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Lanka looking for cheaper three-year private power to plug capacity gap

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ECONOMYNEXT –Sri Lanka’s state-run Ceylon Electricity Board is looking for cheaper private power to plug near term gaps in supply and to offset high-cost power at the margin of costly generators owned by the utility, Energy Minister Kanchana Wijesekera said.

The CEB has advertised for firm energy above 50 Mega Watts that can dispatched at any time for one, two and three years.

“Objective of this endeavor is to serve the nation with low-cost electricity while maintaining an uninterrupted power supply in the country for 24 hours during any period of the year even in a natural disaster or a technical failure of an existing plant,” the tender notice said.

“The envisaged contract period will be for one, two or three years and expected to connect as early to the system. The source of energy shall be any type which can be dispatched to the national grid at least cost on the instructions of System Control Centre of CEB.”

The plants could be located anywhere and the company will also have to build transmission line to connect to the grid. Bids close on September 07.2023 was drier than expected and next year may also be dry, Minister Wijesekera said. Daily energy demand was now also higher than expected, he added.

The CEB is also in talks with ACE Power Embilipitiya and ACE Power Matara to buy power to plug a short-term gap due to being forced to release extra water from the Samanalawewa reservoir. However, these plants too could be used to replace higher cost CEB plants.

Private power without capacity charge could be bought at around 52 to 58 rupees based on discussions, Wijesekera said. The capacity charge will add to the cost.

Furnace oil is generally cheaper than diesel (CPC pricing and taxes may impact), newer plants with a better heat rate are cheaper than older ones, combined cycles are generally cheaper than pure gas turbines, and coal is generally cheaper than liquid fuels.

According to the latest data the energy cost (without capacity charge) of the Lakvijaya coal plant was 43.23 rupees a unit, Sapugaskanda barge was 44.15 rupees, Uthuru Janani was 44.18 rupees, Sapugaskanda A, 47.76 rupees, the West Coast plant 48.36, Kelanitissa 48.36, Kelanitissa Diesel 63.82.

Small CEB generators in Hambantota which were re-activated to avoid supplementary power was 85.28 rupees, CEB generators in Matugama was 87.24 rupees. A CEB gas turbine (expected to peaking) cost 113.11 rupees and a small GT 143.60 rupees.

CEB is now negotiating with ACE Embilipitiya and ACE Matara to buy power for the Southern grid after demands were made to release stored water ahead of schedule from Samamnalawewa reservoir.

“As a practical matter, some of these private plant are cheaper than some of our (CEBs) older plants,” Minister Wijesekera said. “They have been used for many years and their efficiency is low. At times, taking power from private plant is cheaper than those plants.

“So we have to clearly say the extra power is taken due to dry weather and being forced to release more water than earlier requested for irrigation.”

The capacity charge reflects the investment cost and profit. In the past some private plants under competitive bidding has taken a loss on the energy charge to guarantee a better heat rate and win power purchase deals, industry analysts say. Once a plant has been signed up, the capacity charge is a sunk cost. CEB is expecting to sign up both ACE plants of around 100MW and 23 MWs.

“We need at least about 100 MegaWatts,” Minister Wijesekera said. “As much power utilizing those plants would be an additional benefit. May be if there is a surplus of power we can stop some of the high cost power power plants that is in use today.

“If the GT-7 is going to cost us 143 (rupees), and the other plant is going to cost between 60 to 65 rupees, it makes perfect economic sense to go with those power plants.”

In the past attempts by CEB to get idle private plants before a crisis developed and boost is safety margin when the bargaining power to push down the capacity charge is with the CEB has been shot down by various activists.

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