Sri Lanka has achieved 98% grid connectivity and aims to generate 70% of its energy from renewable energy sources by 2030 while achieving a carbon-zero target by 2050.
In an interview with The Sunday Morning Business, Sri Lanka Sustainable Energy Authority (SLSEA) Director General Harsha Wickramasinghe highlighted the nation’s commendable growth in this regard and its benefits to Sri Lankan industries.
Following are excerpts:
Given the global trend of energy transition, how well are Sri Lankan industries adapting to sustainable energy dynamics initiatives and which particular sectors show high adaptation?
Generally, Sri Lankan industries and commercial establishments are demonstrating a degree of adaptation. There are various categories of these active in different ways.
For instance, entities exporting to discerning markets such as Europe and North America are compelled to meet specific emission reduction and low carbon targets. These players are keen to participate in the energy transition, are actively seeking to reduce their carbon footprints, and are conscious about this.
Similarly, large multinational and transnational corporations with branch operations and manufacturing facilities in Sri Lanka are aligning with their global sustainability agendas and are actively involved in these efforts.
However, purely domestic Sri Lankan enterprises not necessarily engaged in exports to these demanding markets are exhibiting a more hesitant approach. At the lower end of the spectrum, companies primarily serving the Sri Lankan or broader South Asian markets are less concerned about reducing their carbon footprint, as their immediate operational challenges may overshadow these concerns. As a result, their participation in green initiatives is less apparent.
Could you comment on Sri Lanka’s progress in terms of sustainable energy adoption?
The nation’s progress in sustainable energy adoption is significant and commendable. In fact, Sri Lanka has exceeded its emission reduction targets by a margin, not primarily attributable to widespread green initiatives but rather to the economic contraction experienced in 2022. The economic downturn led to the closure of many Small and Medium-sized Enterprises (SMEs), resulting in a reduction of energy use.
Also, the tariff increases have prompted more energy conservation among residential consumers and other sectors, leading to more prudent and frugal end-use patterns. As a result, a notable reduction in overall energy use and emissions has been observed.
However, it is important to note that these outcomes are largely a consequence of the economic downturn and therefore cannot be interpreted as an increase in positive green initiatives. Sri Lanka’s emission and energy use has reverted to 2018 levels due to economic regression, possibly losing approximately six years of economic progress.
What is the energy demand by Sri Lankan manufacturing and export industries and what are the challenges in supply? In addition, what are the energy intensity management targets?
Regarding industrial energy, several initiatives are being undertaken both individually by organisations and through the efforts of regulatory bodies such as the SLSEA. A benchmarking system targeting approximately 14 sectors was developed in 2011. This system benchmarked major industries to assess their energy performance relative to established standards.
In 2023, regulatory measures were introduced to this, bringing two economic sectors under a new framework; first, the financial services sector with banks, including the Central Bank of Sri Lanka, and smaller leasing companies; second, retail food outlets, better known as supermarkets. These sectors were brought under an umbrella regulation known as the Energy Consumption Benchmark Regulation of 2023.
This aims to establish benchmarks and ensure adherence while promoting efficiency across these subsectors. While initial efforts focused on these economic sub sectors, plans are underway to extend benchmarking to Government offices, hospitality, healthcare, apparel manufacturing, and tea manufacturing in the next couple of years.
The benchmarking process is complex, as it involves the management of data from thousands of providers through a dedicated portal, and therefore, it will be expanded gradually.
While this initiative is taking place as a regulatory one, at the same time we are happy to note their own initiatives, perhaps due to the steep tariff increases. Industries and commercial entities are increasingly adopting ISO 50001 Energy Management Systems, with businesses seeking to reduce energy consumption primarily for economic survival.
What does that mean in terms of supply?
Currently, Sri Lanka does not face challenges on the supply side, as it is more than what we bargained for. Notably, the solar rooftop industry usually installs a capacity of around 150-200 MW a year. However, it experienced a significant increase in 2024, amounting to 609 MW of new installations in the electricity grid, around four times higher than expected.
While solar energy’s reliability is a consideration, capacity addition targets for reliable power sources remain on schedule. The unprecedented growth in rooftop solar has led to a situation where supply has advanced by approximately four years, reaching levels expected to be reached by 2028, while demand has fallen back to 2018 levels.
The once-affordable subsidised electricity used by a larger population without any inhibitions has now become somewhat unaffordable, driving them to conserve energy as much as they can. As a result, it has freed up resources for higher income groups to enjoy reliable electricity, albeit at a higher price than before.
Therefore, for the first time in history, there is a reverse imbalance, where supply outweighs demand during low-demand time slots. However, this is expected to correct itself over time as the country emerges from the economic crisis.
The addition of 609 MW of capacity within a single calendar year suggests that we have been steadily adding 2 MW per working day, a notable achievement even on a global scale. We were delighted to mark the achievement of the 100,000th installation last month in addition to passing the 1,500 MW mark in the solar rooftop industry. It is now the largest capacity block of a given generation technology, surpassing hydro and coal power.
Therefore, the rooftop solar programme has witnessed a phenomenal capacity increase whereby approximately one-eighth (12.5%) of Sri Lanka’s entire electrical energy demand at present is being met by the rooftop solar industry, which is accountable for a substantial proportion of the energy supply.
It will likely take a while for the demand to align with the increasing supply levels, resulting from a steady economic growth. The solar industry will need to weather a corrective phase, while economic growth will have to accelerate in order to ease the pain of the energy transition. If not, the era of curtailments will arrive, bringing in uncertainties to the industry.
Which industries are benefiting the most from solar energy initiatives in Sri Lanka?
Export-oriented industries benefit the most and also unexpectedly. In addition to larger corporations, smaller enterprises are also realising benefits while using solar energy as an additional revenue stream.
The rooftop solar programme has proven to be a significant and dependable revenue stream for these smaller businesses, acting as a crucial business-steadying financial inflow for a large number of SMEs, allowing them to benefit immensely.
What role does energy play in high production costs and how does reliance on imported oil energy supplies impact this?
Electricity costs are a tangible and easily quantifiable cost for businesses, as payment cannot be deferred, and become an immediate operational burden.
However, it is important to note that from 2014 to 2022, Sri Lanka benefited from some of the most inexpensive electricity for industrial purposes in the region. While energy costs are often identified as a primary concern, the more fundamental challenges may lie elsewhere.
The utilisation of imported fuels is a common global practice – an unavoidable reality for most nations. If domestic oil resources are lacking, importation becomes necessary and increasing the proportion of indigenous energy sources is advantageous, as it directs capital towards the domestic economy, thereby contributing to GDP growth.
Even in terms of thermal energy, we have encouraged a transition towards sustainably sourced fuelwood, reducing dependence on oil and gas.
We are happy to note the importation of Liquefied Natural Gas (LNG) within the next two to three years, which will be a major victory for the industrial sector. When compared to Liquefied Petroleum Gas (LPG), LNG is approximately 50% cheaper, which will lead to considerable cost reductions for industries utilising LPG as a thermal fuel.
It is always beneficial to diversify options rather than depending solely on one source of energy.
The SLSEA plans to develop indigenous renewable energy resources to generate 70% of power by 2030. Sri Lanka also aims to be carbon neutral by 2050. How has the progress been and how will achieving these targets contribute to economic and industry growth?
Achieving the 70% renewable energy target by 2030 requires inviting substantial investment worth billions of dollars into the country and in turn demands thorough preparatory work, ensuring the national grid’s readiness to integrate such large volumes of renewable energy.
It involves infrastructure development, but renewable energy project investors typically do not cover these costs. Therefore, securing long-term financing from development partners such as the World Bank, Asian Development Bank (ADB), and Japan International Cooperation Agency (JICA) is essential to fund the necessary infrastructural development. Without this financial support, realising the 70% target will be more challenging.
Therefore, this is a complex journey, involving tedious and lengthy processes such as land acquisition, overcoming legal hurdles, and land ownership concerns.
However, efforts such as pre-development activities to prepare projects for investment are already underway, and from a project development standpoint, both the Ceylon Electricity Board (CEB) and SLSEA have unearthed a handsome bundle of solar and wind resources in the country.
The carbon neutrality target of 2050 is comparatively attainable as Sri Lanka has a relatively marginal carbon footprint to manage. This can be attributed to our home gardens, forest cover, and sustainable agricultural practices; we are a nation with a carbon output that can be easily neutralised. Therefore, we are happy to note that with well-informed policy decisions, carbon neutrality by 2050 is a realistic objective.
How do delays in project implementation and lack of investments affect our energy targets and growth concerns? What immediate or long-term steps must Sri Lanka take, policy-wise or otherwise?
Actually, we have to live with it. Delays in project implementation are a global reality in infrastructure development. The gestation period for a 100 MW development project can extend beyond five to seven years even in developed nations like the US.
Sri Lanka is also learning this the hard way. For instance, the Mannar wind power project took eight years from initial concept to full operation. A comprehensive environmental impact assessment, for instance, typically needs to cover at least one full weather cycle. Large-scale projects inherently involve complex issues, including land acquisition, impacts on local communities, wildlife considerations, and other such competing uses of land.
Patience and an understanding of the time required for these processes should be considered, as it is not due to lethargy or inefficiency of the relevant officers as many would like to point out. One thing we can be certain of is that the SLSEA will be defending its 50% renewable energy share in the national grid.
What economic opportunities can Sri Lankan industries achieve by developing clean energy technologies?
There are many. In the solar rooftop industry, which is flourishing, areas such as inverter manufacturing, servicing, and the development of indigenous technology tailored to Sri Lanka’s specific needs present promising avenues.
Sri Lanka has demonstrated capability to produce world-class electronic products. Similarly, opportunities exist for increasing local value addition, even in larger-scale engineering aspects such as wind turbine and tower manufacturing.
Therefore, there are many emerging pathways with the expansion of the market. Battery manufacturing will be a major player in terms of higher demand in the future and any business keen on leveraging this market will reap notable benefits, as there are many manifestations of battery technologies.
Although geographically small, Sri Lanka’s market size, comparable in population to countries such as Australia, is significant even on a global scale.