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Sri Lankan energy sector as millstone around nation’s neck

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By Eng Parakrama Jayasinghe
parajayasinghe@gmail.com

Any economy thrives on a reliable and affordable supply of energy. This is a truism that no one has contested ever since the advent of the Industrial Revolution, when the modern form of energy elevated the human kind from the limitations of human and animal power. However, Sri Lanka has adopted a parochial view of this vital field with the authorities concerned jealously guarding the monopoly status they have carved out for themselves, both in the electricity sector as well as petroleum sector. They seem to think their duty is to meet the energy demand by whatever means with scant regard to sources of energy or the immense cost to the national economy.

The monopoly status enables them to continue this ill-conceived and short-sighted practice with dire consequences to the economy and all Sri Lankans, who are compelled to bear the burden of the cost of all the misdeeds and downright erroneous decisions of those responsible.

The CEB alone has suffered losses amounting to Rs 500 Billion over the past decade or so.Under the IMF not to incur any more losses, the government has jacked up tariffs.

So, the expectation was that the CEB would stop incurring losses in time to offer a clean balance sheet to facilitate the restructuring of it.But to one’s surprise, the media reports that this year too, CEB will run at a loss of a whopping Rs 50 Billion.

So, I believe that the titles and comments in my previous articles are quite appropriate. Some of them are given below:

Sri Lankan Electricity Sector – The Headless Chicken (15 Feb 2022) https://www.ft.lk/columns/Sri-Lankan-electricity-sector-The-headless-chicken/4-730564 A simple lesson in arithmetic on electricity sector (05 Dec 2022)  https://island.lk/a-simple-lesson-in-arithmetic-on-electricity-sector/

The CEB produces its long-term electricity generation plan (LTEGP) with a time horizon of 20 years implemented in two-year phases, but none of its objectives has become a reality so far. Of course, they will blame the government for not providing necessary funds, without ascertaining the reasons for their failure and the impracticability of a time horizon of 20 years in view of the clear evidence seen year after year.

Something else has cropped up recently—agitations by farmers in the South due to lack of water for their paddy cultivation and the Minister of Power refusing to release water from the Samanalawewa reservoir.

The CEB has forgotten its oft-repeated excuse for lack of better management of the hydro resource, claiming that the first priority of the reservoir water is for cultivation. This should have been evident from the prior warning issued by the Dept of Meteorology in April.

The occurrence of the El Nino phenomenon every 5-7 years is nothing new. Thus, it should at least be reflected in the LTEGP over several years with particular strategies to counter it in time with short term and long-term plans.

What did the CEB do to face this situation since the country experienced the unprecedented power cuts in 2022, not for lack of generation capacity but lack of funds including foreign currency to pay for fuel imports? We did not see any concerted effort to develop already proven indigenous RE resources.

But the interesting question here is why this sudden additional crisis, particularly affecting the southern farmers? While it is the southern region farmers who are affected by a scarcity of water for irrigation, the power authorities warn that only the southern region will have to face 3-to4-hour power cuts, if more water is released.  Doesn’t Sri Lanka have a highly integrated national grid and widely distributed and interconnected set of generators which should form a common pool?

Isn’t there some element that is not being disclosed here? There has been a long-delay in the construction of a transmission line from Polpitiya to Hambantota, depriving the CEB of flexibility in using such facilities. It has now been revealed that the mere 600m-long section over a tea estate has been holding up the completion of this 150 km power line. Where is the accountability of the CEB or the Ministry?

The 100 MW Solar park in Siyambalanduwa, which has been on the drawing board for many years, if implemented, would have added a substantial amount of low-cost renewable energy to the national grid, thus enabling the release of water of Samanalawewa for agricultural use.

The 2022 debacle should have prompted the CEB and the Ministry of Power and Energy to realise that the way forward was the rapid addition of RE to the grid, for which the private sector was ready and waiting.

The target of 70% RE contribution by 2030 still remains only a buzzword with no evidence of any pragmatic strategies or actions to reach this goal.  In contrast, Nature itself has shown the feasibility of this goal, which was achieved albeit for a few days in 2022, seven years ahead of schedule, as shown below. (See figure1)

Any prudent energy minister, if not the planners at CEB, should have viewed this as a good omen for reaching the target of 70% RE with immense value to the economy, balance of payment, energy security and environment as well as to the prestige of the country. There is absolutely no shortage of RE resources in the country and our own entrepreneurs and engineers have demonstrated the commercial viability of harnessing all the diverse sources of such energy at no cost to the utility. There is no other country in the world where nature has bestowed such bounty.

But in sheer contrast both the CEB and the Ministry have allowed the deterioration of the energy mix to 70% fossil fuels with disastrous consequences we face now, the depth of which is carefully hidden from the people. (See Figure 2)

It does not require much intelligence to fathom that all these moves are designed to perpetuate the use of fossil fuels introduced around 1995 with most dubious terms of contract and total lack of foresight of the consequences for the future, obviously for the benefit of a few and certainly not in the interest of the nation.

It is most interesting to note the number of issues surfacing at this point of time

(a) The refusal to release water for the farmers

(b)  The warnings of power cuts in the South

(c)The decision to use inordinate amount of oil for power generation over the first five months of the year, cited as needed to maintain the myth of no power cuts, as the prime demand of the people, who had got themselves adjusted to face limited power cuts, fully understanding the long term disadvantages of dependence on imported fossil fuels

(d) The lack of any information about the cost of using oil, which obviously scuttled any chance of the CEB covering the cost of generation even after the two tariff hikes

(e)  The long delay in announcing a viable feed in tariff for Non-Conventional Renewable Energy (NCRE), as distinct from the major hydro power , which developed entirely by the private sector , demonstrated a remarkable growth until the debacle of huge depreciation of rupee and massive hike in interest rates badly affected such growth, and the apathy of the authorities.  The tariff once announced after a two-year delay proved to be totally unbankable due to conditions imposed.

 (f) Most of all, the attempt to continue the use of “Emergency Power” at massive cost using imported oil. The recent advertisement is evidence of this. Sri Lanka may be the only country in the world where there is a permanent need for “Emergency Power: year after year.  It is now euphemistically called “Supplementary Power” Whom are they trying to bluff?  The cost of oil -based power now costs over Rs 100.00 per unit and the Supplementary Power would cost at least Rs 135.00 per unit and mostly in foreign currency.

(g) The 14-month long delay in settling the dues to the RE developers who nevertheless continued to provide the much-needed low cost power to the national grid. However, the money and Forex needed to import oil and coal has been found by whatever means

(h) The release of large extents of lands and project approvals to the Indian Company, Adani, in total violation of the Electricity Act and without any competitive tenders. This is the ploy used by CEB to block RE projects over seven years in spite of the clear provisions for declared Feed in Tariff (FIT) for NCRE projects under the SLSEA Act of 2007.

(i) It is not yet clear what is the applicable tariff for ADANI and whether it would be paid in FOREX, which would be a clear travesty of natural justice vis-a-vis local developers.

(j) The disappearance of the Expression of Interest (EoI) received for development of RE Projects up to 50 MW capacity. It was reported that projects of cumulative capacity 600 MW were received and there was a modicum of transparency and competitive tender process.

The bottom line is clear

All these actions and manipulations could lead to achieve one single objective in spite of all declarations and protestations to the contrary. The ever-increasing demand for energy and increasing cost of inputs and services would raise expectations of many to tap that pot of gold. There is no harm at all in such expectations and entrepreneurs benefiting by transparent and fair means within the constraints of safeguarding national interests, economically, financially and environmentally, not to mention the energy security.

It would also be found that use of Renewable Energy Technologies which depend on natural elements of Solar and Wind does not present opportunities for such manipulations, nor does supply chain of fuelwood from small farmers can be exploited.  As such, all activities so far are likely to result in the following:

(a) Discouraging any local developers of renewable energy, who were making very good progress contributing to the national energy supply and demonstrating most satisfactory technical competence. Some have even successfully ventured abroad.

(b) Closing the opportunity to local relatively modest indigenous investment by allowing foreign investors to develop large projects which will block the access to available transmission infrastructure and grid stations. This is reportedly already happening.  It must be emphasized that all RE projects consist of a large number of small units, with even wind plants being limited to about 5 MW each. There is no reason technically or financially to aggregate them to large projects and pretend that local entrepreneurs or banks cannot fund them and put them out of their reach.

(c) The rooftop solar PV sector is devoid of any of these issues, except the reluctance and lethargy of the CEB to facilitate its rapid development, which may require only minor improvement of the grid infrastructure in some areas.  This is the best way to meet the short-term energy deficits without resorting to expensive “Supplementary Power “. Perhaps, the reason for such reluctance is evident here.

(d)  The slowdown of the rapid deployment of RE projects particularly the Roof Top Solar was due to the heavy depreciation of the rupee and the massive hike in bank interest rates. However, the government is blind to the opportunity of tapping many concessionary funds for low cost funding to finance the RE sector. These could also help them to develop the transmission infrastructure needed to absorb the RE generated. Such development should logically match the feasible RE development by local developers first and not to venture in to the projects proposed under the LTEGPs which never materialise

What Sri Lanka needs most urgently is for the national interest to be the driving force in the power and energy sector. Will the restructuring of CEB help achieve this objective?We expect the Minister of Power and Energy to act fast and deliver this urgent service to Sri Lanka instead of making mere tweets and declarations.

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