Despite Cabinet approval being granted for a mega-scale solar development project to be established in Poonakari in Jaffna, the State-run Ceylon Electricity Board (CEB) is yet to finalise the Power Purchasing Agreement (PPA) with the Australian investor United Solar, The Sunday Morning reliably learns.
The project, worth a total of $ 1,727 million, aims to develop a mega-scale 700 MW solar power plant at the Poonakari Tank, and the Australian investors are poised to inject the first tranche of $ 500 million before March next year.
However, as learnt by The Sunday Morning, the unit cost of the solar power produced in Poonakari will be finalised upon signing the PPA.
Speaking to The Sunday Morning, Sustainable Energy Authority (SEA) Chairman Eng. Ranjith Sepala noted that the PPA would be signed soon, as Cabinet approval had already been granted.
He noted that the project would be finalised only once the PPA was signed.
“We received the proposal for the Poonakari project in 2021 when we called for Expressions of Interest (EOIs) to develop solar projects over 50 MW. This is one such proposal, and following lengthy discussions, the project is now in the final stages,” Sepala noted.
He also said that the two pending mega-scale projects – United Solar and Adani – were both still in the final stages and yet to be finalised.
Nevertheless, it is learnt that the SEA had issued provisional approval for the project’s implementation to United Solar Energy SL (Pvt) Ltd. (United Solar) on 17 August 2022. The Letter of Intent (LOI) was issued by the CEB on 16 August and Cabinet approval was granted on 11 September.
Meanwhile, Power and Energy Minister Kanchana Wijesekera stated in Parliament that a unit of solar power was to be purchased at Rs. 49.
He emphasised that this cost included not only solar panels but also battery energy storage for storing solar power for use at night.
The battery energy storage is the largest of its kind in Asia and the world’s largest solar energy storage. The unit cost of Rs. 49 is charged for this stored solar power, which will be used during the night peak and will replace thermal power, saving approximately Rs. 10.
Wijesekera also highlighted that the Poonakari Tank project would enable the cultivation of about 20,000 acres. The Poonakari solar project is expected to generate and supply approximately 1,100 GWh of electricity to the national grid annually, meeting around 6.5% of Sri Lanka’s annual electricity demand.
United Solar has confirmed that the total funding requirement of $ 1,727 million has been arranged and that it plans to commence project construction work on-site in March 2024. The entire investment of $ 1,727 million will be brought in as 100% Foreign Direct Investment within 12 months from the signing of the PPA with the CEB.
However, a senior official attached to the CEB, who wished to remain anonymous, told The Sunday Morning that the PPA should have been signed between the two parties before submitting the project to the Cabinet.
“Now there is Cabinet approval, but the unit costs have not been finalised yet. The Minister says the costs will be around Rs. 50, but according to calculations made by some senior CEB officials, the cost could go as high as Rs. 70. Producing variable energy at this rate is not viable in Sri Lanka,” the official claimed.
In contrast, a United Solar official confirmed to The Sunday Morning that the purchasing price of a unit of electricity produced at Poonakari would be around $ 0.15 cents, inclusive of all costs.
National People’s Power (NPP) Leader, MP Anura Kumara Dissanayake told Parliament that a unit of power generated by a coal power plant was available at Rs. 22. He revealed that, as per the PPA, the Government was committed to purchasing solar power at Rs. 50 for a period of nine years. The MP alleged that the project had not undergone the necessary tender procedures.
In response, President Ranil Wickremesinghe, defended the project planned by United Solar Energy, stating that it aimed to rejuvenate the Poonakari Tank and facilitate the cultivation of 20,000 acres.
He also noted that CEB engineers opposed the project, advocating for least-cost projects typically involving fuel or coal, which could potentially lead to commissions. Solar power and wind power, being less likely to generate commissions, faced resistance from the engineers.
Opposition Leader Sajith Premadasa criticised the Government’s decision to enter into a PPA with the Australian firm United Solar, branding it an act of corruption. He accused the Government of endorsing the PPA with United Solar without following the proper tender process.
On 12 December, the Cabinet of Ministers gave the green light to a proposal seeking to enter into a PPA with the Australia-based company United Solar Group.