Sri Lanka’s electricity shortages have become increasingly severe in recent years, with declining hydro-power output, and chronic problems and breakdowns at the Lakvijaya coal station, a 900-MW plant located in Norochcholai. This, combined with rising Japanese and Indian interest in countering China’s geopolitical influence, has facilitated the incorporation of liquefied natural gas (LNG) and gas-fired power plants into the country’s developing energy strategy. Under revamped plans to boost generation and stave off increasingly severe power shortages, officials hope to convert three power plants with more than 600 MW of combined capacity to natural gas feedstock, and develop a further 1000 MW of new as gas-fired plants.

This is a welcome development for stakeholders such as the Public Utilities Commission of Sri Lanka (PUCSL), which has been at odds with the Ceylon Electricity Board (CEB) over the cost-effectiveness of LNG in comparison to coal-fired plants, with the former arguing that gas offers the best medium-term solution to power shortages. As the government authorities from Sri Lanka, India and Japan now moving forward on plans to build new LNG import infrastructure in the country, the resource is slated to become a more central feedstock for Sri Lanka, as hydroelectric and oil-fired generation concurrently decline.

Norochcholai Breakdowns 

Rapid economic growth, rising power consumption and the decline of hydropower have strained the country’s national grid in recent years, a challenge exacerbated by frequent breakdowns at the Norochcholai coal plant.

Financed with $1.34bn of loans from the Chinese government, the plant is the largest coal-fired power station in the country. The plant, fuelled by imports largely from Indonesia, was upgraded between 2012 and 2014 to boost capacity from 300 MW to present levels. However, the facility has proven to be highly unreliable. Problems at the Norochcholai plant were apparent almost immediately; it experienced five breakdowns between its opening in March 2011 and July 2012 alone, with the fifth outage forcing state-owned power firm CEB to implement daily power cuts for the first time since 2001. In October 2016 all three units of the plant encountered problems simultaneously, the 20th such breakdown recorded since 2011, and Sri Lanka lost 48% of its capacity to meet peak demand of 2.26-GW. Daily 90-minute power cuts were imposed across the country while authorities worked to repair the plant.

Chronic drought in 2016 and 2017 exacerbated the problem, further highlighting how the decline in hydropower capacity has increased dependence on coal-fired generation (see analysis). In response, the government boosted imports of diesel and heavy fuel oil, nearly doubling the regular monthly amount in January 2017, to meet power generation needs. However, fuel products are more costly and consumer electricity tariffs are subsidised, so the state incurs significant losses when there is a failure.

Coal Goals 

Until recently, coal had been viewed as the most viable feedstock for a series of new power plants. The CEB’s 2006 Long-Term Generation Expansion Plan (LTGEP) forecast coal would comprise 70% of Sri Lanka’s primary energy mix by 2016, though its actual share reached 35%. In April 2017 the board published a new LTGEP running from 2018 to 2037, which stated that coal development had been identified as an important low-cost fuel source for future plants. However, it noted that plans to develop such facilities as high-efficiency stations with strict emission controls, indoor coal storage and enclosed coal handling would “result in an additional capital cost of approximately $700 per KW compared with conventional coal power plants”.

Coal has become increasingly unpopular due to the high costs and unreliability associated with coal-fired plants. Additionally, the current administration seems intent on reducing environmental damage, developing green energy and cutting procurement costs, which has strengthened the argument against coal.

Cost Efficiency 

In an August 2017 report titled “Electricity Supply 2020 and Beyond”, the PUCSL found that discrepancies between planned and actual project costs under previous LTGEPs had resulted in cost overruns, load shedding and unplanned power procurement, and that those consequences were expected to continue in the next few years. The PUCSL report noted that regular breakdowns at Norochcholai resulted in significantly higher procurement costs than previous LTGEPs had envisioned. According to the commission, oil-fired power plants’ share of the total energy mix had been forecast to fall to 4% in 2016, but stood at 32% that year, with oil contributing 4259 GWh of generation in 2016, nearly six times higher than what was forecast in the 2006 LTGEP.

A number of planned thermal power plants, including 520 MW of gas-fired plants, had also failed to materialise between 2006 and 2016. At the same time, unplanned load shedding had worsened unforeseen power procurement costs for projects, including a 60-MW barge power plant in November 2015, as well as the 100-MW Ace Power Embilipitiya Plant, commissioned in April 2016.

As a result, generation costs in 2016 averaged LKR14.79 ($0.10) per KWh, against 2006 projections of LKR9.32 ($0.06) per KWh, with the PUCSL reporting that an additional 320 MW of oil-fired capacity is planned for 2018 under the existing LTGEP to meet the country’s most pressing near-term power needs.

Moving to Gas 

Despite continued reliance on costly oil-fired generation, natural gas is becoming a greater focus for discussion and future plans. In a list of medium-term recommendations for the period from 2018 to 2020, the PUCSL called on the government to expedite development of LNG import infrastructure in order to facilitate delivery of new gas turbine and combined-cycle power plants.

The administration of President Maithripala Sirisena, which has already announced its plans to generate 100% of its electricity via renewable resources by 2050 (see analysis), has embraced LNG for its clear benefits. In August 2017 it was recommended by an appointed committee led by Sarath Amunugama, minister of special assignments, that the existing 300-MW Yugadanavi power plant in Kerawalapitiya, and two 163-MW plants in the Kelanitissa complex in northern Colombo, be converted to gas immediately. At present, the Kerawalapitiya and Kelanitissa plants operate using diesel and heavy fuel oil. The government launched a tender to upgrade the Kerawalapitiya plant in April 2017, though as of early 2018 the project had yet to be awarded.

Contract delays remain a concern, and the PUCSL has expressed worries over the 300-MW Yugadanavi power plant’s delayed contract award in January 2018. The project is planned to be commissioned by 2021, significantly augmenting electricity generation and offering a more reliable and environmentally friendly alternative to large-scale coal power developments.

The committee also recommended developing a further 1000 MW of gas-fired capacity to add to the national grid at two plants planned to be completed by 2019. Additionally, the 2018-37 LTGEP calls for 705 MW of gas-fired plants to be built between 2018 and 2025, alongside 900 MW of coal-fired capacity.

Ranjith Siyambalapitiya, minister of power and renewable energy, told local media that the committee had also recommended the government establish a floating regasification storage unit (FRSU) prior to 2019, in order to process LNG imports at a lower cost than a land-based terminal.

LNG Power

After a series of deals with China, the country is finding it easier to move forward on gas-fired power station development. The agreements with China are for new transport infrastructure, including a renegotiated January 2017 deal to sell a majority stake in Hambantota port. The media has widely reported that these moves have raised concerns in Japan and India about China’s growing influence as it advances its Belt and Road Initiative, which entails investing billions of dollars in developing economies’ infrastructure in order to revive historic trade routes linking it to Europe. Days after the LNG policy announcement in September 2017, regional media reported that Sri Lanka had invited India’s largest gas importer, Petronet LNG, and an unnamed Japanese company to jointly build the FRSU at a to-be-determined location on the western coast near Kerawalapitiya. According to the report, Petronet LNG had earlier proposed a 2m-tonne-per-annum facility estimated to cost $250m.

The project is expected to take two to three years to complete, costing between $200m and $300m depending on whether it is second-hand or built from scratch, with the authorities reportedly mulling plans to buy a used FRSU from Qatar.

Details of the deal emerged following a visit from Japan’s minister of foreign affairs, Taro Kono, in January 2018, with the office of Prime Minister Ranil Wickremesinghe announcing the signing of a memorandum of understanding to build the FRSU, under a joint venture between Japanese companies Mitsubishi and Fujitsu, Petronet and the Sri Lanka Ports Authority (SLPA). The facility, once completed, will help to meet the country’s gas needs, which were forecast to reach 1m British thermal units (Btu) annually by 2022, rising to hit 3m Btu by 2026.


In January 2018 local media reported the new facility would be built within the existing Port of Colombo by a new company that will be formed to develop the project. It will include docking facilities for specialised, super-cooled LNG tankers, necessitating SLPA’s involvement.

The pipelines will connect the FRSU to the two 500-MW power plants, with the Japanese and Indian governments expected to build one facility each, under a 20- or 30-year build, -operate, -transfer public-private partnership, although contracts for these projects had yet to be awarded as of March 2018. Construction is expected to take up to three years.