Investors are eagerly awaiting the findings of the expert committee appointed to review Renewable Energy (RE) projects submitted through the Expression of Interest (EOI) process initiated in 2021. With the committee set to meet next week, stakeholders are hoping for a swift resolution, as learnt by The Sunday Morning.
Ceylon Electricity Board (CEB) Chairman Dr. Tilak Siyambalapitiya told The Sunday Morning that they were expecting a quick response from the committee.
Despite this development, investor confidence remains fragile due to the prolonged regulatory uncertainty surrounding these projects. Having committed significant resources based on prior approvals, investors now face delays that could impact the viability of their ventures.
Any further hesitation in providing clear direction could risk derailing Sri Lanka’s renewable energy ambitions, especially with the new Sri Lanka Electricity Act No.36 of 2024 set to take effect in June.
Regulatory stalemate
In 2021, the then Government initiated an EOI process to expedite RE projects aimed at meeting Sri Lanka’s target of generating 70% of electricity from RE sources. Several projects received approvals and progressed to implementation stages. The controversial projects were approved under the previous Sri Lanka Electricity Act No.20 of 2009.
However, the new Energy Ministry has recently sought to overturn much of this progress.
The ministry has proposed a set of measures in a Cabinet memorandum to address issues in the implementation of RE projects. A significant action included revoking previous Cabinet approvals that were seen as conflicting with the Sri Lanka Electricity Act No.20 of 2009 (as amended).
The ministry also recommended suspending further processing of EOI projects under Sections 17 and 18 of the Sri Lanka Sustainable Energy Authority (SLSEA) Act No.35 of 2007 to ensure legal compliance and alignment with the prescribed procedures.
Additionally, the ministry has planned to introduce technology-specific standards and Standardised Power Purchase Agreements (SPPAs) for RE projects above 10 MW, aimed at promoting non-negotiable, least-cost electricity production. These steps are designed to ensure a transparent and efficient process for future projects, in line with national energy goals.
The ministry has also sought legal advice regarding the revocation of previous Cabinet approvals, considering the commitments made by developers. It has also requested guidance on creating a legally sound framework for implementing a technology-specific standardised tariff and SPPA for RE projects above 10 MW, ensuring compliance with the Sri Lanka Electricity Act and related regulations.
As learnt by The Sunday Morning, the Attorney General’s (AG) Department has warned of potential legal action from investors if the ministry proceeds with revoking the approvals and implementing the standardised tariff.
When The Sunday Morning inquired about the progress of the expert committee to be appointed by the Energy Ministry, Ministry of Energy Secretary Prof. Udayanga Hemapala confirmed that the committee was yet to be appointed, despite several weeks having passed since Cabinet approval.
New amendments
The amendments have been suggested to the new electricity act through a concept paper submitted on 20 January 2024, which has been compiled by a committee comprising Government officials, energy sector experts, and academics.
The committee was chaired by Prof. Hemapala, with Pubudu Niroshan Hedigallage serving as General Secretary and Chandana Wijayasinghe as Convenor. Other members include senior officials from the CEB, Lanka Electricity Company (LECO), leading universities, and professional engineering bodies.
As per the suggested amendments, the changes highlighted competitive bidding for energy projects and imposed a 1 MW cap on renewable power plants eligible for SPPAs. These reforms aim to enhance regulatory oversight but may also impact ongoing and future RE investments.
The proposed amendment to Section 11(1) introduces two key changes to the existing provision. First, the requirement for a competitive and transparent procurement process is moved from being a separate provision into the main list of exemptions, ensuring that only projects selected through such a process qualify for exemption. This shift clarifies that competitive selection is a mandatory condition for exemption, thereby tightening the regulatory framework.
Second, the amendment removes the emergency procurement exception which previously allowed for bypassing the competitive process in urgent situations, such as during a national crisis or significant energy disruptions. With the removal of this provision, all projects including those intended to address emergency energy needs must now go through the competitive procurement process.
Furthermore, Section 11(3) which currently reads as “the Minister may on the advice of the council, by order published in the gazette, specify the maximum capacity of any renewable energy technology-based power plants which may be permitted to enter into SPPAs with the National System Operator (NSO),” will be amended to “the maximum capacity of any renewable energy technology-based power plants which may be permitted to enter into SPPAs with the NSO shall not be exceeding 1 MW in interconnection capacity”.
However, as reliably learnt by The Sunday Morning, the new amendments could have serious implications for previously approved RE projects. Projects that were not awarded through a competitive bidding process may face uncertainty or cancellation, leading to potential legal disputes.
Additionally, RE projects with capacities exceeding 1 MW that were previously eligible for SPPAs may now have to renegotiate contracts or face restrictions on grid access. This could disrupt investment plans and slow down RE expansion, potentially impacting Sri Lanka’s energy transition and investor confidence in the sector, it is learnt.
Unexpected cancellations
Against this backdrop, the Hambantota District Development Committee (DDC) made a controversial decision on Wednesday (29 January) to immediately suspend 30 solar power projects that were proposed for the Hambantota District.
This move was based on a proposal from DDC Chairman and National People’s Power (NPP) MP Nihal Galappaththi, who reportedly argued that all projects initiated by certain corrupt businessmen through political influence during the previous administration must be immediately halted.
As reliably learnt by The Sunday Morning, a series of solar projects in the Hambantota District have received approvals, including a 50 MW project from a consortium comprising five companies – Nidhanya International Ltd., Tanu International Ltd., Tannish International Ltd., Dudu International Ltd., and Orion Solar Ltd.
These projects have secured SLSEA approval, signed CEB SPPA agreements, and have long-term land leases from the Mahaweli Authority of Sri Lanka (MASL).
Additionally, a 150 MW project by a consortium consisting of 17 companies such as Photowatt Ltd., Solargen Ltd., Elephant Power Ltd., Geneco Ltd., and others has also received SLSEA approval, signed CEB SPPA agreements, and secured long-term land leases from the MASL. WindForce PLC has also proposed a 60 MW solar power plant with its EOI approved, and land is provisionally approved by the MASL.
Furthermore, seven new 10 MW solar projects have been approved, including from companies such as Crystalline Central Solar Ltd., Sundrop Solar Power Ltd., and Harbourview Sunrun Solar Energy Ltd., all with SLSEA approval and provisional land clearance from the MASL.
Authorities in the dark
However, according to Prof. Hemapala, the ministry is yet to officially be informed about the decision. “We have not received any official communication in this regard,” he told The Sunday Morning.
Further, when contacted, SLSEA Chairman Prof. Wijendra Bandara told The Sunday Morning that they were not informed of such a decision made by the Hambantota DDC.
“The DDC has certain powers, but I am not sure it has the authority to cancel projects. We are promoting RE projects and the authority is working hard to ensure that more RE projects will be connected to the national grid,” he said.
When asked about the delay in appointing the committee to negotiate some of the RE projects approved by the previous Cabinet, Prof. Bandara said that policy decisions would be made to streamline the projects without discouraging the RE sector.