Renewable energy: Is it a solution to Sri Lanka’s power crisis?

By Shailendree Wickrama Adittiya

Power outages have become commonplace in Sri Lanka despite multiple assurances from the Government that sufficient fuel has been purchased for the generation of electricity. In fact, the Public Utilities Commission of Sri Lanka (PUCSL) on Tuesday issued a statement saying there was no need for power interruptions until 27 January.

According to the PUCSL, there were sufficient stocks of fuel to generate electricity for these three days and the statement was issued after the PUCSL decided to reconsider a proposal made by the Ceylon Electricity Board (CEB).

Given the struggle the country is currently facing with regard to power generation, stakeholders of the renewable energy sector came forward yesterday to propose what they believe is the solution to the country’s current energy crisis.

“If we look at the ongoing power crisis, the CEB has more than enough power plants to meet the electricity demand. However, the main problem today is a shortage of capital required by oil and coal power plants, with the exception of renewable energy sources,” Wind Power Developers Association Secretary Manjula Perera said.

He added that, due to the US dollar shortage, renewable energy was the only solution to the power generation issues. There are four types of renewable energy that are commercially viable in Sri Lanka, Perera explained. These are solar, wind, hydro and biomass.

“We have these four sources in abundance for energy generation. We have also shown how during a period of 25 years, from 1996 to today, we have successfully and cheaply generated electricity from these sources,” he added. At present, 426.43 MW are generated from mini hydro, 148.45 MW are generated from wind, 13.08 MW are generated from agricultural and waste-to-energy biomass, and 37.01 MW are generated from Dendro power biomass.

In addition to this, 93.36 MW are generated from ground-mounted solar and 480 MW are generated from rooftop solar.

The total generation from renewable energy sources is 1,198.33 MW and the energy contributed by these non-conventional renewable energy (NCRE) plants is 2,200 GWh. This is 13% of the annual energy contribution. “The CEB has done studies that show where we need to be by 2030. Today, peak electricity demand is 2,600 MW daily. Annual energy requirement is 17,000 GWh,” Perera said, adding that peak demand will rise by 73% to 4,500 MW by 2030, while annual energy requirement will rise by 65% to 28,000 GWh. 

Sri Lanka’s 70% renewable energy goal

The policy decision by the Government to increase renewable energy generation to 70% by 2030 will require at least 4,500 MW added to the system from renewable energy sources.

“During an eight-year period, this addition must be made. CEB has estimated that 3,000 MW from ground and rooftop solar and 1,500 MW from wind and biomass,” Manjula Perera said.

He went on to say that a common question raised by the public is if CEB can generate 70% of the total capacity from renewable energy and if they do, will it be an issue to the CEB system?

“We must remember that when we talk about 70% renewable energy, 40% of this will be generated from large hydro power plants that are already in the system. It is the remaining 30% that will be from wind, solar, mini hydro and biomass,” he explained.

Perera went on to add that longitudinal studies have been carried out by CEB and the Asian Development Bank on NCRE penetration in Sri Lanka. These studies looked at how much renewable energy can be added to the system. He said that these studies show up to 25% can be absorbed with no modifications to the current system.

“Today, even the CEB has recognised the current crisis and accepted that 70% renewable energy by 2030 is a must. They are currently making changes to their generation plan to add this 70% to it,” Perera said.

The implementation of the 70% renewable energy policy depends on CEB’s long-term generation plan. “The CEB prepared the generation plan last time for 50% renewable energy, but the PUCSL rejected this because it did not match government policy. The CEB has accepted the 70% and are currently making changes to the long-term generation plan. It is likely to be resubmitted to the PUCSL for approval next month with the addition of the 70%,” Manjula Perera said, adding that the process towards achieving the 70% goal will begin thereafter. 

Arrears to be paid by CEB

While the implementation of projects to carry the country towards the 2030 goal of 70% renewable energy depends on CEB’s long-term generation plan, the future of the renewable energy sector also depends at least partly on the CEB.

This is due to the fact that CEB is yet to pay arrears of five months for ongoing projects. The pending payments since July 2021 make it difficult for those in the renewable energy sector to pay loans and cover operational expenses. Government support was needed in this regard as the CEB owes close to Rs. 25 billion to solar and wind energy producers.

No action

Despite the goal of reaching 70% renewable energy generation by 2030, stakeholders of the renewable energy sector claim that the Government is all talk, but no action.

According to Small Hydro Power Developers Association President Thusitha Peiris, President Gotabaya Rajapaksa appointed Dr. P.B. Jayasundera as a representative, with whom stakeholders of the renewable energy sector have held discussions. Speaking about interactions with President Rajapaksa, Peiris said, “Although he does not directly interact with us, he appointed his representative to ensure that the renewable energy growth is maintained, so we hope all these people will get together. At the end of the day, as stakeholders, we have a lot of input to be given. We have faced all the hardships.”

Giving an example of the difficulties faced by the industry, he said there is no speedy procedure to secure a government line in Sri Lanka. Peiris added that there are no priority lines or special or high-powered committees to fast track these projects.

“The Sri Lanka Sustainable Energy Authority was established as a one stop shop to get approval for all renewable energy projects. However, there is no one stop shop concept there,” he said, adding that they are required to work separately with environment, irrigation, and wildlife authorities as well as provincial councils.

This makes the process of implementing renewable energy projects a lengthy one, which is why the industry is calling for a high-powered committee.

Thusitha Peiris went on to add that restrictions have caused a shortage of spare parts, which is, in turn, causing issues with ongoing projects.

According to Solar Industries Association President Kushan Jayasuriya, there is a shortage of solar panels in the market.

“The biggest issue we face is that the Government has implemented a procedure with HS codes that are given priority and those that are not. Banks do not issue debt instalments for non-priority HS codes. However, when going towards 80% renewable energy as per government policy, equipment for renewable energy projects must be made a priority,” he said.

Need for immediate measures

Industry stakeholders do acknowledge that the Government has taken certain measures in support of renewable energy generation. These include expressions of interest and the tendering process, but Manjula Perera explained that these procedures continue to be time-consuming.

“The main issue is that they have to fast track these because there is a crisis. If we take the normal path, it will take another two to three years to award these projects. If they immediately take steps, we can immediately start these projects,” he said.

According to Kushan Jayasuriya, solar panel installation takes a very short time, but the pre-approval process takes three to four months.

“When an individual who wants to install 10 KW or 100 KW is told they need to wait at least three or four months without certainty, they go do something else. If the pre-approval process is a must, the best thing is to get it done in a week,” he added.

Current status of NCRE projects

According to Manjula Perera, the CEB in November called for expressions of interest for electricity generation from renewable energy sources for plants above 50 MW. They received 600 applications. However, as of now, the CEB has only shortlisted applications and called for tenders for the shortlisted companies. The tender procedure is time consuming and it will take at least another year to implement these projects.

Given these delays, Perera suggested that the Government make the right decisions and pick the lowest local bidders, giving them the opportunity to develop at least 10 plants. This would add 500 MW to the system in next two years.

“The reason there were several renewable energy projects at the beginning is because of the feed-in-tariff system,” Perera explained.

According to him, the system was changed in 2015, with the introduction of tendering. While saying there was nothing wrong with the process, Manjula Perera explained it was time consuming. The CEB is now reintroducing the feed-in-tariff system for projects less than 10 MW.

“A tariff committee was appointed for this. They have recommended it and sent it for PUCSL approval through the Ministry. If this process is fast tracked, our businessmen can easily add 200 MW from wind, solar, and biomass technologies within the next two years,” he said.

A tendering process was introduced from 2015 for renewable energy, in order to create transparency. “It is a very good system. Unfortunately, the evaluation process is very time consuming,” Perera said. According to Perera, some tenders from 2017 were only awarded in 2020, which meant a three-year evaluation process.

Legal barriers

“Renewable energy generation began in Sri Lanka in 1996 with small hydro plants. Twenty-five years have passed, with what was a fast-developing power generation system at the beginning. For seven years, CEB has stopped signing agreements for these power plants due to a minor issue with the Electricity Act,” Manjula Perera said.

According to him, this legal issue has put a stop to standardised power purchase agreement (SPPA) signing.

He explained that small hydro projects that have approval cannot be added to system due to this legal issue. If it can be cleared, 150 MW can be added to the system in the next two years at a very low cost.

Explaining the legal framework that comes into play with renewable energy generation was Small Hydro Power Developers Association Secretary and Legal Advisor Waruna Dahanayake. He said the industry came to a halt in 2015 due to certain legal issues. According to Section 43 (2) of the Sri Lanka Electricity Act No. 20 of 2009, the purchasing of generation plants can only be carried out through a tendering process.

“Subject to the approval of the Commission, a transmission licensee shall, in accordance with the conditions of the transmission license and such guidelines relating to procurement as may be prescribed by regulation and by notice published in the Gazette, call for tenders to provide new generation plant or to extend existing generation plant, as specified in the notice,” the Act states.

This is despite Section 20 of the Sri Lanka Electricity Act No. 20 of 2009 stating that a distribution license can be issued following the payment of a standard tariff.

“We believe this is an industry developed by local investors. This is an industry built entirely on the basis of standard tariffs and standard agreements and not tenders. Regardless of the strengths and weaknesses of the tendering process, the legal system supports the development of projects based on a standard tariff,” Dahanayake said.

He explained that local investors are eager to develop projects if standard tariff and standard agreements are allowed, adding that the Sri Lanka Sustainable Energy Authority has lost a number of projects due to this issue.

Dahanayake thus asked the authorities to reconsider the matter and interpret the law in a way that supports these projects.

Speaking about how this legal issue has affected the small hydro industry, Thusitha Peiris said that despite celebrating their 25th anniversary, they were only able to develop projects for 18 years.

“During this period, we added 25 GW to the system. This is around 13 projects a year. A minimum of 7,000 contractors and workers are required for these projects. The entire country was a work site during these 18 years,” he said.

However, since 2015, no progress has been made.

“As per the capital expenditure of projects we could have implemented in 2015, 2017 and 2018 and the current capital expenditure, if these projects are to be continued, we need a higher tariff to cover the capital expenditure of these projects,” Peiris said.

He urged the relevant authorities to resolve these issued and relax the barriers to implementing renewable energy projects.

A look at the renewable energy industry

While the industry continues to request that the Government fast track processes in order to support the implementation of renewable energy projects, Manjula Perera shared information about the current renewable energy generation in the country.

Based on 2020 data from a CEB Performance Report, Perera said the cost of NCRE was Rs. 28 billion for 1,860 GWh, with an average selling price of Rs. 15.11 per kWh.

The average selling price of CEB and IPP thermal energy was Rs. 16.72 per kWh. The cost of 1,437 GWh from CEB thermal (oil) was Rs. 29.74 per kWh, with a total cost of Rs. 43 billion. IPP thermal (oil) generation was 2,717 GWh at a cost of Rs. 27.89 per kWh. The total cost was Rs. 16 billion.

The total cost of CEB and IPP thermal generation was Rs. 119 billion, with an average cost of Rs. 28.64 per kWH.

Perera explained that 6,365 GWh was generated through coal, which cost Rs. 62 billion and had an average selling price of Rs. 9.81. The cost of generating 3,929 GWh from large hydro was Rs. 9 billion, with an average selling price of Rs. 2.32 per kWh.

The total energy generation from renewable energy and coal was 12,154 GWh, which cost Rs. 99 billion. The average selling price was Rs. 8.23 per kWh.

Both oil and coal used for energy generation are imported.

According to Manjula Perera, prior to the COVID-19 pandemic, the price of coal was $ 60/MT. However, the price had risen to $ 212/MT by the last coal shipment delivery. The last coal order placed was at a price of $ 270/MT. The cost of generating power using coal prior to the pandemic was Rs. 9.81/kWh. The present cost is Rs. 24.90/kWh.

He added that NCRE is paid in a fixed amount in rupees for 20 years, whereas all thermal plants are dependent on the world market price of coal and oil as well as US dollar fluctuations. Looking at specific types of renewable energy sources, Manjula Perera said rooftop solar is limited to contract demand in Sri Lanka. However, more solar plants would be built if this is changed. He explained that large warehouses, for instance, have low contract demand due to very low consumption.

If more panels can be installed on warehouses, at least 100 MW can be added to the system within a year.

Battery storage for nighttime use would boost the ground-mounted solar industry, he said, adding reducing CEB delays would help the roof-mounted solar industry.

“Unlike technologies like wind and solar, where generation only happens when the energy source is available, biomass offers stable power. The source is Gliricidia plants and energy can be generated from this throughout the day,” he said.

According to Manjula Perera, Gliricidia could also be a solution to the country’s fertiliser issue as well as a source of income to rural communities.

Bio Energy Developers Association President Chamil Silva said, “If we generate 100 MW a year, we can save $ 40 million in foreign exchange. In addition to this, these plants provide an income of over Rs. 3.3 billion to neighbouring farmers and communities. So this has a big contribution to the country’s economy and rural economy.”

However, he added that 85 MW projects have been sent in for approval at various levels, but any progress has been stalled since 2015, when the last power purchase agreement was signed.

Is renewable energy the solution?

Despite the challenges posed by time-consuming procedures, the Government’s goal of reaching 70% renewable energy generation by 2030 points to the acknowledgement that renewable energy is the way forward. This is backed by the information shared by stakeholders of the sector.

In terms of solar power, for instance, Manjula Perera explained that the price increase of solar panels is marginal. “I would say it is less than 10%,” he said, adding that the price is well below the CEB selling price.

Ground Mounted Solar Developers Association President Lasith Wimalasena explained that the specialty of solar power plants is that it takes only three to six months for construction following approval. A plant can be connected to the national grid within a very short time.

“Every year, the power crisis occurs from January to May. The reason for this is because large hydro plants face water shortages due to a lack of rain. During this period, the country gets a lot of sun. If we use solar power during such shortages, it is a good solution. Instead, we always look at how we can use emergency power to generate power during these months,” he added.

Pix by Lasantha Kumara