Ad hoc policy shifts and renewable energy development

Two weeks ago, the Federation of Renewable Energy Developers (FRED) at a press conference expressed its strong disapproval of the Government’s decision to reduce feed-in tariffs for renewable energy projects, pointing out that ad hoc policy changes could disrupt the country’s drive towards renewable energy. Recently, the Ceylon Electricity Board (CEB) announced a revised set of feed-in tariffs applicable to standardised power purchase agreements below 10 megawatts, without competitive tendering. These new tariffs, effective from June 2025, reflect reductions from previous rates.

The controversial move has attracted widespread criticism, with many claiming the State-owned electricity utility operator’s action would be detrimental in terms of attracting investments into clean energy. In response to the allegations, the CEB had claimed that the new tariff structure reflects falling solar panel costs, lower interest rates, and improved economic conditions while ensuring fair returns for investors as well as affordability for consumers.

FRED had conveyed its profound displeasure about the alleged harmful decisions by the CEB that risk destabilising investment flows, undermining the viability of the sector at a critical time of the country’s energy transition. The industry association had opined that the very foundation of sustainable energy development – predictable and fair policy – has been diminished by the CEB’s questionable actions. 

The ill-reputed State entity’s decisions with regard to tariffs on renewable energy do not align with the stated policy of becoming a carbon-neutral country in 2050 by making the most out of the energy available and developing cleaner energy resources according to the National Energy Policy and Strategies. Such an objective demands the widespread adoption of renewable sources of energy such as wind, biomass, and solar. The Government of Sri Lanka envisaged to reach a 10% target in power generation via new renewable energy technologies by 2016, and this objective was successfully achieved a year ahead in 2015. The overall goal of policymakers is to reach 70% of electricity generation via renewable energy sources by 2030.

According to the data from the CEB, although the country spent Rs. 227 billion on thermal energy in 2023, the expenditure on thermal power declined to Rs. 145 billion in 2024, representing the benefits of cost savings from the shift towards renewable energy. Some in the past have accused special interest groups within the CEB for blocking efforts to promote the generation of renewable energy in the island to satisfy their personal financial interest. Last month, the former CEB Chairman Dr. Thilak Siyambalapitiya was replaced by Professor K.T.M. Udayanga Hemapala. Some of the CEB’s decisions subsequent to Siyambalapitiya’s appointment were perceived as detrimental to the renewable energy sector.

Meanwhile, the CEB’s recent announcement which claimed that Sri Lanka achieved 70% renewable energy generation based purely on the performance in June was highly misleading as well as inaccurate. By misrepresenting the progress in renewable energy, policy makers and the general public could develop a false impression apart from undermining the importance of continuous investments and adoptions of sources of clean energy.

Nevertheless, integrating renewable energy sources like solar and wind into Sri Lanka’s grid can pose challenges to grid stability due to their intermittent and variable nature. Sri Lanka’s existing grid infrastructure needs upgrades to accommodate the increased integration of decentralised renewable energy sources. This includes investments in modernising the grid, improving reliability, and incorporating energy storage solutions. With regard to energy storage systems, Battery Energy Storage Systems are crucial for managing the variability of renewable energy and enhancing grid stability. Further, modernising the grid with smart grid technologies can help optimise energy distribution, manage fluctuating renewable energy sources, and improve overall grid efficiency.

To achieve the nation’s ambitious carbon-neutral goal by 2050, Sri Lanka needs not only investment in infrastructure but also unwavering policy support. The CEB and PUCSL must move beyond short-term fixes and demonstrate credible, long-term commitment to clean energy development.