission of Sri Lanka (PUCSL) has estimated a financial loss of Rs. 50.6 billion due to the delay in implementing planned power plants and has urged authorities to step up as a matter of national importance.

The assessment and recommendations are contained in PUCSL’s report which aims to identify any prospective delays in the plant implementation schedule of the Least Cost Long-Term Generation Expansion Plan 2018-2037 approved and attempts to forecast the financial implications and economic consequences of such delays. Over 20 projects aiming at generation through thermal and renewable means are faced with delays, it added.

The report estimates total expected financial loss due to implementation delays of the 2018-2020 plant schedule in the long-term generation expansion plan is Rs. 50.62 billion. To make matters worse, the financial loss due to any further delay beyond what is forecasted in the previous section will cost Rs. 3.43 billion for each month, the PUCSL has said, in a dire warning to the whole country.

Given the scale of financial losses that can be expected and prospective impact this is going to have on the national economy, the PUCSL has recommended expediting the procurement of the listed power plants in accordance with an approved schedule as a matter of national importance.

It said that these financial losses or cost overrun figures are merely the primary outcomes of implementation delays and the total cost, when tallied up, could well be much more. Repeated failure to implement planned power plants, which has been an endemic problem in Sri Lanka for decades, have resulted in serious problems that have plagued the electricity sector and seriously hampered its progress.

Cost overruns and load shedding are the most prominent and direct consequences while the impact of these two factors on the economy of Sri Lanka and its competitiveness is secondary consequences. The cost overruns happen because of the expensive emergency power procurement and over dispatch of existing expensive power plants. The financial loss due to non-implementation or delay of the approved power plants over the last 20 years is enormous and the economic impact of load shedding and high prices is much bigger.

The power sector continues to be remarkably important and extraordinarily complicated. Sri Lanka is still struggling to find the right energy mix, whether it is coal, LNG or renewables, and matching them with affordable finance options. Multiple LNG plants have been proposed without considering that LNG too is a finite resource and it is not economically feasible to extract Sri Lanka’s LNG resources.

Internal issues have also been rife with the Ceylon Electricity Board (CEB) and the PUCSL often at loggerheads. A top government minister recently slammed the CEB for refusing to sit on tender boards but CEB officials contend that Government decision making is slow, fragmented and contradictory.

What is obvious is the power sector is in a sorry state of affairs and needs immediate attention to avert a crisis. If a power crisis is to materialise next year, as warned by experts, all parties will find public anger hard to bear.