The prevailing drought situation is expected to last for many weeks, as hydro-power generation continue its downward trend and has increased considerably power generation by diesel and coal power plants, while wind and solar power generation showed slight increase. Also for the government to achieve rapid economic growth, reduction in the commercial and industrial electricity tariff rate is a must as the present commercial tariff rate is too high when compared with many countries in the region.
With a good potential to be a service hub, this high tariff rate is a detriment to the country as it is much higher than for example Vietnam which is attracting much foreign direct investments at present. Thus the country will not be an attractive destination to investors as the production cost will be invariably high due to high cost of electricity and labour as both are comparatively higher in the region.
Bitter Truth is the power sector is presently in a very precarious situation and indications are that the country is heading towards a major power crisis due to the fact that not a single major power plant has been added to the National Grid since 2014. The last major power plant commissioned in 2014 with installed capacity 600MW was the second stage of Norochcholai coal power plant. Since then only 25 MW hydro power plant at Moragahakanda was added in 2018.
Undoubtedly the cheapest source is hydro power and having already developed all the major hydro power sources; it only possible to increase the hydro power generation by significant amounts as the Uma Oya and Broadlands hydro plants under construction with installed capacities 122 MW and 35 MW respectively. Since the power generated from diesel generators is the most costly, to reduce the generation cost it is best to retire some of the very costly diesel power plants.
Oddly, since 2016 every year CEB purchases emergency electricity from many diesel power plants, a situation welcomed by many in the CEB and Ministry for obvious reasons. At present it is the only short-term remedy available to CEB is to purchase emergency electricity from many diesel power plants at exorbitant prices.
Later on due an anti-pollution drive, many countries across the globe begun switching to cheaper and cleaner Liquid Natural Gas (LNG) power plants; due to its availability in the market, it could be established as an integrated solution with LNG supply, off loading terminal, storage and power plant to supply electricity to the National Grid. Sri Lanka is another country that taken to LNG as an alternative to generate power.
Earlier in 2011, a plan to set up a 500 MW coal power plant in Sampur, was scrapped later following protests from anti-coal lobby. Thereafter government agreed to convert the coal power plant into an LNG powered power plant; but due to heavy pressure from the engineers union of the CEB against the construction it got scrapped. Ironically, CEB gave priority to set up environment-friendly green energy-powered power plants using solar and wind power, confirming that CEB has not learned lessons from the past power shortages.
Thus by reducing by half the diesel power generation by opting for LNG power plants, CEB could save many billion Rupees annually; and government decided to build the first-ever LNG power plant of 500 MW capacity in Kerawalapitiya on the west coast. Moreover, a 400 MW LNG power plant is to be established in Hambantota, where Chinese state interests assumed control of a strategic deep-sea port in a debt-for-equity swap in 2017. Local media reports indicate that CEB will operate the facility alongside China’s Hambantota Power Private Limited.
In this scenario, with an eminent power crisis and in spite of the state-owned CEB incurring losses the government has taken measures to provide electricity without any cuts and has no plans to increase the cost of electricity to the consumers; perhaps because it is the election year and by establishing several new power plants by the year 2023, the government has plans to provide electricity at even a lower rate. But based on the growth observed in the past, it is estimated that the demand for electricity will increase annually by 6% and with increased development anticipated this estimated growth target is likely to be exceeded, reason being the per capita electricity consumption of the country is low when correlated to the per capita GDP of the countries in the region.
At present, the electricity consumption compared with per capita income indicates a lower industrial base, but when planning future electricity demand, it may be safer to assume the electricity consumption to increase per capita in the near future and the power generation capacity will need to double. At present for private investments on large power is not possible due to a Sri Lanka Electricity Act enacted in 2009. With Sri Lanka not being the only destination for investments and other countries not having such restrictions it is a major obstacle and if the intention is to facilitate private investment in power generation above restrictions should be suitable amended. With a favourable legal framework and a healthy investment climate there will be absolutely no difficulty in attracting investments for power generation with a lease of land and power purchase agreement.
Earlier the government had intention to establish more coal power plants, but have opted for the environment friendly NLG power plants, but the country may still end up having its first nuclear power plant (NPP) someday, due to growing energy demand in the country. In many countries nuclear generation provides on average more low-carbon power per year than solar or wind, but the cost of generated solar and wind energy is less than half the nuclear energy costs. However, NPP is losing ground to renewables in terms of both cost and capacity as its reactors are as less economical and slower to reverse carbon emissions. Over the past decade, comparing the total lifetime cost of building and running a nuclear plant to lifetime output have increased while that for solar and wind have dropped. There are advantages and disadvantages of NPP on the positive side it produces no polluting gases and does not contribute to global warming; while on the negative side waste is radioactive and safe disposal is not easy and expensive.
With progressive economic development, the energy consumption is increasing significantly in the country and NPP may well be the answer in the long-term perspective. But when something new is introduced there is always lot of indifference from people, especially from those who are in opposite camps to the ones introducing something new. This cause resistance to cause delays or even prevent the implementation of anything new. Hence without a National Plan that includes all sectors including Power Generation may yet thwart all anticipated developments in Sri Lanka, the little island nation!