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Renewable energy projects: Moving at snail’s pace despite power crisis 

03 Jul 2022

  • No significant progress despite amending Electricity Act
  • Developers facing difficulties in launching new projects due to economic crisis
  • Information on 47 projects submitted, awaiting PPAs with CEB: SEA DG
  • Foreign and local developers have sent 500 EOIs, 450 shortlisted, 22 PAs issued
  • SEA has not issued provisional approvals to Adani Group project, information sought
  • Local industry facing difficulties in importing material due to currency shortage 
By Maheesha Mudugamuwa The Electricity Act was amended last month, with obstacles being removed to enable proceeding with many renewable energy projects in the pipeline. The move is also aimed at bringing in much-needed foreign investments to the country through the renewable energy sector. However, the Government is yet to make significant progress in the field despite the country facing one of its worst power crises, The Sunday Morning learns. At a time when Sri Lanka has set a target of achieving 70% of its total energy requirement via renewable energy sources by 2030, experts stress that the expected renewable energy expansion has now come to a standstill, with developers facing serious difficulties in launching new projects or continuing existing projects due to the ongoing economic crisis. According to them, there is an urgent requirement to increase renewable energy tariffs to attract more developers and also to lower the losses incurred by current developers. Need to attract FDIs: SEA With local developers facing difficulties mainly due to the foreign exchange crisis, the Sustainable Energy Authority (SEA) said the main focus of the sector at present was to attract Foreign Direct Investments (FDIs) in order to avert the existing foreign exchange crisis affecting expected renewable energy development. Speaking to The Sunday Morning, SEA Director General (DG) Sulakshana Jayawardena said following the Act’s amendment, the authority had submitted information on 47 projects which were waiting for the amendment to sign Power Purchasing Agreements (PPAs) with the Ceylon Electricity Board (CEB). “The Power and Energy Ministry has appointed a committee to review the tariffs applicable for PPAs with those developers under standard tariffs. Once the tariff is available and obtains no objection licences from the Public Utilities Commission of Sri Lanka (PUCSL), they can continue with the projects,” he said. According to him, a majority of the developers are local and only a few are foreign. Commenting on the foreign investments, Jayawardena said: “We invited them to submit Expressions of Interest (EOIs) last year. At the outset we have received around 500 proposals and after shortlisting, we have 450 proposals. We have 30 EOIs from foreign and local developers for lands with ownership and we have issued 22 Provisional Approvals (PAs).” According to the DG, the SEA has issued 50 PAs in total, which should get environment clearance. “Foreign investments are coming for large-scale developments of mainly 50 MW or higher. We are looking for FDIs as local developers are facing issues in obtaining bank loans. “The existing foreign exchange crisis will not affect foreign investors as they can open Letters of Credit (LCs) or obtain loans from their respective countries,” he explained. When asked about India’s Adani deal, the DG stressed that the SEA had not issued Provisional Approvals for Adani. “We have requested some information from the Ministry Secretary and there is a project approving committee representing all stakeholders,” he added.   Increasing tariffs is a must: SIASL The Government last month amended the Electricity Act to eliminate the prevalent issues pertaining to adding small-scale solar projects to the national grid and to open up the sector for FDIs. Welcoming the decision taken by Power and Energy Minister Kanchana Wijesekera to amend the act, Solar Industries Association of Sri Lanka (SIASL) General Secretary Lakmal Fernando said: “There are bigger issues we need to be addressing right now. Act amendment is one thing. The entire country is facing this importation issue, as all materials for renewable energy projects are imported. We don’t have currency to import materials. The industry is seriously threatened from all angles,” he stressed. Hence, as an immediate solution, they urged the Government to increase solar and other renewable energy feed-in tariffs as well.   “Naturally, feed-in tariff adjustments should come into play as a matter of priority because what we are replacing are the high-cost diesel units, which currently cost around Rs. 125 per unit. That is for the diesel cost alone. When you add other costs, it is around Rs. 130. That is what we are replacing and the Government should look at a reasonable price to the kWh generated by the third party and make the CEB more beneficial for the general public,” Fernando explained. When The Sunday Morning inquired about foreign investments for the sector as a solution to the country’s current foreign exchange shortages, Fernando said foreign investments were good if they were coming to Sri Lanka for renewable energy exportation, and not to sell to Sri Lankans. “They will take money for every kWh we burn if they sell energy here. We are 100% for renewable energy exportation,” he added. However, as mentioned in the CEB’s Long-Term Generation Expansion Plan 2022-2041, which includes the policy guidelines of the Government introduced in April 2019 to achieve a total renewable energy share of 50% in 2030, the CEB stated that in order to achieve the said target, moderate growth was expected from the mini-hydro resources considering the remaining economical resource potential and both wind and solar resources being Variable Renewable Energy (VRE) sources with inherent characteristics, which introduced a range of challenges in reliable and economic operation of the power system as well as transmission network expansion. According to the CEB, at the end of 2020, the total renewable energy capacity reached 2,447 MW which includes 1,383 MW of major hydro and 1,064 MW of other renewable energy capacity which in turn includes 425 MW of solar PV with both rooftop and ground mounted applications, 410 MW of mini hydro capacity, 179 MW of wind capacity, and 50 MW of biomass capacity.  Solar PV, being the leading form of renewable energy technology, is facilitated to be increased up to 1,829 MW by 2025 under several schemes of implementation and is expected to reach 2,684 MW by 2030 together with large-scale solar PV projects. As per the CEB’s plan, the present wind capacity is planned to grow up to 1,013 MW by 2030 and continue to grow beyond the same pace with large-scale wind resource development while mini hydro and biomass resources are expected to grow moderately within the next 20 years. According to the CEB, to achieve the 50% target in the long term, the total Other Renewable Energy (ORE) capacity should be increased from 2,447 MW in 2020 to 5,903 MW by 2030 and to 9,563 MW by 2041. Total capacity of major hydro resources should be increased in the first five years by 186 MW with the completion of ongoing hydro power projects, and will remain at the same level afterwards. The total planned ORE capacity should increase from 1,064 MW to 4,371 MW by 2030. Wind and solar capacity are significant contributors to ORE capacity increase whereas moderate growth is expected in mini hydro and biomass technologies. Beyond 2024, the major share of the total renewable energy capacity should be held by the solar PV capacity followed by major hydro capacity. In such a backdrop, as highlighted by solar developers, in order to achieve the 2030 target of 70% set by the Government, the country should have the capacity to spend at least $ 8 to 9 billion for the development of renewable energy sources. New renewable energy sources should be explored: NAO Meanwhile, the National Audit Office (NAO) in its latest report issued in February this year on the renewable energy sector has highlighted 1,374 projects which were currently licensed to generate, with Letters of Intent (LOIs) to be signed for electricity purchase agreements under the standard tariff with the CEB from 1 January 2017, which had been delayed up to three years, and noted it was advisable to expeditiously start development activities. They have further highlighted that according to the Long Term Generation Expansion Plan (LTGEP) 2018-2037, although it was planned to reach 18.4% new renewable energy supply by the end of 2020 as per the published information for 2020, the actual contribution achieved had only been 12%. “That is, the contribution of small hydropower plants among new renewable energy is 7%. The contribution of solar and wind energy is only 5% of the total energy supply. In a situation where the generation capacity of large-scale hydropower plants has been maximised, only new renewable energy sources have the potential to grow further,” the NAO said. According to the NAO, the suspension of signing renewable energy PPAs on a standard tariff basis from 2017 by the CEB has also contributed to the failure to achieve the expected renewable energy generation targets. However, when contacted by The Sunday Morning, CEB Chairman N.S. Ilangakoon said that there was a green light for renewable energy projects as the obstacles had now been cleared. “Things will be much better now,” he added. Local renewable energy suppliers awaiting payments While the Government focuses on foreign investments for renewable energy, local renewable energy generators and suppliers have continued to wait for their payments for the past eight months. As claimed by renewable energy experts, the entire sector has now come to a standstill, with payments worth billions of rupees still pending for renewable energy generators by the State-run Ceylon Electricity Board (CEB), which itself is facing bankruptcy. According to them, the CEB owes a total of around Rs. 25 billion to solar power generators alone for feeding the grid for the last seven to eight months and as result the loans obtained by them from the State banks have now been defaulted. Speaking to The Sunday Morning, Solar Industries Association of Sri Lanka (SIASL) General Secretary Lakmal Fernando stressed that the CEB had failed to pay around 15,000 solar developers and the money it owed them amounted to around Rs. 25 billion. “Non-payment of one State institution has resulted in another State institution putting its customers at defaulting status, which is very unfair. We have discussed this on several platforms and they come up with various excuses,” he added. As a solution, Fernando said they had proposed that the Government pay them directly from the Treasury, like the payments being made for petroleum oil at present.  “Right now, the renewable energy industry is around 1.5 GW and we are looking at expanding this to 9 GW. How are we going to expand unless the utility is paying its debts? No one is going to do charity. The banking sector exposure is about Rs. 70 billion. The entire banking sector is suffering. Individuals are suffering. These are the bigger issues that we should address,” Fernando stressed. Emphasising on the need for the Government to make serious decisions immediately, he said: “The CEB’s expenditure is going to be around Rs. 900 billion and its income will remain at around Rs. 250 billion. We will have to make serious decisions and it has to be done today. We are very happy that the current Minister has done a very brave thing by amending the Act, but that alone is not enough. They are coming out with excuses. This is a result of long-term blocking of renewable energy.” He also noted that the construction cost of projects had gone up by around two-and-a-half times but the feed-in tariff that the industry was having right now was tariff determined in 2016 when the dollar was at Rs. 140. CEB continues to seek tariff hike The Ceylon Electricity Board (CEB) has sought the approval of the Public Utilities Commission of Sri Lanka (PUCSL) – the electricity sector regulator – for an 82% increase in tariffs for the year 2022 under Section 30 of the Sri Lanka Electricity Act No. 20 of 2009.  However, the PUCSL is of the view that the tariff increase should not exceed 57% as a concession to the majority of household electricity consumers. As per the CEB’s tariff revision proposal, it targets to increase the average price of a unit of electricity by 82% from Rs. 18.14 to Rs. 32.48. However, at present, the tariff revisions are in the public consultation process and the Commission has requested all parties, including the public, to submit their views and proposals regarding the proposed tariff revision before 18 July. PUCSL Chairman Janaka Ratnayake said the CEB was targeting an annual revenue of Rs. 512 billion through this tariff revision. However, the recommendation of the PUCSL is that the price of an average unit of electricity should not exceed Rs. 28.14. “We also recommend that the CEB should reduce its operating costs by 10% by increasing its efficiency and use those savings to get more renewable energy for the system.”  Meanwhile, CEB Chairman Ilangakoon said that the CEB was waiting for the tariff increase process to be completed as otherwise it would have to seek the Treasury support to make the pending payments.  “We have to pay the renewable energy sector people around Rs. 22 billion, which now must have reached Rs. 25 billion. We also expect this tariff increase by the PUCSL and it is being processed. Once we receive money we will be able to do that. Otherwise, we have to get the support from the Treasury to make the payments,” he said.  


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