• Rs. 41 billion spent annually on thermal fuel oil for electricity generation
• Improving self-reliance saves foreign currency spent on fossil fuel imports
• Implementing sector reforms, facilitating free market operation crucial
• Supportive, transparent, and consistent policy environment necessary

Short-term action measures for Sri Lanka to get its energy sector on track include demand-side management strategies such as energy-efficient technologies which require fewer investment costs and cost-reflective pricing, while medium-term strategies should support implementing the Renewable Energy (RE) targets of the Paris Agreement and long-term strategies should align with the Net Zero Emissions (NZE) by 2050, said Institute of Policy Studies of Sri Lanka (IPS) Research Fellow Dr. Erandathie Pathiraja, in an interview with The Sunday Morning.

Commenting on where Sri Lanka stands in terms of the key policy goals in the sector, Dr. Pathiraja said that the country had already committed to no coal capacity additions in the updated Nationally-Determined Contributions (NDCs), being a signatory to the Paris Agreement, and that discussions were underway for expediting the plans with greater political interest. 

Achieving the bulk of electricity energy mix from RE has a multitude of benefits, she asserted: “Considering the economic context and the global energy market uncertainties, it enhances the energy security of the country. Improving self-reliance saves foreign currency spent on fossil fuel imports. Around Rs. 41 billion is annually spent on thermal fuel oil for electricity generation. Moreover, electricity cost is low for RE-based electricity compared to fossil fuel oils. It is a relief for the consumers and other economic sectors to enhance competitiveness.”

Asserting that Sri Lanka was blessed with a range of renewable energy resources – hydro, biomass, off-shore, and on-shore solar and wind – Dr. Pathiraja emphasised that a supportive, transparent, and consistent policy environment would make Sri Lanka’s RE sector attractive for investors.

“Procedural delays in getting environmental licences, possible rent-seeking behaviours, and politicisation need to be avoided. Implementation of power sector reforms and facilitating a free market operation in the electricity sector are crucial for making the sector sustainable,” she further noted.

Following are excerpts of the interview:

Sri Lanka constantly finds itself grappling with energy-related challenges, especially given the state of its economy and heavy dependence on fossil fuels. What would you list as short-, medium-, and long-term action the country should take to get its energy sector on track?

Short-term measures would involve demand-side management strategies such as energy-efficient technologies which require fewer investment costs and cost-reflective pricing.

Some possible supply-side management strategies would be cost-minimising approaches with the optimum use of low-cost electricity sources, efficiency improvements, or retirement of inefficient thermal power plants and promoting rooftop solar facilities and battery storage, perhaps facilitating to go off-grid unless the transmission facilities are developed. 

Medium-term strategies should support implementing the RE targets of the Paris Agreement. The electricity sector’s target is to achieve 70% of the electricity from renewable energy sources by 2030. The CEB’s Long-Term Generation Expansion Plan (LTGEP) has incorporated capacity additions and parallel infrastructure development while the climate prosperity plan has a target to connect with the South Asia grid in particular India.

According to the power sector NDCs, a 25% emission reduction is targeted by 2030. However, a 5% emission reduction is unconditional while the rest 20% is conditional depending on external financial and technical assistance. Therefore, the implementation of proposed plans through necessary policy reforms and supportive policies as well as sourcing outside funding remains crucial. 

Long-term strategies should align with the NZE by 2050, a normative scenario set by the International Energy Agency (IEA). It remains an ambitious goal to achieve globally with technology transition.

Could you do a SWOT analysis of the country’s energy sector as things stand?

Sri Lanka is blessed with a range of renewable energy resources such as hydro, biomass, off-shore, and on-shore solar and wind. There are other potential sources identified with a future potential to commercialise. A supportive institutional structure has already been developed for the renewable energy sector. 

The renewable energy sector has implementation delays of power plants and complementary infrastructure, policy gaps, financing gaps, a lack of skilled employees and investments in vocational skill development, and import dependency on technology. 

However, Sri Lanka can benefit from the technology spillovers. The cost of technologies is gradually declining with technological development. The Paris Agreement considers providing technical and financial assistance for developing countries to achieve emission targets through renewable energy development. 

Sri Lanka needs to depend on global supply chains to meet the technology demand. Globally it is concentrated in a few countries with resource endowments and technology advancements. Hence, uncertainties in supply chain disruptions may influence the sector. 

Going net zero by 2050, achieving 70% of the electricity energy mix from RE by 2030, and no capacity additions of coal plants have been identified as key policy goals. Where do we currently stand in terms of reaching these goals in a timely manner?

The near-term goal is to achieve 70% of the electricity energy mix from RE. The country has already committed to no coal capacity additions in the updated NDCs, being a signatory to the Paris Agreement. It is evident that discussions are underway for expediting the plans with greater political interest. 

What are the key benefits of achieving the bulk of electricity energy mix from RE?

It has a multitude of benefits, other than meeting the climate pledge targets and air pollution. This is discussed in detail in the recently-released IPS annual flagship report ‘Sri Lanka: State of the Economy 2023’. Considering the economic context and the global energy market uncertainties, it enhances the energy security of the country. 

Improving self-reliance saves foreign currency spent on fossil fuel imports. Around Rs. 41 billion is annually spent on thermal fuel oil for electricity generation. Moreover, electricity cost is low for RE-based electricity compared to fossil fuel oils. It is a relief for the consumers and other economic sectors to enhance competitiveness. For example, among the SAARC region countries, Sri Lanka’s electricity price is above Bhutan, Bangladesh, and Nepal. 

What measures should the transport sector, which is heavily dependent on fossil fuel, adopt in order to conserve energy?

Globally, Electric Vehicles (EVs) are considered an option to cut down fossil fuel use. Sri Lanka has committed to implementing tax concessions to promote electric mobility and hybrid vehicles through the transport sector NDCs. 

There are several measures committed under 13 NDCs; for example, transport sector system improvement, promoting public passenger transport, shifting from freight to efficient modes, rapid transport for passenger transport, promoting non-motorised transport modes, introducing taxes and other instruments to promote public transport, introducing inland water transport modes, modernising and upgrading of suburban railway, improving vehicle fleet efficiency, road infrastructure development, reducing GHG emissions from the marine sector, and providing a conducive policy environment. Key activities have been identified under each of the NDCs mentioned above. 

How can we attract investor interest for green/sustainable energy projects?

A supportive, transparent, and consistent policy environment makes it attractive for investors to invest in the RE sector. Procedural delays in getting environmental licences, possible rent-seeking behaviours, and politicisation need to be avoided. Implementation of power sector reforms and facilitating a free market operation in the electricity sector are crucial for making the sector sustainable. 

What would you list as steps the public and corporates should adopt to ensure efficient use of energy?

Enhancing energy efficiency and RE use in all sectors immensely contributes to the economy and the environment. Hence, the NDCs of the Paris Agreement consider transport, industry, waste, forestry, and agriculture sectors in emission reduction other than the electricity sector.

With reference to energy efficiency, NDCs consider demand-side management measures such as promoting the use of energy-efficient equipment, technologies, and system improvements. It includes identified activities such as phasing out incandescent bulbs, promoting the use of efficient lighting, fans, refrigerators, and chillers, implementing energy efficiency building codes, and adopting other energy efficiency enhancement technologies in the industry sector. Performing an energy audit through a registered energy auditor is the recommended way of improving energy efficiency in buildings.