In a post on Twitter in late November 2015, Sri Lanka’s president, Maithripala Sirisena, wrote, “[Sri Lanka] has great potential to generate renewable energy, and it’s essential that we encourage and inspire investors’ focus towards it.” The statement served to reiterate the government’s commitment to the development of sustainable energy sources and, more broadly, to comprehensive energy reform (see overview). Indeed, Sirisena campaigned as an energy reform candidate in the 2015 presidential election, and under his leadership the government has taken an aggressive position on the topic in its first year, instituting a raft of new policies and development programmes.
At the heart of this effort has been a sustained focus on the renewable energy segment, which has expanded rapidly over the past five years and is widely regarded as a source of major potential cost savings and environmental progress for Sri Lanka in the future. “Today around one-tenth of Sri Lanka’s energy consumption is met by non-conventional renewable sources, including small hydropower projects, wind, small-scale biomass and solar power,” Manjula Perera, the director and CEO of Windforce, the country’s largest private provider of renewable energy, told OBG in late 2015. “But the potential is much greater. This country has huge renewable energy resources that it is not yet taking advantage of.”
History Of Renewables
Until the early 1990s large-scale commercial hydropower projects were the primary source of power generation in Sri Lanka. However, droughts in 1992, 1996, 2001 and 2002 led the Ceylon Electricity Board (CEB) and other major Sri Lankan power producers to shift to thermal power – fuelled primarily by oil imports – through the 1990s the 2000s. In 2012, according to a report published by the Asian Development Bank (ADB), “oil-fired thermal power provided nearly 60% of generation” in Sri Lanka. That same year hydropower accounted for around 23% of the total. According to the Sri Lanka Sustainable Energy Authority (SLSEA), which was established by the state in 2007 to develop the country’s indigenous sustainable energy resources, the era of large-scale hydro projects has come to a close as they do not represent a sustainable way of harnessing energy in the context of Sri Lanka.
Instead, the country is in the midst of a move toward so-called non-conventional renewable energy (NCRE) technologies, including small hydro projects, solar projects, wind projects and formal biomass projects. Biomass is estimated to already be a leading source of energy supply in Sri Lanka, albeit primarily in private homes, where it is used for cooking and heating. Formalising this market is widely considered to be a key component of boosting NCRE’s contribution to the energy mix. In 1996, as part of wider power sector reforms, the government declared a number of incentives aimed at ramping up activity among small-scale private NCRE power producers, including standardised tariffs and a standardised power purchase agreement. By agreeing to buy power at set prices, the state effectively encouraged long-term planning and investment in this segment among private sector players, thus facilitating the growth of the NCRE market.
Planning Under Way
Under the Ministry of Power and Energy’s National Energy Policy and Strategy of 2008, the government laid out a plan aimed at steadily increasing NCRE resources. The strategy called for developments to boost the contribution of small-scale renewables to the country’s energy generation mix from 5% in 2008 to 7% in 2010 and 10% by 2015. These targets were met ahead of schedule, with NCRE accounting for 10% of the total by 2014 and more than 11% by the end of 2015, according to estimates from the CEB.
Efforts to boost the renewables segment have been ramped up under Sri Lanka’s new government. Over the past year a number of new power sector development plans have been initiated, all of which have called for additional investment in NCRE capacity. For example, the CEB recently announced plans to increase the country’s renewable energy generation capabilities to 972 MW by 2020, up from 442 MW in 2014. The increase is expected to boost the contribution of renewables to total power generation to 20% by 2020, up from around 11% at the end of 2015. This target was put forward as part of the CEB’s proposed long-term Generation Expansion Plan (GEP), which covers the period between 2015 and 2034, and was submitted for approval to the Public Utilities Commission of Sri Lanka in September 2015. The GEP also includes targets for NCRE expansion beyond 2020. By 2025 the CEB aims to have overseen the installation of 1367 MW-worth of renewable capacity in Sri Lanka, which is forecast to be equal to around 21.4% of total power generation. By 2034 this figure is expected to have jumped to 1867 MW under the GEP. Japan’s International Cooperation Agency is also designing an electricity sector master plan for Sri Lanka, to help forecast demand and supply for the next 25 years.
According to the GEP, this increase is expected to take place primarily in the wind segment. Many power sector players believe the potential of wind power in the country is hard to overestimate. “The total energy requirements for Sri Lanka by 2022-23 is in the range of 5000-7000 MW,” Ramesh Kymal, the chairman and managing director of Indian operations at the Spanish firm Gamesa, one of the largest wind turbine manufacturers in the world, told Sri Lankan media in mid-2015. “This could be easily achieved through wind power, for which the generation potential in the country is 30,000 MW by the same period.”
While the CEB has taken a somewhat more cautious approach in its forecasting and planning, it maintains that wind energy will likely overtake small-scale hydropower in terms of installed capacity as early as 2023. By 2034 wind generation is forecast to account for almost 38% of all NCRE capacity, followed by small-scale hydro at around 35%, biomass at almost 15%, and solar power at 12%. The CEB itself also aims to get directly involved in wind development, with a 375-MW Mannar wind farm in the planning stages to be installed in several phases from 2018 to 2025.
In addition to the CEB’s long-term plan, the Ministry of Power and Energy (MoPE) released a sector reform strategy of its own in 2015. In the Sri Lanka Energy Sector Development Plan for a Knowledge-based Economy (SLEDP), the ministry laid out a comprehensive set of targets and projects for the period 2015-25, with the overarching objective of supporting the country’s transition to middle-income status (see Economy chapter). According to data from the MoPE, for 2014 Sri Lanka’s total electricity usage was around 10,500 GWh. Domestic and industrial demand accounted for 38% and 39% of this figure, respectively, whereas commercial enterprises represented 20% of overall usage. A slew of smaller activities, including street lighting and religious activities, made up the rest. The objective of the SLEDP is to meet this demand while simultaneously transitioning the country to a more sustainable energy mix.
The SLEDP is organised around eight thrust areas, each of which is designed to address a separate issue currently facing the sector. Under the second thrust area, “The vast renewable energy resource base of Sri Lanka will be developed to increase the dominance of indigenous energy in both electricity and thermal energy supplies.” The plan also lays out specific programmes and reforms that are to be instituted in the coming years with the aforementioned goal in mind. For instance, the state aims to develop and institute a competitive bidding process for large-scale solar and wind projects; to introduce net-metering to small NCRE projects in an effort to promote national grid connectivity; to develop the biomass industry; to rehabilitate older hydro plants; and to establish a fuelwood exchange, which is regarded as a step towards formalising the biomass market.
Private Sector Involvement
Instituting the plans laid out in the SLEDP and the GEP will require increased involvement from private companies. Private participation in power generation has had mixed results since became permitted in 1996. According to ADB data, almost all of the nation’s small-scale hydro-power plants are currently operated by private firms, which feed power into the national grid at competitive rates. Five projects to set up mini-hydro power plants in Sri Lanka were among 16 new agreements the Board of Investment signed with investors in early 2016. The agency said the 16 agreements represent a cumulative investment of $110m and will generate 1250 new jobs. Most private wind and biomass ventures have been less successful – with some exceptions – due to non-competitive pricing and issues related to connecting these projects to the grid. Clarifying the relationship between private power companies and the public sector is widely regarded as a precondition to the further development of the growing NCRE segment, which will rely largely on private-led activity.
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