Sri Lanka launches new long-term electricity plan

In late February and early March 2016 Sri Lanka suffered a series of island-wide power outages, setting off a cascade of automatic shutdowns across the country’s power generation and transmission infrastructure. Some facilities – including the 900-MW Puttalam coal plant in Norochcholai, the largest power plant in the country – were offline for more than three days while the Ceylon Electricity Board (CEB) worked to restore service, causing by some estimates the worst failure in 20 years. A similar cascading grid collapse knocked the country offline in early October 2015, in what was reportedly the first failure of Sri Lanka’s national power grid since the CEB installed new automatic system restoration methods in 2010. “There were nine island-wide power system failures from 2006 to 2010, but there [had been] none since 2010 [until] the last incident,” Athula Wanniarachchi, the president of the CEB Engineers’ Union, told local media after the October outage. Some criticisms have been more severe. The Public Utilities Commission of Sri Lanka (PUCSL) accused the CEB of providing “inaccurate and misleading” information to it on the non-availability of two high voltage transformers whose failure caused a major outage. PUCSL said the failure was due to negligence in maintenance.

Balance Maintenance

These grid failures have drawn attention to Sri Lanka’s power generation and transmission segment. In both cases the system responded to an unexpected power surge, as it was designed to, by sequentially shutting down the nation’s power infrastructure, thereby protecting power plants and transmission facilities from permanent damage. Nevertheless, according to CEB engineers, a key factor is a rising grid instability in Sri Lanka’s generation mix. The addition of a growing number of small-scale non-conventional renewable energy (NCRE) facilities has made managing the nation’s electricity supply-demand balance increasingly challenging. “They start, stop and change their load at their own will,” Wanniarachchi told local media. “The system operators find it difficult to maintain the power balance in the system.” Overcoming these issues by improving reliability, while simultaneously boosting the use of renewables and meeting the rising demand for electricity, is the aim of the CEB’s long-term Generation Expansion Plan (GEP), which lays out a blueprint for power generation in Sri Lanka for the period 2015-34. In addition, the Public Utilities Commission of Sri Lanka’s 2016 activity plan outlines a number of improvements to quality and reliability in the lead up to 2020. Furthermore, Japan’s International Cooperation Agency (JICA) will design an electricity sector master plan for Sri Lanka’s utilities, to forecast demand and supply for the next 25 years and introduce new forms of energy. The one-year study by JICA will cover power generation, transmission and distribution while taking into account the environmental aspects of the electricity supply.

Shifting Supply

In 2016 the CEB was still Sri Lanka’s largest electricity player, accounting for some 66% of generation and over 90% of transmission capacity. Nonetheless, power generation projects undertaken by private sector firms have become increasingly prevalent. According to CEB data, at the end of 2015 there were 173 private NCRE projects up and running in Sri Lanka, with a total generation capacity of 448 MW, up from 145 with a capacity of 367 MW at the end of 2013. In 2010 there were 99 NCRE projects with a capacity of 214 MW, and in 2006 just 48 projects with a capacity of 112 MW.

Perhaps more fundamentally, the CEB’s own generation mix has changed dramatically in recent years. In 2014, the firm generated around 3600 GWh from hydropower plants, 3200 GWh from coal-fired power plants and 1800 GWh from oil-fired power plants. The firm’s generation mix was quite different in 2013, when it generated almost 6000 GWh from hydro, 1500 GWh from coal and 1300 GWh from oil. Shifting production at the CEB over the years has been due to a wide range of factors, including the introduction of coal, the growing amount of power generated by private companies and changes to the size and reach of the transmission grid, which currently serves more than 98% of the population.

Demand Drivers

Over the past decade there has been a steady expansion of electricity demand across Sri Lanka. While the country’s population has grown only slightly – from 20.2m in 2008 to 20.7m by 2014, according to CEB data – Sri Lanka experienced dramatic economic growth over the same period. Indeed, from 2009, when the civil war ended, to 2014, Sri Lanka posted average real annual GDP growth of 6.8%. GDP per capita, as measured at market prices, jumped from $2011 in 2008 to $3794 in 2014, which represents overall growth of just over 80%.

As the CEB noted in its GEP, economic fluctuations have historically correlated neatly with electricity demand. While the link between the two metrics has loosened somewhat in recent years, in general the relationship has held. For instance, over the course of 2010 the country saw real GDP growth of 8% and a corresponding increase in electricity demand of 10%. Similarly, as real GDP growth slowed slightly in 2012, before rising again in 2013, so too did electricity demand. In general, a steady rise has been seen over the years in terms of per capita electricity consumption, with the average rate at 412 KWh per person in 2009, increasing to 519 KWh in 2013 and 534 KWh per person in 2014. Given that the Asian Development Bank forecasts GDP growth of 5.3% in 2016 and 5.8% in 2017, the CEB is preparing for continued expansion in electricity demand.

Current Mix

In terms of generation capacity, Sri Lanka has seen dramatic changes since 1996, when small-scale (less than 10-MW capacity) private projects were allowed for the first time. Prior to this, large commercial hydropower projects had been the country’s primary means of power generation. In the 1990s and 2000s, however, the state constructed a considerable number of oil-powered thermal power stations, which were seen as more sustainable.

At the same time, the state moved to invest in additional indigenous, sustainable energy resources, including small-scale hydro, solar and wind projects. This move to so-called NCRE initiatives has been successful. Under the 2008 National Energy Policy and Strategy of Sri Lanka, the state aimed to boost NCRE’s share of the national generation mix to 10% by 2015. The industry surpassed that goal, reaching 11% by the end of last year (see analysis). While private sector generation – primarily in the form of small-scale oil-powered thermal plants – has increased rapidly in recent years, the CEB has branched out into new areas. In 2014, for example, the third phase of the state-owned coal-fired Puttalam power plant at Norochcholai came online. In 2015 the facility contributed 33% of the national grid’s power. These diversification efforts have bolstered the country’s overall power supply considerably.

Long-Term Strategy

Yet, as the late 2015 and early 2016 outages demonstrated, the system is far from infallible. While the CEB has been aggressive about extending the national grid – particularly since the end of the civil war – some northern and eastern rural districts remain disconnected. There have also been system management issues. To improve the energy mix the CEB plans to rely more heavily on private NCRE producers, which represent a key growth area in terms of energy investment. The CEB forecasts that by 2020 NCRE capacity will reach 972 MW, more than double the 2015 total of 437 MW. This figure is expected to continue to rise over the ensuing decade and a half, reaching 1897 MW by 2034.

As of early 2015, some 49% of the CEB’s total system capacity was installed across 17 large-scale hydropower plants. In the GEP, however, the CEB noted that “the hydro potential in the country has already been developed to a great extent”. While sub-10-MW privately operated plants – which tend to run low-impact run-of-river technology – are expected to account for a larger percentage of Sri Lanka’s generation mix in the coming years, the era of large-scale hydro development seems to be over.

While oil-fired plants gained popularity in the 1990s, the CEB is now working to phase them out, as they rely entirely on imported fuel, which has become economically unsustainable. Instead, the government has carried out a number of studies on alternative thermal fuels, including coal, liquefied natural gas and nuclear. The Puttalam power plant, the country’s first coal-fired power plant, was widely regarded as a successful test case in this instance. Indeed, in recent years the CEB has begun to develop a new coal-fired power project at Trincomalee. In early 2016 Sri Lanka began talks with Japan to finance and build this 1200-MW high-efficiency, eco-friendly plant. Work on another 500-MW coal plant with India’s National Thermal Power Corp. is also currently under way.

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The Report: Sri Lanka 2016

Energy & Utilities chapter from The Report: Sri Lanka 2016

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