- NSO refers tariff issue for policy-level decision
- Competitive bids to establish market price
- Ministry warns against locking in costly 15-year tariff
The proposed Feed-in Tariff (FIT) for Battery Energy Storage Systems (BESS) has been referred for a policy-level decision, with the Ministry of Energy warning that locking Sri Lanka into a high tariff for 15 years before competitive bidding establishes a market price could ultimately make battery storage costlier than diesel-fired generation.
Ministry of Energy Secretary G.M.R.D. Aponsu told The Sunday Morning that the BESS tariff proposed by the Public Utilities Commission of Sri Lanka (PUCSL) should be considered alongside prices emerging through competitive procurement.
He said that competitive bidding would provide a clearer indication of the market price for battery storage, which could then be used as a benchmark in determining an appropriate FIT.
“If we give a higher FIT now and sign agreements for 15 years, it could ultimately become more expensive than diesel,” Aponsu claimed.
According to him, the Government therefore intends to establish a competitive market price for BESS before committing to long-term fixed tariffs.
As a result, rooftop solar projects linked to battery storage are being kept towards the latter stages of the programme, allowing the authorities to first monitor the prices emerging from competitively bid BESS projects.
Aponsu said that the intention was to avoid fixing a long-term FIT before there was sufficient evidence from the competitive market to determine the actual cost of battery storage.
The issue has also raised a policy question over the capacity threshold at which BESS projects should move from a FIT mechanism to competitive bidding.
According to Aponsu, the National System Operator (NSO) has referred the matter for a policy-level decision to determine whether competitive bidding should apply to projects above 10 MW, 5 MW, or even 3 MW.
The final threshold would therefore determine which projects could qualify for a Feed-in Tariff and which would have to be procured competitively.
“We want to delay giving the FIT. The price should be taken from the competitive market,” Aponsu stated.
Against such a backdrop, the Secretary said that four private companies were undertaking 160 MW BESS projects at present, with one project launched last week and the remaining projects expected to be launched shortly.
Technical evaluations have already been completed for some of the projects, while the remaining procurement and implementation processes are continuing.
The BESS facilities will not generate electricity themselves but will store electricity produced during periods of excess supply and release it when required by the grid.
Aponsu said that the projects would particularly assist subgrids where increasing solar generation had resulted in renewable energy curtailment. Battery storage would allow excess solar electricity that cannot immediately be absorbed by the grid to be stored and supplied later when demand increases.
The projects are expected to progress towards implementation by May next year.
Aponsu stated that competitive procurement allowed authorities to assess battery quality alongside price, rather than awarding projects solely on the basis of a predetermined tariff.
“When we conduct competitive tenders, we have already included the quality measures. We have asked for specifications for the cells, so we are directly involved with quality,” he said.
He further noted that under a standard tariff mechanism, without detailed technical requirements, sufficient attention may not be paid to the quality of the battery cells used by developers. The Government is therefore working on technical guidelines and quality standards for BESS while the competitive procurement process continues.
In July, the PUCSL proposed tariffs covering rooftop solar integrated with BESS, standalone BESS, and renewable power plants equipped with battery storage.
Under the proposal, rooftop solar projects integrated with batteries could receive between Rs. 41.56 and Rs. 66.53 per unit during the prioritised evening feed-in period from 5.30 p.m. to 9.30 p.m., depending on system size.
Standalone BESS projects were proposed with tariffs ranging from Rs. 30.83 to Rs. 50.01 per unit, in addition to a charging component linked to the applicable daytime electricity tariff.
As previously reported by The Sunday Morning, a 10 MW BESS project competitively tendered by the NSO had attracted bids of around Rs. 20 per unit – substantially below some of the rates proposed under the FIT mechanism.
It is against this price difference that the ministry is seeking to observe the outcome of further competitive tenders before deciding on a long-term FIT.
Meanwhile, the Government is preparing a separate programme targeting large industrial rooftop solar producers currently affected by renewable energy curtailment.
Around 480 industrial operators also have ground-mounted solar installations, while a further 150 MW of ground-mounted solar capacity is expected to be procured through competitive bidding, with individual projects limited to around 1 MW.
The Government is separately moving to expand private sector participation in floating solar power. Aponsu said that around 10 floating solar projects were being worked on at present, including a 50 MW project. Several projects are undergoing environmental clearance, with Request for Proposals (RFPs) expected to be called once the required approvals are obtained.