The Ceylon Electricity Board’s (CEB) decision to introduce a new price formula for solar energy has raised concerns about the sustainability of the domestic renewable energy industry, The Sunday Morning learns.
This, while Sri Lanka has set an ambitious target for renewable energy to provide 70% of the national power supply by 2030.
It is learnt that if a new price formula is introduced for solar energy-based power generation, the difference between the unit cost of solar and other fossil fuels such as naphtha and Heavy Fuel (HF) may reduce.
The concern that the pricing difference may reduce stems from how the calculation of other cost factors such as grid expansion and storage for renewable energy is included in the new price formula. Industry insiders fear that the unit costs will reach nearly Rs. 100 within the next few years, dampening hopes of many in the domestic industry from investing.
CEB unit costs
According to CEB statistics (as of January this year), a unit cost at Lakvijaya, Kelanitissa Combined Cycle Plant (KCCP) – naphtha, Sapugaskanda B, Barge, Sapugaskanda A, Uthuru Janani, West Coast – LSFO, Sojitz, KCCP – diesel, West Coast – diesel, CEB Thulhiriya (Emergency), Kolonnawa 1, Kolonnawa 2, Matugama, KPS (GT7), and small GT were respectively around Rs. 49, Rs. 57, Rs. 58, Rs. 59, Rs. 62, Rs. 62, Rs. 63, Rs. 86, Rs. 86, Rs. 101, Rs. 113, Rs. 114, Rs. 116, Rs. 117, Rs. 149, and Rs. 195.
However, in 2022, a unit cost at Lakvijaya, KCCP – naphtha, Barge, Sapugaskanda B, Sojitz, Uthuru Janani, KCCP – diesel, West Coast, Sapugaskanda A, KPS (GT7), CEB Thulhiriya (Emergency), Kolonnawa 2, Kolonnawa 1, Matugama, and small GT were respectively around Rs. 15, Rs. 22, Rs. 25, Rs. 25, Rs. 25, Rs. 25, Rs. 25, Rs. 26, Rs. 27, Rs. 34, Rs. 35, Rs. 35, Rs. 35, Rs. 35, and Rs. 50.
On the contrary, it is understood that in line with the three-tier tariff options suggested by the committee which was appointed by the Ministry of Power and Energy, the tariffs suggested for tier 1 (year 1-8), tier 2 (year 9-15), and tier 3 (year 16-20) were Rs. 32.28, Rs. 17.52, and Rs. 11.95 for mini hydro; Rs. 29.79, Rs. 14.99, and Rs. 9.89 for wind; Rs. 33.74, Rs. 16.98, and Rs. 11.21 for solar; Rs. 17.92, Rs. 9.02, and Rs. 5.95 for biomass; Rs. 17.92, Rs. 9.02, and Rs. 5.95 for agricultural and industrial waste; Rs. 57.02, Rs. 28.69, and Rs. 18.94 for municipal solid waste; and Rs. 13.44, Rs. 6.76, and Rs. 4.46 for excess power from agri/industrial waste of the same industry, respectively.
The previous tariffs have been reviewed by an eight-member committee appointed by the Power and Energy Ministry. The committee comprises Ministry of Power and Energy Additional Secretary A.K.N. Wickramasinghe (Chairman), Ministry of Power and Energy Additional Secretary (Generation, Transmission and Distribution) L.K. Sugath Dharmakeerthi, CEB Deputy General Manager (Renewable Energy Procurement and PM) K.K.P. Perera, Ministry of Finance Department of Public Enterprises Additional Director General H.M.S. Dharmawardane, CEB Deputy General Manager (Energy Purchase) G.W. Vajira Priyantha, Public Utilities Commission Director General Damitha Kumarasinghe, SLSEA Deputy Director General (SSM) H.A. Wimal Nadeera, and Central Bank of Sri Lanka Senior Economist M.M.L.K. Wijerathne, as per their official designations at the time of appointment.
New formula for solar tariffs
However, according to CEB Chairman Nalinda Illangakoon, the tariffs introduced for solar under the recent tariff options will be changed and instead, a new formula will be introduced to decide solar tariffs.
The move comes after the recent visit of a group of officials from India’s Adani Energy, during which concerns had been raised by both local renewable energy development specialists close to the subject, as to whether the Government was attempting to increase the tariffs to meet the feeding tariff requirements sought by the Indian energy giant.
The Sunday Morning earlier reported that the Sri Lanka Sustainable Energy Authority (SLSEA) had granted the preliminary approval to Adani Green Energy for the declaration of the development area as a renewable energy development area under Section 12 of the Sri Lanka Sustainable Energy Authority Act, No. 35 of 2007.
In a letter dated 7 July 2022 (Ref no: SEA/RFP/A-41640), the SLSEA Chairman has informed the Adani Green Energy Sri Lanka Director that upon the receipt of the technical feasibility report on 24 May 2022 from Adani and as per Clause 3(2) of the MoU dated 11 March 2022 to set up 500 MW renewable energy power plants (wind and solar) in Mannar and Pooneryn amounting to an investment approximating $ 442 million, the authority grants the preliminary approval and declares the development area as a renewable energy development area.
As per the SLSEA, the approved capacity for Adani is 234 MW.
Furthermore, it is understood that the SLSEA is in the process of carrying out the necessary steps to complete the resource allocation for the proposed project, adhering to all legal and other relevant formalities.
It is also learnt that the SLSEA has informed Adani that it had already informed the transmission licensee, energy regulator, and other stakeholders to fulfil their legal obligations.
Opposition to increased solar tariffs
Prior to the electricity tariffs being reviewed, the Sri Lanka Electricity Act was amended in June to eliminate competitive bidding for energy projects. The move drew sharp criticism from the Opposition as well as from some of the engineers working at the CEB.
A senior CEB official, speaking to The Sunday Morning on terms of anonymity, said that if the solar energy tariffs were increased once again, foreign investors like Adani would benefit for 20 years, since the tariff had been determined during a very turbulent period in the economy, where the exchange rate fluctuated daily and high interest rates were given by banks.
It is reliably learnt that the CEB, despite the new amendments which paved the way to go ahead with feeding tariffs without calling for tenders, has called for a tender. This is a move that is viewed by several energy sector sources as an attempt to give legitimacy to increased renewable energy tariffs.
However, when The Sunday Morning contacted Renewable Energy Council (National Chamber of Commerce of Sri Lanka) Chairman Lakmal Fernando, he stressed that the CEB should have identified its priorities and provided what the local developers wanted the most at present – to see their pending payments, amounting to nearly Rs. 5 billion, being paid by the State.
“It is hard to survive as a renewable energy developer in the country,” Fernando stressed.