“The Government will endeavor to reach a minimum level of 10% of electrical energy supplied to the grid tobe from NRE by a process of facilitation including access to green funding such as CDM. The target year toreach this level of NRE penetration is 2015.”
As environment lovers you and I all like this statement which I have extracted from the government extraordinary gazette that has been published under the Ministry of Power and Energy as National Energy Policy and Strategies of Sri Lanka.
What if we are able to achieve the target of 10% by 2015?
If we analyze the back ground of this scope, since from the beginning, the large hydro power plants were built by the aid of soft loans, which result the lower energy generation costs. These benefits are directly passed on to the consumers so that we were lucky enough to consume electricity for lower price in the region. Just seventeen years ago, in 1995the 95% of electricity generation was contributed by the hydro power plants. Dominance of hydropower changed dramatically from 1996 onwards. This share was rapidly declined and crossed the 50% within just five years causing oil dominated power generation and high electricity tariff in the region.
Since 1997, the ESD project and RERED project have provided concessionary financing to the private sector to develop small power plants. Non-conventional Renewable Energy (NCRE) – based electricity from power plants less than 10 MW, have been priced at avoided cost tariff (ACT). The avoided cost is the cost the utility (CEB) would have incurred had it supplied the power itself or obtained it from another source. The calculation was based on the mix of marginal generators that would reduce their output, when these small power plants provide electricity to the grid. So that, there was no any significant impact on the electricity production costs of CEB because of this new small power plants. But, at that time, these avoided cost prices are dominated by the oil prices because of the oil dominated power generation in Sri Lanka. So that mini hydro power plants were the only viable solution in NCRE generation. Because of this we were unable to see any other types of NCRE plant like Wind, Solar or Bio mass in the country.
After the announcement of new Small Power Purchas Agreements (SPPA)by the new regulatory agency (Sustainable Energy Authority) in 2007, which are in operation since 2008, Sri Lankan has accelerated the development of renewable energy with a high growth rate. As a result of this, we were able to witness the first ever economically feasible wind plants in west coast with total capacity of 30MW. Now the wind power industry has become a profitable industry which is very popular among the inverters. This enthusiasm made another couple of proposed plants in Jaffna peninsula
Now it is obvious that the new tariff is providing significantly high returns to the NCRE investors compared with the ACT, which was on acting till 2008. This new tariff has several pluses from the investor’s point of view. Unlike ACT, these price changes are designed to make all kind of NCRE proposals profitable. It is cost reflective while it changes from technology to technology with three tire tariff structure. Specially, during the first tire, during first eight years, the tariff is very high compared to the ACT. This is to recover the loans and other investor’s capital requirements. So that this will impose an additional burden on the CEB, and most importantly, the society.
That implies, the development of renewable in Sri Lanka is not economically sound from the consumer point of view for near future. Then it is obvious that if we are on the way to achieve the 10% target by 2015, the more burdens will be on consumers. This means, present pricing offered to NCRE should be revised. Or we can just reduce the share of the NCRE and keep moving with fossil fuel such as coal and diesel until Sri Lankan economy becomes more stable. Intention of this article is to open our mind.
Are we on right track?
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