Fossil fuel obsession, flawed advice have pushed energy security to the brink – Dr. Vidhura Ralapanawe

By Shanika Sriyananda

Dr. Vidhura Ralapanawe

Sri Lanka’s energy sector is facing mounting pressure amid rising global fuel prices, a prolonged dry spell, and growing uncertainty in international markets. The ongoing Middle East crisis has further exposed the country’s vulnerability, as its heavy dependence on imported fossil fuels continues to drive up costs and threaten supply stability.

Energy analyst Dr. Vidhura Ralapanawe warns that policy missteps, delays in renewable energy adoption, and structural weaknesses in the power sector have placed the country’s energy security at serious risk. In an interview with Daily FT, he outlines the challenges, risks, and urgent reforms needed to steer Sri Lanka toward a more secure and sustainable energy future.

“During the dry, hottest months, Sri Lanka relies on oil for electricity—and with Middle East tensions driving up oil prices, consumers will face higher bills,” he said, adding that the Government has not only been lethargic, but downright hostile for renewable energy. 

The Government has not only been lethargic, but downright hostile  to renewable energy, as it is being advised by anti-renewable fossil fuel fanatics such as one who they appointed as the CEB Chairman and now has become the architect of the electricity and tariff policies.  First, they created a myth saying Sri Lanka has too much solar

Following are the excerpts:

Q: With the alarming situation in the Middle Eastern crisis plus the existing dry spell in the country, will electricity prices increase?

A: Yes, we are currently in the dry period with rains not expected till May and it is also the warmest period driving up the demand, in which electricity generation is dominated by oil. With the crisis in the Middle East, there is a sharp increase in oil prices, which will also lead to price increases for electricity.

Global coal prices have also gone up due to the war and thus increased the cost of coal based generation. The emergency tendered coal also comes at a higher rate which is about 40% extra. Technically, the Public Utilities Commission of Sri Lanka (PUCSL) should use the most recent prices for generation costs even when announcing the April electricity tariffs. So, the costs will indeed increase.

The excess costs related to the additional oil-based generation to compensate for poor quality coal, and inability to procure the required amount of coal, which is significant due to high oil prices, cannot be passed to the consumers as per the tariff methodology. This is because PUCSL has previously requested all thermal generators to enter into fuel supply agreements which insulate them from such events, but they have not, and therefore, this loss cannot be passed to consumers through tariff - the Government will have to still find funds from the Treasury so it still is public who will pay for it through our tax payments.

Q: Will this situation lead to power cuts in the coming months?

A: As for power cuts, this solely depends on oil availability. The Government appears to prioritise the electricity sector, and allow oil to flow to them without interruptions. If this continues, there will not be any cuts, outside a couple of generators breaking down, which is also a risk due to inferior coal.

The problem is not immediate but in the latter part of the year, in July and August. El-Nino conditions are likely to emerge from July 2026, and this normally results in lower than the average rainfall during this period from the South West monsoon. Due to coal shortage, this period will also likely see one unit of coal plant shut down due to lack of coal. Each ship short will result in approximately a 25-day shutdown. This dual pressure may see the utility struggle to ensure uninterrupted power -especially if any unplanned plant breakdowns occur.

The answer is not diversification per say, but independence from fossil fuel imports. We are blessed to have plenty of renewable energy potential – from solar, wind, hydro and biomass. But these sectors are now in decline due to adverse policies of the Government and its anti-renewable cabal, who cannot see the risks of fossil fuel dependency. The whole country is paying dearly for this already this year. We need course correction now

The price and availability risk of electricity is due to our high dependency on fossil fuels for electricity generation - be it coal or oil. None of the renewable energy generators that sell power to the utility raise prices during a war. What Sri Lanka needs is to rapidly scaling renewable energy and battery storage. Rooftop solar can scale in 4-months if a viable tariff is offered and roadblocks are removed. Battery storage will take longer, but a viable utility scale battery storage feed-in-tariff is offered, these can scale as well. Even if storage cannot be built by July where evening peak will be a challenge, they can play a critical part from January 2027 when El-Nino is expected to drive up demand due to the expected heat wave in the first half of 2027. The Government suspended procurement processes for 3 months for fossil fuel procurement - they can easily extend this to renewables and battery storage. 

Q: Your views on the steps taken by the Government to address the present power crisis in the country and why do you think that the Government is still lethargic over promoting alternative energy sources to cut down on high dependency on thermal power generation?

A: The Government has not only been lethargic, but downright hostile for renewable energy, as it is being advised by anti-renewable fossil fuel fanatics such as one who they appointed as the CEB Chairman and now has become the architect of the electricity and tariff policies.

First, they created a myth saying Sri Lanka has too much solar. The real problem was not that we had too much solar, but that we did not have enough battery storage to collect it and use it at night, which would have reduced use of expensive oil. By this year, we should have had 300 MW battery storage, which is the capacity of one coal or oil plant, as per the 2023 generation plan but still we have zero.

The first battery storage tender was floated late last year, one year after this Government came to power, and was awarded only last week. The Cabinet spent over two months after the tender was closed to award it, and this will only be operational in late December. Even this one is merely 160 MW, and is nowhere close to what we need as at least 500 MW should be in place by December.

The irony is that this much maligned renewable energy sector is what is saving the Government and the public. The solar generation is significantly reducing oil requirement for over 6 hours during daytime, reducing the generation cost. Batteries would have extended this to over 10 hours where peak oil usage was expected. This short- sighted fossil fuel love, and selection of wrong advisors, have put Sri Lanka's energy security at peril.

Q: Power sector reforms were much talked about and what was the intent of the electricity sector reform that began under the previous Government, and continued in the present?

A: The energy sector is evolving rapidly globally. Countries, industries and people shift away from fossil fuel -based energy. The current crisis in the Middle East is another reminder that fossil fuel dependency is also an economic security issue. Technologies in the sector is also evolving along with larger consumer participation in electricity generation, storage and system stability.

Energy transition that is on the way also shifts other fossil fuel uses also to electricity – such as transportation with electric vehicles, and industrial thermal with heat pumps and other  technologies. Sri Lanka has not progressed much in any of these areas.

The intent of the reform was the overall sector transformation so that we can meet the evolving needs of consumers and industry, to meet the future energy needs as the Electricity Act of 2024 articulated in its objectives. They include improvement of sector performance via independent and accountable corporate entities and transparent policies, introduction of electricity markets, to ensure affordable electricity to all consumers and financial viability of licensees and to decarbonise the electricity sector, promoting renewable energy and energy transition

In addition, this policy has also strongly emphasised on energy security, with specific mandates to shift away from fossil fuels. This was an important legislative mandate which was sadly ignored.

Q: How do you view the current restructuring process including winding up of the Ceylon Electricity Board (CEB)? What are the key changes proposed under these reforms?

A: The current restructuring separates the CEB generation, transmission, distribution and system operations into four different companies. This separation, concluded through the preliminary transfer plan, is probably the most visible change at present.

The new structure is designed to create more financial accountability, cost transparency and efficiencies through ‘corporatisation’. New HR policies (yet to be introduced) are expected to move away from CEB’s legacy practices such as seniority-based promotions, recruitment and reward strategies that are skewed to electrical engineers, to enable a merit-based recruitment, promotion and reward culture.

Even though it has taken a while, this is just step one of the process envisaged in the Electricity Act of 2024 (and amended in 2025), with another unbundling process slated to happen within a year or so, under a final transfer plan.

Fast-tracking renewable energy and battery storage additions by removing roadblocks set up for renewable energy is important, especially leveraging the feed-in-tariff mechanism which can scale fast. Creating a stable, coherent, forward-looking policy environment that supports rapid energy transition to support investments in the sector and country as a whole is also vital. A future-ready stable policy environment is needed to mobilise the investments to the country. It is unfortunate the National Electricity Advisory Council (NEAC) that was envisaged for this was removed in the 2025 Amendment

Q: What are the main challenges facing the CEB restructuring process at present?

A: Although the companies have been separated, the contracts between these companies such as power purchase agreements (PPA) between National System Operator (NSO) and CEB generators and Power Sales Agreements (PSA) between distribution companies and NSO, and Transmission Services Agreement (TSA) between transmission company and the NSO have not been signed. It is rumoured that they have signed a temporary cash-flow agreement, which leaves the inter-company payments in a risky state. For example, it is unclear how the payments for coal will be made for the season, as cash flows for these type of large payments are not accounted for in this mechanism.

The PPAs, PSAs and the TSA were all supposed to be completed by USAID and WB consultants for the Power Sector Reform Secretariat (PSRS) ahead of the preliminary transfer plan, and now it appears that this is handed over to the NSO, who does not appear to have the specialised skills for such an endeavour.

PSRS, Director General has resigned, though their work is not complete, including creation of the final transfer plan with further unbundling – especially the distribution companies. It is unclear who will take this work forward.

When one looks at the Board of Directors of these companies, it is difficult to imagine how these entities perform as per expectations set in the Act, improving customer service while driving cost efficiency, cost transparency and innovation.

Most directors lack corporate sector experience. Each board consists of 5 members and has one treasury representative, one ministry representative and one retired CEB engineer. The retired CEB engineers co-incidentally are ex-leaders of CEB Engineers Union, which is responsible for a large part of the sector follies including blocking renewables for decades.

Some directors are academics who also lack corporate and finance experience. How such boards can transform the sector is anyone’s guess. Weak boards lead to a shift in gravity of governance to management and in turn their vested interests. Thus, instead of one inefficient CEB we have four!

Beyond these specifics, the restructuring process had objectives, which included energy security, sector financial sustainability, markets and lower cost electricity to the public. We were to have electricity markets. I cannot see the limited reform implementation leading to ANY of these outcomes.

Q: Some critics say restructuring could increase private sector participation in electricity transmission and distribution. How does this affect Sri Lanka’s electricity sector?

A: In the 2024 Act, this would have been possible with some of the distribution companies (and even some shares of the transmission company) could have been listed in the stock exchange, or divested. But the 2025 Amendments insisted 100% state ownership, and unless further unbundling enables the same, this will not happen.

It is technically possible for some new transmission links to come with private sector investment with a transmission licence and a tariff. This may not be the best case, as transmission augmentation is expensive and requires long term debt at lower rates, which is not a private sector forte. Therefore, I am not holding my breath on this.

Q: Sri Lanka is currently facing concerns over substandard coal imports and delayed shipments, which have reduced generation at the Norochcholai power plant. How do these issues affect the country’s energy security?

A: Coal availability adds to the problem, with the supplier repeatedly failing to arrange the required shipments before 30 April when the sea becomes too rough to continue unloading. Unloading 13 more shipments before then with an errant supplier is quite unlikely as each ship takes 4-5 days to unload. The current emergency coal procurement is only for 5 ships from 20 April. Getting the previous supplier to provide 8 ships between now and 20 April is impossible. 

The demand has also been creeping up with night time demand crossing 3 GW for the first time, and daytime demand closely behind. Even off peak demand is coming close to 2 GW. This is before reaching the temperature peaks of late March to early April.

 Q: With uncertainties in coal supply and a high dependence on oil-based power generation, how do you see the future of Sri Lanka’s energy sector?

A: We have been in the same situation before 2022, so I am not sure if we are suffering from a case of learning disability. We need to get off oil- based generation as it is expensive and polluting. Coal was temporarily cheap, but now the prices have increased and it is more polluting. We need to import both, and we are currently facing supply availability challenges for both. We need an urgent course correction and I only hope that we learn the correct lessons from this crisis to do that.

We have been in the same situation before 2022, so I am not sure if we are suffering from a case of learning disability. We need to get off oil- based generation as it is expensive and polluting. Coal was temporarily cheap, but now the prices have increased and it is more polluting. We need to import both, and we are currently facing supply availability challenges for both. We need an urgent course correction and I only hope that we learn the correct lessons from this crisis to do that

Q: How important is it for Sri Lanka to diversify its energy sources, especially through renewable energy and alternative fuels?

A: The key principle that is driving energy policy in most countries for at least a decade is energy independence. You can see this in the USA for example – when President Barak Obama began the transition of the USA from a net oil importer to a net oil exporter. Or closer to home, Prime Minister Narenda Modi has declared 2047 as India’s energy independence year – including its massive scaling of renewable energy. China has been working on this for years now, with the world’s largest annual installations of solar, wind and batteries, coupled with the fastest growing electric vehicle fleet.

Therefore, the answer is not diversification per say, but independence from fossil fuel imports. We are blessed to have plenty of renewable energy potential – from solar, wind, hydro and biomass. But these sectors are now in decline due to adverse policies of the Government and its anti-renewable cabal, who cannot see the risks of fossil fuel dependency. The whole country is paying dearly for this already this year. We need course correction now.

Q: What key reforms or investments are needed to ensure long-term energy security while keeping electricity affordable for households and businesses?

A: Fast tracking renewable energy and battery storage additions by removing roadblocks set up for renewable energy is important, especially leveraging the feed-in-tariff mechanism which can scale fast. A viable feed-in-tariff for battery storage is also needed. These will reduce the oil-based generation to reduce consumer costs. Enabling power wheeling and open access will also help.

Moving to the end destination of the reform process, with the final transfer plan with the ability to attract private capital is important to ensure the sector is not starved for capital, especially for distribution entities which will require large upgrades for both solar and EV charging.

Creating a stable, coherent, forward looking policy environment that supports rapid energy transition to support investments in the sector and country as a whole is also vital. Electricity sector and overall energy sector policy making was badly done, historically, due to handing over policy making to CEB and ex-CEB individuals, who do not understand commercial aspects nor technology. This has to change, and a future-ready stable policy environment is needed to mobilise the investments to the country. It is unfortunate the National Electricity Advisory Council (NEAC) that was envisaged for this was removed in the 2025 Amendment.

Creating a time bound plan for transition to electricity markets is an important requirement in the Act but there appears to be no plan for market introduction even in the draft policies sent for public consultation.