• CEB proposes tariff revision for rooftop solar projects, competitive bidding for large-scale projects

The State-run Ceylon Electricity Board (CEB) has predicted a tariff revision for rooftop solar producers while maintaining that the tariffs of large-scale Renewable Energy (RE) projects will be decided on competitive bidding. 

This is in the context of the Ministry of Power and Energy submitting a report containing nearly 40 RE projects submitted under the previous administration to the Cabinet last week. As reliably learnt by The Sunday Morning, the proposal has only been submitted for principal approvals, but it has not been discussed with the CEB yet.

CEB clarifies RE tariffs

Speaking to The Sunday Morning, CEB Spokesman Eng. Dhanushka Parakramasinghe said: “The proposal was prepared by the ministry, but nothing has been finalised yet.” 

Referring to RE tariffs, he said that should tariffs be changed, it would only apply for rooftop solar. 

“At present, the prices range between Rs. 27-30. Recently, the variable tariff has dropped by Rs. 1 or so. Likewise, if tariffs are to be reduced, it will be in terms of rooftop solar. There have been discussions, but nothing has been finalised yet,” he shared.

Parakramasinghe said that the CEB would go ahead with competitive bidding for mega-scale projects.

The new rooftop solar tariffs proposed by the committee appointed by former Minister of Power and Energy Kanchana Wijesekera will only be applicable to new customers entering into Power Purchase Agreements (PPAs) with the CEB after 1 July, according to a letter written by CEB General Manager (GM) Eng. Dr. Narendra de Silva.

In the letter written to the Additional GMs of Distribution Divisions 1 to 4 on 15 July, the CEB GM has stated that the Cabinet of Ministers at their meeting held on 1 July had decided to revise the tariff for rooftop solar schemes based on the input parameters used for determining the tariff.

“The revised tariffs are applicable only for new customers coming under net accounting, net plus, and net plus-plus schemes. Once the PPA is signed, the relevant tariff will be fixed for the next 20 years,” Dr. de Silva has stated in the letter.

In Cabinet Memorandum No.53/2024/P, Minister Wijesekera had highlighted the urgent need to revise tariffs for solar rooftop systems due to changes in capital costs and economic parameters. 

A committee comprising officials from the Ministry of Power and Energy, Department of Public Enterprises, Sri Lanka Sustainable Energy Authority (SLSEA), CEB, and Central Bank of Sri Lanka (CBSL) was formed to address the matter. The rooftop solar programme added approximately 875 MW to the grid. 

Proposed tariff reduction

The committee’s 5 June report had considered factors such as capital cost, plant factor, interest rates, operational and maintenance costs, return on equity, and discount rates.

Wijesekera had noted improvements in the country’s macroeconomic situation, including significant drops in the cost of solar photovoltaic (PV) panels and the exchange rate of the USD. 

The Cost, Insurance, and Freight (CIF) Colombo price for solar PV panels decreased from 27 USD cents per kWp to around 13.5 USD cents per kWp, and the exchange rate fell from Rs. 3,600 in 2022 to around Rs. 214 in the first quarter of 2024. Additionally, Value-Added Tax (VAT) and Social Security Contribution Levy (SSCL) were imposed on solar PV equipment at 18% and 2.25%, respectively.

The committee, consulting with the RE Association, had reviewed the capacity classes and proposed tariff denominations. To meet the Long-Term Generation Expansion Plan (LTGEP) targets for 2024-2030, the committee had recommended flat tariffs of Rs. 27.06 per kW for systems up to 5,000 kW and Rs. 23.18 per kW for larger systems, effective for 20 years. 

The new tariffs were to be implemented from 1 July this year pending approval from the Public Utilities Commission of Sri Lanka (PUCSL).

In a letter dated 15 July, PUCSL Director General Damitha Kumarasinghe had informed the Secretary to the Treasury that the CEB had requested PUCSL approval for the revised rooftop solar PV purchase tariff under Section 43(6) of the Sri Lanka Electricity Act No.20 of 2009, following a Cabinet decision on 2 July. 

The Ministry of Power and Energy policy aims for 70% RE in electricity generation by 2030, as outlined in the LTGEP (2023-2042), which includes significant solar PV capacity targets. The commission had noted that the current targets had not been met, with an additional 3,508 MW required by 2030. 

The proposed tariff reduction could impede these goals. After consulting stakeholders and reviewing consumer complaints, the commission had decided to maintain the current tariff until further information was gathered and verified, after which it would advise the Cabinet.

Need to exercise caution 

Solar Industries Association (SIA) President Kushan Jayasuriya said there had been no major changes in the parameters considered when deciding solar tariffs, such as dollar rates and interest rates. Therefore, if the utility is planning to revise the tariffs, it should exercise caution to avoid affecting or discouraging investors.

“If an unfavourable tariff is decided, the industry won’t survive. Rooftop solar saves billions of rupees for the country and helped during the economic crisis and fuel shortages. Solar tariffs solely depend on rupee costs. 

“Changes in the global fossil fuel market do not affect them, which is a significant advantage for the industry. Therefore, the solar rooftop sector must continue. Just because the authorities achieve the expected target does not mean they should completely ignore the solar sector. This should be a sustainable industry,” Jayasuriya asserted.

Commenting on mega-scale projects, he said that solar tariffs should be a mix of feed-in tariffs and competitive bidding tariffs. For feed-in tariff projects, it takes only three to six months to complete the project. On the other hand, even if a lower cost is assured, large-scale projects take years to commence actual construction. Therefore, there should be a mix of these two tariff types.

Attempts made to contact Energy Ministry Secretary Prof. Udayanga Hemapala were futile. 

RE tariff updates

Former President Ranil Wickremesinghe, in his capacity as Minister of Finance, raised important considerations regarding the Cabinet memorandum submitted by Minister Wijesekera. He emphasised that the former Government’s policy aimed to achieve 70% of electricity generation from RE sources by 2030. 

Reducing the prevailing rooftop solar tariff could discourage developers from investing in rooftop solar projects, potentially hindering the achievement of this target. Therefore, creating an investment-conducive environment is essential to attract more developers and customers to rooftop solar projects. 

Given these considerations, it is not appropriate to reduce the proposed rooftop solar tariff at this stage until a sufficient number of projects are established to meet the 70% RE generation goal by 2030.

Accordingly, the tariffs for project PPAs signed before 1 July will follow the rates introduced by the CEB through Circular No.2023/GM/36/DCC, issued by the Additional General Manager DD2, Chairperson of the Distribution Coordination Committee, on 26 June 2023. 

The updated rates are Rs. 48.89 for 0-20 kW, Rs. 47.79 for 20-100 kW, Rs. 44.17 for 100-500 kW, and Rs. 43.77 for systems above 500 kW. Aggregation schemes will be subject to a rate of Rs. 46.46. This marks a change from the previous fixed tariffs of Rs. 37 for systems below 500 kW and Rs. 34.50 for systems above 500 kW.

Planned RE projects

Meanwhile, RE projects prepared by the former administration of the CEB focus on the feasibility of grid interconnection for RE projects with capacities ranging from 1 MW to 10 MW, planned for integration into the distribution network during 2023-2026. 

Under the Energy Permit issued list, four RE projects are to be connected to the distribution network of DD1, with a total capacity of 25.65 MW. 

These include a 10 MW solar plant in Vavuniya, a 5.5 MW dendro power plant in Chunnakam, a 0.15 MW micro-hydro power plant in Polonnaruwa, and a 10 MW wind plant in Puttalam. A detailed technical study, using Synergi Electric software, was conducted to finalise grid interconnection proposals for these projects. 

The load profiles of relevant grid substations were analysed to assess the potential for reverse power flow into the transmission network. 

Based on this, grid interconnection proposals have been issued, although for certain plants like the 10 MW solar plant in Kebithigollewa and the 10 MW wind plant in Alankuda, the developers will bear the cost of energy loss due to their locations being distant from the grid substations and in low energy-density areas. 

Additionally, there are 23 RE projects under the Provisional Approval issued list for DD1, with a total capacity of 165.56 MW, which includes various solar, wind, and biomass projects. Some of these projects face grid connection challenges and are recommended for the second phase of implementation beyond 2026, such as those in Kalpitiya, Puttalam, Jaffna, and Mullaitivu. 

The plan also outlines 12 business models for RE projects, categorised based on factors such as capacity, approval stages, and implementation strategies, with a total capacity of 2,533.665 MW expected to be integrated into the grid during 2023-2026. 

This capacity addition will require an investment of approximately $ 2.268 billion, covering various RE sources including rooftop solar, ground-mounted solar, solar PV plants (1 MW to 10 MW), wind power, mini hydropower, biomass power, large-scale hydropower, and large-scale wind power.