Last week, Sri Lanka’s Board of Investment (BOI) approved two renewable energy projects of Indian conglomerate Adani Green Energy worth $ 442 million, which are expected to be built in Mannar and Pooneryn in the north of the island.
The multimillion dollar investment for two wind power plants, which are expected to add nearly 350 MW of power to Sri Lanka’s starving national electricity grid, received approval days after a controversial electricity tariff hike for consumers.
With the approval for the power plants, the Indian multinational company now tips the $ 1 billion mark in investment in crisis-hit Sri Lanka as it is already involved in the $ 700 million West Container Terminal (WCT) port expansion project, which was approved late last year.
The approval from the BOI came weeks after the controversial Indian multinational company stocks dropped by more than 3%, following concerns raised about its debt by US-based Hindenburg Research.
Issuing a press release on the approval, the BOI stated: “The two wind power plants of 350 MW are scheduled to be commissioned in two years and accordingly, it will be added to the national grid by 2025. Also, the new project will generate 1,500 to 2,000 new employment opportunities.”
Adani delegation meets Wijesekera, Amunugama
Last week also saw an Adani delegation meet with the Minister of Power and Energy Kanchana Wijesekera and State Minister of Investment Promotion Dilum Amunugama.
When contacted by The Sunday Morning, Minister Amunugama said Sri Lanka was keen to fast-track investments, particularly into the energy sector, given the current energy crisis currently facing the island nation.
When asked about the Government’s move to streamline the investment architecture of Sri Lanka to improve ease of doing business and obtain relevant approvals expeditiously via a National Economic Commission, Minister Amunugama said: “There is an oversight committee appointed and they are working on streamlining it. It may take some time because they are not only looking at fusion of the different investment institutions, but also at reviewing the investment law of the land. We are analysing the entire local environment. What the President envisages is the BOI or relevant future mechanism to have authority like the Colombo Commission to fast track investment.”
According to Indian CEO Forum President T.S. Prakash, along with delays in approvals, some of the key challenges Indian investors face in Sri Lanka are the lack of clarity on policy and skilled man power.
When asked what Sri Lanka could do to reach a position of being a regional renewable energy hub, as stated by the President during a policy speech at Trincomalee Harbour last November, Prakash said that Sri Lanka should make an attractive policy for private investments in the energy sector and partner with India for grid connectivity.
Govt. plans for 2,250 MW of renewable electricity generation
According to the Sustainable Energy Authority (SEA), Sri Lanka’s move to navigate out of its current energy crisis has seen significant interest from Indian investors, like Adani. According to SEA Chairman Ranjith Sepala, the Government plans to add a total of 2,250 MW of renewable electricity to the national grid over the next four years.
“We have significant interest recorded for renewable energy. This also includes the potential 600 MW capacity plant at Sampur. There are many Indian companies keen on the energy sector, including some who are keen to assemble solar panels in Sri Lanka. The Sampur Solar Power Plant has been jointly discussed by the CEB and an Indian company,” Sepala explained.
According to him, there is potential to increase the renewable energy capacity in special zones identified around the country, including near Sampur in Trincomalee. He said Sri Lanka had identified Mannar and parts of the Southern coast as priority locations for wind power, including offshore wind power plants, while Sampur and other locations were earmarked for ground-based solar farms.
“One challenge we face is the need to upgrade the transmission lines to connect the solar farms to the national grid,” Sepala added.
India-Sri Lanka grid connectivity
Earlier this month saw reports from Colombo and New Delhi that the two nations were once again attempting to come to an agreement on linking Sri Lanka to the South Indian electricity grid to alleviate the strain on the local power grid.
However, energy expert Dr. Tilak Siyambalapitiya told The Sunday Morning that the potential linkage to the Indian grid may not bring near-term relief to power-hungry Sri Lanka.
“Such an interconnection must be for long-term mutual benefits to both countries. Sri Lanka presently has a crisis in electricity costs and customer prices and in a few years’ time, as we come out of the economic crisis, will again have capacity shortages. This is because Sri Lanka has not built the required power plants of all descriptions, with politicians interfering and cancelling power plant projects at the eleventh hour over and over again.
“The planned interconnection cannot bring relief to any of the ongoing shortages or high costs as an interconnection will take at least three years to build once agreements are signed. We are nowhere near that date, in spite of numerous misleading reports in the media,” Siyambalapitiya opined, adding that, for the project to be successful, Sri Lanka also needed to focus on technical and commercial viability.
“It is like building an expressway. There must be a high potential for power transfers between the two countries, for which costs of electricity production must be different between the two countries at different times of day or in different seasons. Otherwise, if one country is always short of electricity (or short of lower cost electricity), power flow will only be in one direction. The second most important requirement is for a transparent technical and commercial regulatory arrangement, which has to be carefully worked out between the two countries,” he said.
Trinco oil tanks
Meanwhile, in Trincomalee, the Lanka Indian Oil Company (LIOC) is pushing for an early completion of phase one of the upper tank farm, with access to many of the tanks now cleared, LIOC Managing Director Manoj Gupta told The Sunday Morning, adding that LIOC did not want any delays regarding the 10 tanks of the upper tank farm-phase.
“Subsequently, we will be moving ahead with phase two – with the balance 51 tanks. We are awaiting a report from PricewaterhouseCoopers of India (PwCI). It is not only the use of the existing tanks, there is adequate space available and depending on what the feasibility study suggests, we can also explore setting up new large-scale tanks. It is dependent on what PwCI tells us,” said Gupta.
Gupta also pointed out that once the feasibility studies were completed, the LIOC could decide how the oil pipelines – which had not been upgraded for well over 50 years – could be replaced with a new system.
India’s increasing geopolitical influences
India’s increasing contribution to the Indian Ocean region and the evolving geopolitical and security relations of the Indo-Pacific has raised interest about whether the ‘Quad’ collective will venture into infrastructure investment as a counter to China’s influence in the region and to build capacity with the nations that partner with the Quad.
According to Indian Ocean security analyst and East-West Center in Washington, DC Adjunct Fellow Nilanthi Samaranayake, while the Quad is indeed discussing collectively working on infrastructure development in the Indo-Pacific, Sri Lanka will need to clearly indicate its foreign policy stances for there to be interest from the collective.
“The Quad countries have indeed discussed working together on infrastructure. However, it’s not clear at this stage why Trincomalee Port would warrant attention over other potential projects in the Indo-Pacific. Sri Lanka would need to make clear how Trincomalee Port would align with the Quad’s stated objectives on infrastructure development,” Samaranayake told The Sunday Morning.
When asked if India and Sri Lanka would work forward to implement key energy projects related to the strategic Trincomalee bay, now that President Wickremesinghe has signalled his willingness to work together, Samaranayake questioned: “We can recall Prime Minister Modi’s trip to Sri Lanka in 2015 when he discussed India’s desire to help Trincomalee become a regional petroleum hub. It is nearly a decade later, so both countries would be wise to articulate which enablers are needed to achieve this vision and also the obstacles that have so far prevented progress. What will be different in 2023?”