• Renewable energy producers, investors & consumers push for cost-effective renewable (especially solar) power based electricity generation in the face of innumerable regulatory & financial obstacles  

The recent decision by the Government to reduce the tariff rates for new rooftop solar and renewable energy projects has sparked considerable debate and concern among stakeholders. With the revised rates set to be applied from 1 July, this policy shift has drawn attention to the broader implications for both the energy sector and economic stability. While the Government argues that the new tariffs were determined with careful consideration of the current electricity rates and other-related conditions, many stakeholders including local investors fear that the move could discourage local investment in renewable energy, thereby stalling the progress made in recent years and threatening the country's goal of achieving sustainable economic growth through increased reliance on renewable energy sources. The Cabinet of Ministers recently approved a significant reduction in the tariff rates paid for new rooftop solar and renewable energy projects. 

The revised tariff rates are to be applied to all new projects from 1 July. The revised rooftop tariff - 20 years flat rate is Rs. 27.06 up to 500 kilowatts (kW) and Rs. 23.18 for over 500 kW while the revised feeding tariff - 20 years flat rate is Rs. 25.48 for solar, Rs. 30.53 for mini hydro, Rs. 29.86 for wind, and Rs. 52.77 for biomass. Several stakeholders have since warned that the Government's latest decision will discourage local entrepreneurs who have invested in solar and renewable energy projects and potentially lead to the collapse of the renewable energy sector in Sri Lanka.

Speaking to The Daily Morning, the Treasurer of the Renewable Energy Protectors' Association (REPA), Chanaka Jayawardena highlighted the economic benefits of increasing renewable energy generation, especially solar power. He pointed out the high costs associated with fuel based power generation and the significant impact that they have had on the country’s finances. "In 2022, we spent Rs. 203.7 billion on fuel based power, and this rose to Rs. 278.9 billion last year (in 2023). These expenses are a huge burden on our economy in both the short- and long term. By contrast, a power capacity of 1,320 gigawatt hours (GWh) a year can be generated at a cost of Rs. 48.8 billion. To generate the same capacity using diesel will cost us Rs. 92.4 billion. This is why renewable energy sources, particularly solar power based power generation should be promoted."

Power generation from renewable energy sources such as hydro, wind, solar, and tidal power is essential for achieving sustainable economic growth. These sources ensure the continuity of power generation, which is fundamental to the stability and development of businesses and the economy as a whole. It is however noteworthy that the generation of power using hydro, wind, and tidal power faces numerous challenges. One major challenge is the limited availability of suitable locations for installing hydro and wind power plants, and in a context where many of these prime locations have already been utilised. Additionally, continuous power generation is often interrupted due to various factors such as drought, which affects hydro-power plants. The high initial capital required for setting up these renewable energy projects further complicates their development. Moreover, Sri Lanka's limited foreign exchange reserves constrain the ability to import the necessary technology and equipment, making it difficult to expand renewable energy based power generation. Even though such challenges exist in generating electricity from the other renewable sources, solar power stands out as a particularly advantageous option for Sri Lanka. With its abundant year-round sunlight, Sri Lanka is naturally well-suited for solar power generation. The country has ample rooftops and open spaces for solar panel installations, making it feasible to harness solar power on a large-scale. Investing in solar power generation requires relatively low capital compared to other renewable sources, and it involves minimal foreign exchange outflow, which is crucial for a country like Sri Lanka with limited reserves. The production costs for solar power are also significantly lower, enhancing its economic viability. Additionally, the solar energy sector is poised to create substantial employment opportunities, thereby boosting the local economy. Solar power is 100% eco-friendly, producing no harmful emissions and contributing to the global goal of zero carbon energy by 2050. The maintenance costs for solar installations are relatively low, adding to their long-term affordability and sustainability.

An investor in solar power projects, Amal Sarathchandra highlighted the numerous advantages of solar power based power generation while also pointing out significant obstacles that impede the sector's development. He noted that frequent delays in approving requests for solar power system installations disrupt project timelines and overall efficiency. Additionally, securing financial assistance intended to support these projects has been challenging, impacting their financial feasibility. For solar power systems with capacities exceeding two megawatts (MW), the approval process for pricing related applications can extend beyond five years, creating uncertainty and delays in implementation. Furthermore, the current tax system imposes significant taxes on essential equipment such as solar panels and inverters, resulting in exorbitant prices that make these devices less affordable, in turn deterring potential investors. He emphasised that these regulatory and financial hurdles collectively hinder the solar power sector from achieving its full potential and expanding effectively.

The popularity of solar system based power generation in Sri Lanka began to rise significantly in 2015 with the launch of the 'Soorya Bala Sangramaya'. A report compiled by the REPA states that as of 31 December, 2023, the country's solar capacity had reached 652 MW. From 2015 to 2022, the solar capacity increased at an average rate of approximately 81.5 MW per year. By the end of 2022, the solar capacity stood at 535 MW. Over the course of the following year, 2023, this capacity saw a substantial increase of 117 MW, reaching a total of 652 MW. By 30 June (last month) of this year (2024), the solar capacity had surged to 1,000 MW, marking a remarkable increase of 348 MW in just the first six months of the year. The report attributes this significant growth in solar capacity to the Government's decision to raise the tariff rate for solar generated electricity from Rs. 22 to Rs. 37 per unit, and increased public awareness. According to the report, a total of Rs. 203.736 billion was spent on power generation in 2022, which included Rs. 135.534 billion for coal based electricity and Rs. 68.202 billion for diesel based electricity. In 2023, the expenditure rose significantly to Rs. 278.865 billion, comprising Rs. 159.163 billion for coal generated electricity and Rs. 119.702 billion for diesel generated electricity. The cost per unit of electricity generated from diesel varies, ranging from a maximum of Rs. 115.44 to a minimum of Rs. 50.55, with the average being Rs.70.

The Electricity Consumers' Association (ECA) General Secretary Sanjeewa Dhammika emphasised that the fluctuating prices of diesel and coal cause the cost of electricity generated using these sources to constantly rise and fall. In contrast, one of the significant advantages of solar energy, he said, is its cost which does not undergo frequent changes. He noted that this stability allows for the direct and long-term reduction of electricity bills and the preservation of a substantial amount of foreign exchange, preventing it from flowing out of the country. Furthermore, he highlighted that solar energy has the potential to strengthen the local economy in multiple ways, including by creating numerous direct and indirect job opportunities.

Another local investor, Suresh Galanga, raised significant concerns regarding foreign investments in local solar energy projects. While at first glance these investments might appear advantageous due to the provision of the initial capital, he argued that they could ultimately harm the country's economic stability. He explained that although these foreign funds offer temporary financial relief by jumpstarting solar energy projects, the long-term consequences are far from beneficial. The crux of the issue lies in the payments that should be made for the electricity generated by these foreign funded projects. This scenario, he noted, is similar to the financial drain experienced with expenditures on purchasing diesel and coal. He also drew a parallel between this situation and the burden of repaying foreign debts, claiming that continuous payments for electricity generated by foreign investments create a significant financial strain on the country. This perpetual outflow of money to pay for energy, he emphasised, diverts valuable financial resources that could otherwise be used to strengthen the local economy. "The focus should be towards encouraging local entrepreneurs to invest in the solar energy sector. By doing so, the country can ensure that the financial benefits and profits of renewable energy projects remain within its borders."

In a recent letter to the Ministry of Finance, Economic Stabilisation, and National Policies, as well as the Ministry and Treasury Secretary, Mahinda Siriwardana, the Public Utilities Commission of Sri Lanka (PUCSL) recommended delaying the implementation of the revised tariff rates for new rooftop solar and renewable energy projects until they can gather and analyse the relevant data. The PUCSL's Director General Damitha Kumarasinghe, explained that the Ceylon Electricity Board (CEB) had requested the PUCSL's approval for the new tariff rates. He further noted that the PUCSL had engaged in discussions with key stakeholders, including the CEB, the Lanka Electricity Company, the Sustainable Energy Authority, the Solar Industry Association, the Federation of Renewable Energy Developers, and various solar companies, to obtain their input. He also mentioned that the PUCSL had received a substantial number of consumer complaints regarding the tariff revision. Due to the need for more information to accurately analyse and verify the data related to the proposed changes, the PUCSL recommended maintaining the previous tariff rates until a thorough review can be completed.

The Minister of Power and Energy, Kanchana Wijesekera, addressed the recent tariff revision in the Parliament, asserting that no one has been subjected to injustice due to the Government's decision. He clarified that projects which received approval and made their deposits before 1 July will continue to be paid at the previous rates. "For projects that were approved and had deposits made after this date, payments will be made according to the new rates. The new tariff rates were determined after careful consideration of the various factors, including the current electricity tariffs."