Sri Lanka has an installed electrical power capacity of 4,100 MW, whereas its real requirement, to provide security and continuity of supply should be about 5,500 MW, since consumption grows at the rate of 7-8% per year.
The challenge that the country faces is increasing power supply to match demand, while giving more prominence to renewable energy sources, and at the same time keeping costs to a minimum. The person tasked with solving this problem is the Minister of Power, Energy and Business Development.
“After I took office, roughly five months ago,” says Minister Ravi Karunanayake, “my intention was that I would deal with the professionals, as this is a field that is alien to me – of course business, I knew, but certainly the electricity industry is a different world.”
The policy guiding the installation of new electricity generation plant in Sri Lanka is that of “least-cost generation”, that is that the primary consideration should be low cost of electricity. However, the last installation under this policy was in 2011. Subsequent additions have been supplementary, and generally of higher cost.
“The professionals who guided us,” says the minister, “ensured that one of the first concepts to which we should adhere was the least-cost generation. If you look at it on that basis, the lowest cost that exists in Sri Lanka is hydro. The hydro plant … generate at the rate of about LKR 1.34 upto about LKR 3 [per kWh]. The next available is mini-hydro. Then going on to coal, which has been established as one of the cheapest-cost … roughly, it generates from about LKR 11 to 13. The next available choice is LNG [liquid natural gas]. And then you have the renewables that come in-between. And of course, the most expensive is the thermal diesel and furnace oil, which starts from LKR 21 and goes up to almost LKR 50 or 60.”
He says that, given that he cannot increase household rates, he intends to reduce the difference between the selling price and the generating price to a bare minimum. With the advice of the professionals of the Ceylon Electricity Board [CEB], and guided by the Public Utilities Commission of Sri Lanka [PUCSL], the cabinet decided that the best mix for electricity generation entailed one third each of coal, LNG [liquid natural gas] and renewables.
“Our intention is that we go for renewables, to increase them by 500% in the short run. Of course, it should be economical for the CEB. At the moment, what is happening is that we are buying it at a fairly high rate – in the range of LKR 22-25 – for renewables and we sell it at LKR 16. So this disparity is what we are trying to reduce. At the moment, owing to world prices of renewables, for solar and wind, reducing 20-25%, we are also making it that the CEB cannot say “no” to renewables. So we are dealing with a feed-in tariff so that you don’t have to go through a one or two year, laborious process; you basically bring an environmentally-friendly project and, within two weeks, you will get your licence to produce power. This is the way we are heading: renewables to be brought in a mix, of one third at the moment and, certainly, by 2050 we want to have 50-60% of our total generation on renewables.”
In the last four years, Sri Lanka did not get more than half a dozen renewable projects, which Karunanayake attributes to “the bureaucratic process, ably assisted by a dysfunctional political system.” However, he says, the new government, now in place. means to ensure that 400-500 MW of power is installed this year and next year, making certain the fulfilment of the sustainable goals for 2020, and that at least 40% of generation is renewable by 2030.
Karunanayake explains his position on rooftop solar generation, pointing out that owners of rooftops generating excess power, sold it to the CEB at up to LKR 24 per kWh. The CEB sold this to consumers at LKR 16 per kWh, making a loss on the transaction of up to LKR 8. Taking into account the reduction in the cost of installations of up to 30%, he decided to pitch the power buying tariff at an affordable rate for the CEB.
“There was a huge outcry about this,” he says, “…this went to a hell of a fury… There has been no agreement which we stopped or which we varied, which has been signed. They are valid for 20 years. But new ones that come in the future, proactively, we will basically look at a firm rate which is levellised for 20 years, because when you sign an agreement, you can’t say tomorrow ‘I’m sorry the solar rates have come down.’”
He advocates an optimal rate, affordable to the CEB, which also encourages renewables, as well as helping the cause of the local entrepreneur. He believes firmly in a “Sri Lankan approach” to business, which he extends to the field of electricity generation by renewables. Previously, the policy on renewables centred the issuance of saleable permits. There had been a lucrative trade in permits, but very little in the way of construction.
“A lot of foreigners come and say ‘I want to put up solar’ or ‘put up wind’, but my polite response to them, after discussing with the professionals in the CEB, the secretary and all concerned, is ‘bring your finances and tie up with a Sri Lankan.’ I want to ensure that the renewables are, if possible, 100% Sri Lankan. The reason is the sun, the wind and the water, which provide a god-given opportunity.”
He invites entrepreneurs to come forward with proposals for 5 MW or less, promising that every possible application would be be pursued. For wind-power or dendro-power (which he describes as “another wonderful concept”) he promises to pursue proposals of up to 10MW as soon as possible. He does admit that grid connectivity is an issue, but that he would certainly encourage a 100% grid capacity connection, since firm generation is only about 30% of the renewables.
“I think we are going through a sea-change in the power and energy industry, and I call upon every businessman, please come in without cursing the dark, ensure that you come and light that candle, which will help us to come out of this problem. When I say ‘light the candle’, it is to come and search for new opportunities. There are a lot of problems. It is an industry which is dictated to by a few, for the benefit of the few, at the expense of the many, and this is what I want to change. The best transparency process is to ensure that generation is brought as close as possible to the selling price, as well as to ensure that there is a competitive process.”
The minister is optimistic about the future. “I really think you should have a power economy. When I say ‘power economy’, that is you should have a surplus of power which will help people to come in. Now, my vision has been to ensure zero power cuts. To ensure that a household will be connected in 24 hours, and a commercial establishment to be connected in two weeks. When you have a power economy, your security level should today it is 10%, we have increased it to 25%. And a more merchants plant is there, not CEB generated, but the IPP model.”
However, he has reservations about the bureaucracy entrusted with governance of the power sector.
Karunanayake acknowledges that the SAARC region is growing rapidly, and that India plays a pivotal role within it – which he welcomes. He points out that India has been invited to invest in the Sampur coal-fuelled power plant, the LNG-fuelled power plant, and up-coming solar projects, “just to show that they are not only a close neighbour, not only a friendly neighbour, but also a neighbour that can have economic ties” and that during his tenure as trade minister that Sri Lanka developed the free trade agreement with India.
“And we are looking at a SAARC grid connection, which means that we can sell and buy from a SAARC grid, routed through the Indian thing under the sea, which will help us to ensure that we can exchange power generation from here and also to get power generation from SAARC, especially India, and balance the grid.”
He also posits that, while the CEB has a lot of professionalism, it is a massive operation – possibly the largest company in Sri Lanka – “layers of complacency” have set in. He thinks it should become a proactive entity, thinking of the future as yet unborn and set to carve out a niche in meeting a hitherto unserved market need.
“We need to take our professionalism overseas. I must compliment, while being in the industry, a company that is under CEB – 63% under CEB, which is LTL [Lanka Transformers Ltd] which has gone overseas. Now if a subsidiary under CEB can go overseas why has the CEB not gone overseas? They have not been encouraged, they have not been led, nor have they been shown the way. My intention is that they go, take the advantage of Maldives, Bangladesh, Myanmar and seize the foreign opportunities that are there. Within the next 2-3 months I want to see the first export order out of Sri Lanka into the region, and also to have encouragement of CEB investing overseas, which will help us to reduce the generating costs and improve the overall balance sheet. I think as a trademark, CEB has one of the best product services.”
He looks forward to engineers, no longer operating alone in their own compartment, co-operating with accountants, intertwining financial ability and engineering skills, to ensure that the CEB is on the move.
“This is why I say we have a lot of lost opportunities,” he concludes. “It is lack of vision, lack of drive, lack of sense of urgency, and this is where the problem is.”