Power supply: Uninterrupted power assured till December

a year ago

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Forex and debt crisis risk energy security for next year
Two coal spot tenders fail to attract bidders
Sri Lanka failed to exploit renewable energy solutions

By Asiri Fernando Sri Lanka has adequate reserves of coal and hydropower to provide sustained electricity supply till December this year, The Sunday Morning learnt. “Right now, I don’t see any immediate threat of power cuts or load shedding till December. And our reservoirs are full, and we have not yet begun to use their full capacity,” Ceylon Electricity Board (CEB) General Manager M.R. Ranatunga told The Sunday Morning in response to a query. Ranatunga opined that with the current stocks of coal and a shipment expected between November and December this year, the CEB was confident that they can deliver uninterrupted supply through the first months of 2022. “Hopefully, we will be able to manage until February or March. Then, we will have to see the situation, because the backup (power generation) supply is from coal. For the first part of the year, we have adequate coal. But after that, we have to see how the situation develops in the country,” he said. The CEB official’s comments came in the backdrop of Minister of Energy Udaya Gammanpila, last week, reiterating that there was no fuel shortage in the country. However, Gammanpila highlighted the debt the CEB owed the Ceylon Petroleum Corporation (CPC), which he claimed was constraining the CEB’s ability to pay its debt to two state banks. Sri Lanka also sought a line of credit worth $ 3.6 billion from Oman to sustain fuel supply needed for the country. When asked about the debt the CEB owes, Ranatunga said that they too were facing a debt problem with domestic and industrial customers owing the utility supplier Rs. 28 billion and Rs. 17 billion, respectively. Ranatunga said that the CEB will find it challenging to purchase coal and other fuel needed to run the thermal power stations next year due to the ongoing foreign currency crisis. He warned that maintaining supply may be affected as diesel and heavy fuel oil costs increase and with inadequate forex reserves to purchase them. Both types of fuel are used to run thermal power plants. The CEB will also face difficulties in ensuring adequate stocks of coal are purchased for next year due to the debt it is owed and the foreign exchange problem, Ranatunga opined. The situation is made more challenging since coal inflows to Sri Lanka can only be unloaded during the window from October to April each year. Thus, purchases of coal for the better part of 2022 need to be made now or in the coming months. CEB Engineers’ Union (CEBEU) President Saumya Kumarawadu told The Sunday Morning that although tenders were called to buy coal, many suppliers had not responded. He opined that this may be due to the ongoing forex crisis and concerns regarding payments. “Tenders have been called to replenish coal stock, but we see a reluctance to respond to them by potential bidders due to Sri Lanka’s dollar issue. This could lead to spot market purchases. If that happens, we may run the risk of low-quality stocks being purchased,” Kumarawadu opined. The Sunday Morning reliably learnt that two spot tenders (300,000 MT each) for coal had not attracted any bidders this year. The resulting gap of 600,000 MT of coal makes up approximately 25% of the annual requirement for coal-fired power generation in Sri Lanka. Speaking to The Sunday Morning, energy expert Dr. Vidura Ralapanawe explained that even if the Lanka Coal Company floated a tender for coal early next year, the question of Sri Lanka’s forex reserves and the utility provider’s ability to make payments would likely continue to play a role when bidders considered responding to it. Dr. Ralapanawe questioned if the status quo will change adequately enough by the first quarter of next year to encourage coal suppliers to bid for a new tender. “Another tender for coal next year assumes several things. One of them is, will our payment risk be sufficiently resolved that interested parties will want to bid for it? The question is, if they didn’t bid before, will they bid next year? If the fundamentals of the earlier tender have not changed by the time the new one is issued, will there be bids?” Dr. Ralapanawe questioned. Commenting on power generation, Dr. Ralapanawe questioned if the CEB had adequate power-generation capacity by itself, without seeking to purchase power from private suppliers to fulfil an increasing demand as Covid-19 effects reduce, even if coal and fuel stocks were secured. If the Covid-19 outbreak’s impact declines next year, as the Government anticipates, “returning back to normal” may see a surge in demand for electricity, which is likely to put a strain on the supply grid. Another factor which adds to the energy supply risk calculation is the possibility of one or more of the coal power plants breaking down. Responding to a query on Sri Lanka’s long-term energy security, Dr. Ralapanawe stated that Sri Lanka had failed to capitalise on a push to improve the renewable energy sector in Sri Lanka over the last few years and that poor policymaking was also contributing to the issue. He argued that the CEB’s reluctance to adapt to the changes in the market, its love of fossil fuels, and inconsistent national policies on energy sector reforms created unnecessary bottlenecks for the growth of the renewable energy industry. He pointed out that many countries in the region, including India, welcomed renewable energy and supported its growth. Dr. Ralapanawe also charged that the CEB withheld payments to renewable energy suppliers who had already supplied energy for the last three months. He questioned the CEB’s commitment to diversifying the national power generation system and the renewable energy targets set by the Government. “What are we communicating to potential investors who want to invest in renewable energy in Sri Lanka by bringing in technology and foreign currency?” he questioned. Each year, Sri Lanka debates its energy issues, but the core issues remain. The power generation woes of Sri Lanka have been well documented over several decades. Sri Lanka’s neighbouring countries keep moving forward with renewable energy, diversifying their supply options and reducing generation costs in the long term.