- US company submits unsolicited proposal
- CEB stands firm on competitive bidding
Accordingly, Minister of Power Dullas Alahapperuma has sought Cabinet approval to call for a detailed proposal including the relevant technical and commercial aspects from New Fortress Energy as well as to permit any other investor the opportunity to make similar proposals and seek the approval of the Cabinet of Ministers to evaluate all these proposals by a Cabinet-Appointed Negotiating Committee (CANC) to select the most technically and financially suitable proposal.
The aim of the Ministry, as per the media statement issued last week, is to replace the costly diesel power that generates electricity at a cost of around Rs. 30 per unit.
As confirmed by the Ministry of Power, the US proposal is made to bridge the gap between the demand and supply of power in Sri Lanka as well as to overcome the shortage of 300 MW of power as predicted by the CEB.
A highly informed source of the Ministry, who wished to remain anonymous, told The Sunday Morning that the cabinet proposal had been submitted along with several other short-term measures the country could implement to bridge the gap between the demand and supply, as the CEB has informed the Ministry that there will be a shortage of 300 MW, as several power plants are scheduled to be retired in the near future.
Questioning the approach
Nevertheless, the senior engineers attached to the CEB are vehemently opposing the decision made by the Minister of Power to submit an unsolicited proposal without going for a compulsory bidding process, especially without consulting the engineers to see whether the power generation is viable.
Furthermore, they questioned the feasibility of the project and asked why the Government did not go for competitive bidding for another 300 MW instead of submitting unsolicited proposals.
CEB engineers also raised concerns as to whether the Government is trying to bring down a US company to Kerawalapitiya which has been identified by the CEB’s Long Term Generation Expansion Plan (LTGEP) to construct three LNG power stations, including the already awarded 300 MW Lakvijaya LNG Power Plant.
As explained in the LTGEP, natural gas-fired combined cycle power plants and associated LNG import infrastructure, and 2x300 MW dual fuel combined cycle power plants must be commissioned in the western region by 2022.
The associated LNG import infrastructure is to be developed via a fast-track process with sufficient capacity to cater to both the new power plants as well as the conversion of other oil-fired combined cycle power plants in the western region.
Furthermore, an additional three 300 MW natural gas-fired combined cycle power plants are expected to be commissioned by 2026 in either Kerawalapitiya or Hambantota.
Accordingly, the incorporation of LNG-fired power plants to the Sri Lankan power system has been considered in the LTGEP 2015-2034.
In preparation of the LTGEP 2020-2039, however, the present trend of LNG fuel prices was considered with the possibility of recovering the capital cost of LNG infrastructure. The option of adopting a Floating Storage Regasification Unit (FSRU) as an immediate requirement, while the possibility of a land-based LNG terminal as a long-term solution is considered.
However, LNG infrastructure must be established at least by 2021 in order to gain the maximum benefit of avoiding high-cost fuel oil. The combined cycle plants, which operate using oil in the western region, will be converted to natural gas immediately when the facility is made available. The delays in procuring LNG infrastructure will cause the power plants to operate on oil, which would then result in an enormous cost overrun and increased environmental emissions.
Proposals galore
When contacted by The Sunday Morning, CEB Chairman Eng. Vijitha Herath stressed the CEB was receiving a number of proposals for various energy methods, but the Board is strict on following a competitive bidding process.
According to him, the CEB incurs a loss as it sells a unit at around Rs. 16 while the production cost is around Rs. 23. Therefore, from each and every unit it produces by using diesel, the CEB incur losses, and to reduce the losses, it should go for low-cost electricity, the Chairman said.
“We are finalising the LNG projects and several other low-cost electricity projects. Unless we commence such projects, the losses incurred by the CEB cannot be reduced,” he stressed.
Furthermore, the CEB Chairman said the reason for the delay in commencing low-cost power plant constructions was due to the delay in procurement processes, adding that at the present documentation speed, it would take another a year to finalise the construction of the power plants.
Yet, the CEB could only finalise 300 MW of LNG to be built by Lakvijaya in Kerawalapitiya during the last year.
In January, the Cabinet of Ministers approved a 300 MW LNG plant in Kerawalapitiya as a joint venture between the CEB, Japan, and India, with financial support from the Asian Development Bank (ADB).
The main load centre of Sri Lanka is also located in the western region. In order to minimise the transmission losses, development of power plants closer to the load centre is identified. Therefore, the development of natural gas operated power plants in the western region is identified as a priority, which will also comply with the environmental requirements in the western region. Hambantota is identified as the second location to develop natural gas power plants with its available port facilities.
Meanwhile, Minister of Power Alahapperuma stated that two LNG power plants will be constructed by the year 2023 as a solution to the power crisis in the country.
At a meeting held at the CEB recently, he said that during the last five years, only 300 MW of power was added to the national grid, although the demand for electricity is growing at 6% a year.
Alahapperuma had said that in line with the President's “Vision for Prosperity” policy statement to address the potential power crisis in the future, the contribution of green and renewable energy to the country's power grid should be increased to 70% by 2030.