Adios coal

Saturday, 22 July 2017 00:05 - - {{hitsCtrl.values.hits}}

The Public Utilities Commission of Sri Lanka (PUCSL), which is the regulator of the Ceylon Electricity Board (CEB), has ruled out coal as a source of power for the next two decades opening up greater space for renewable energy. But timely implementation of the plans is crucial.

Last September, the Government launched a ‘battle for solar energy’ initiative which aims to add 220 megawatts of clean power to the country’s energy grid by 2020, or about 10% of the country’s current daily electricity demand. By 2025, the country hopes to boost its solar power output to 1,000 megawatts to meet fast-growing power needs; but shifting away from coal and other fossil fuel power to renewables will be a challenge. Solar power has the potential to meet 32% of Sri Lanka’s annual power demand of around 10,500 gigawatts – but so far just 0.01% of that potential has been developed, according to the Sri Lanka energy sector development plan for 2015-2025.

Currently about 3% of Sri Lanka’s energy demand is met by renewables such as wind and solar. Hydropower provides about half of the country’s electricity during the wet season, but during the dry season, between August and October, 81% of the island’s power needs are met by fossil fuels, over half of that from coal. The cheapest entry-level home solar panel installation costs over Rs. 200,000 because the materials must be imported and face import duties. Compared to that, even larger users of household power pay only around Rs. 5,000 a month in electricity bills.

For the smallest-scale users of one to 30 units of electricity a month, electricity costs Rs. 7.85 a unit, while large household consumers – those above 180 units – pay Rs. 45 per unit. The potential loss of that subsidy for poor households is one barrier to faster uptake of solar energy. Even though companies have tied up with banks to offer loans and easy payment schemes it could still take families years to break even and they could have repairs before payments are completed. This simply does not make economic sense to families, though possible power cuts might provide some motivation. This is where large solar plants could make more sense.

Cheaper costs for panels, free installation, Government help in maintaining panels, and a higher government payment for solar energy produced for the national grid, are some of the incentives recommended by experts, but it would mean larger allocations of resources than what might be possible for an already fiscally-constrained government.

The world is spending heavily on renewable energy and finding its higher returns are reshaping the direction of the energy industry for decades to come. Renewables provided more bang for the buck last year because the cost of installations and financing declined, says the latest report released by the International Energy Agency (IEA).

A Bloomberg analysis on the report found the capacity of new renewable energy installations coming online surged 40% in five years even though investment in those technologies slid 2% to $ 288 billion. Project finance loans surpassed company balance sheets as the biggest source of capital for renewables last year, the IEA data shows.

Energy should be a platform for sustainable growth and not limited to just narrow decisions based on short-term costs. It could also help the Government’s endangered popularity.