A significant shift in Sri Lanka’s power sector is being witnessed, with a growing dependency on India. Several forthcoming mega projects, including Adani’s Renewable Energy (RE) investment, a grid connectivity initiative, and a potential Liquefied Natural Gas (LNG) collaboration with the US-based New Fortress Energy (NFE), are set to redefine the nation’s energy landscape.

Highly-placed sources told The Sunday Morning that Power and Energy Minister Kanchana Wijesekera was actively pressing the State-run Ceylon Electricity Board (CEB) to expedite these projects, with a particular focus on the project with India’s major business entity, Adani Green Energy Ltd.

Meanwhile, in India, the Adani Group has drawn criticism for allegations related to the use of offshore tax havens to drive up share prices. More recently, Indian National Congress (Congress Party) politician Rahul Gandhi blamed the Adani Group for the rise in electricity prices, citing a Financial Times report. 

Gandhi reportedly claimed that the Adani Group had over-invoiced coal imports, which had impacted electricity rates in the country and led to consumers paying higher electricity bills.

Adani’s investment

 Currently, the CEB is in a holding pattern, awaiting critical project-related confirmations from Adani. A CEB official, closely involved in the discussions, disclosed on conditions of anonymity: “Clarifications are being sought, and negotiations are progressing well. We anticipate that the project will commence in the near future.”

However, Sri Lanka’s increasing reliance on India for these vital energy projects is raising eyebrows. The official said the utility provider was currently awaiting several essential clearances and documents from Adani, stressing that these were pivotal to the project’s progress.

Previously, there were doubts regarding the CEB’s ability to initiate the project as originally planned. However, officials are now optimistic that, provided the current negotiations and discussions proceed smoothly, the project will commence according to the scheduled timeline.

The growing involvement of India in Sri Lanka’s energy security landscape has sparked a debate among senior State officials, it is learnt. They have been discussing Sri Lanka’s growing dependency on India for significant energy infrastructure projects, with potential implications for the nation’s energy security and sovereignty in the long run.

Adani Green Energy Ltd.’s (AGEL) proposed 500 MW wind and solar project stands as the sole large-scale government investment in Sri Lanka, despite expectations of more investments following recent amendments to the CEB Act. With an investment of $ 442 million, AGEL aims to establish 500 MW of renewable energy capacity in Mannar and Pooneryn, combining wind and solar power generation.

Last year, Sri Lanka and AGEL inked a Memorandum of Understanding (MoU) to facilitate the development of wind and solar power plants. The MoU was a collaborative effort involving AGEL, Sri Lanka’s Treasury Secretary, Ministry of Power Secretary, the CEB, the Sustainable Energy Authority (SEA), and the Board of Investment (BOI).

A significant milestone was reached when, a few months after the signing of the MoU, the SEA issued Provisional Approval to AGEL under Sections 16 and 17 of the SEA Act. This approval reflects the fulfilment of the project’s technical, economic, and environmental feasibility criteria.

Several months ago, Power and Energy Minister Wijesekera expressed confidence that Adani’s project would be finalised by December of the following year. This initiative not only promises to significantly enhance Sri Lanka’s renewable energy capacity, but also underscores the nation’s commitment to a more sustainable and greener energy future.

Nonetheless, despite the Minister’s optimism, CEB experts are voicing concerns that the ambitious project may face significant delays. They assert that it is currently falling behind its original schedule, raising questions about the feasibility of completing it within the timeframe indicated by the Minister.

An engineer closely involved with the project, who chose to remain anonymous, shared insights with The Sunday Morning. According to this source, unless there is a remarkable and rapid acceleration in the project’s progress in the months ahead, achieving the Minister’s stated deadline of completion by the end of the following year appears increasingly unlikely.

Despite the Minister’s keen interest and his expressed desire to kickstart the project by December next year, it has come to light that no specific date has been set for the initiation of physical work on the project. The project’s timeline remains uncertain, prompting questions about its overall progress.

However, SEA Chairman Eng. Ranjith Sepala emphasised that Adani had taken significant steps to advance the project, including the purchase of the necessary turbines. Adani is strongly committed to the project and remains hopeful of meeting the initial deadline, aiming to complete the project by the end of the following year. In addition, plans are in place to finalise all required documentation by the end of August. Once this documentation process is completed, the physical construction phase can commence.

On another front, when contacted, CEB Chairman Nalinda Ilangakoon confirmed that the project was indeed progressing, with the CEB having issued a Request for Proposal (RFP) containing detailed project information and unit prices.

Grid connectivity 

 In the meantime, as learnt by The Sunday Morning, the CEB is actively engaging with its Indian counterparts to connect the grids of two countries – Sri Lanka has already finalised the local point to initiate the grid and is currently awaiting India’s response.

The journey towards grid connectivity between India and Sri Lanka began with a 2002 pre-feasibility study, aided by the USAID. In 2006, India’s POWERGRID, with USAID support, reviewed and updated the study. In 2010, an MoU was signed by India and Sri Lanka to conduct a feasibility study. The Long-Term Generation Expansion Plan (LTGEP) outlined the HVDC project, initially involving a submarine cable. In 2017, plans shifted to an overhead connection without a cable.

A feasibility study explored synchronous and asynchronous options, with asynchronous (DC) via overhead lines being preferred for Stage I. The project faced economic and financial viability challenges due to the submarine cable and HVDC technology costs. A detailed financial feasibility assessment is also planned.

The CEB envisions a 500 MW HVDC connection by 2034, with an estimated cost of $ 687 million. However, the transfer price uncertainty requires further analysis. The project aims to address high renewable energy integration, and CEB estimates a total cost of around $ 18,883 million.

LNG procurement 

 The suspension of the long-delayed LNG procurement process for establishing a Floating Storage Regasification Unit (FSRU) and LNG pipeline has raised suspicions among CEB engineers, who allege that the Government is creating an opening for India-US collaboration in Sri Lanka’s LNG sector.

According to Cabinet Memorandum No. 28/2023/PE, signed by Power and Energy Minister Wijesekera on 14 July 2023, the Cabinet has suspended the procurement process for the development of an FSRU offshore Kerawalapitiya on a Build, Own, Operate, and Transfer (BOOT) basis.

This also includes the compatible mooring system on BOOT basis and the associated project for the development of the offshore and onshore Regasified LNG (RLNG) transmission pipeline network, including on-shore receiving facilities and associated systems to connect the floating storage and regasification unit to the existing and future Kerawalapitiya and Kelanitissa power plants on BOOT basis.

The Cabinet’s decision involves obtaining the views of the Gas Utilisation Master Plan Committee on the scope and necessity of the current project proposals and the assumptions used in their development, with a focus on aligning with the electricity sector plans.

The Ministry of Power and Energy has proposed to reanalyse the LNG procurement process, specifically tailored to the requirements of the electricity sector, taking into account the prevailing challenges and the global environment.

Some CEB engineers who spoke to The Sunday Morning emphasised that LNG was a highly sensitive subject in the power sector, with politics often playing a significant role in such matters. The suspension of the procurement process has raised questions and uncertainties surrounding the future of Sri Lanka’s LNG sector.

Concerns of CEB engineers 

 However, a faction of CEB engineers is openly opposing the prevailing trend of growing dependency on India as a future power supplier for Sri Lanka. These engineers are raising concerns about why the country didn’t opt for competitive bidding, particularly from India, to secure the best deals.

A senior CEB engineer, who requested to remain anonymous, shared their apprehensions with The Sunday Morning. They stressed that if the Government had chosen to pursue projects with India exclusively, it could have at least considered a competitive bidding process specific to that country. 

The engineer expressed deep concerns about the current trajectory, describing it as uncertain and potentially burdensome. They said: “The future is dark, and we don’t know what this will bring us. We are suffering now, and it seems there is no end in sight.”

The engineer went on to clarify that investments of this nature could impose a further strain on the public, as it was likely that electricity tariffs would increase in the coming years. They pointed out that by continuing along this path, Sri Lanka would essentially be selling its resources to India and then repurchasing electricity from them at a higher rate. 

Additionally, grid connectivity is not without costs, and there is a high possibility of private investors becoming involved, which could complicate the situation. Ultimately, the engineer emphasised that these project expenses would inevitably be passed on to the public through higher electricity bills.

In light of these concerns, the engineer argued that the CEB should focus on acquiring more energy resources at more competitive rates, rather than becoming a financial burden to the public.

Meanwhile, commenting on the development of the projects, CEB Chairman Ilangakoon said that the work on various projects, including Adani’s investment in renewable energy and improving grid connectivity, was currently underway.

Teams from the CEB were collaborating closely with their counterparts in India to keep these projects moving forward, he said.

However, Ilangakoon noted that there was no new information available regarding the LNG project at this time.

Attempts to contact Power and Energy Minister Kanchana Wijesekera and Ministry Secretary M.P.D.U.K Mapa Pathirana were futile.