Annual General Meeting – 2009
The President’s Report
The year that has passed has seen some positive events that augur well for the future of the Renewable Energy sector in Sri Lanka in general and Bio Energy in particular. However, in spite of the progress achieved and the momentum gained it is still very necessary to be conscious of the barriers that still hinder us in our efforts to harvest the maximum benefits from proper utilization of the Bio Energy Resources of Sri Lanka. We are more than ever conscious and convinced of the immense contribution that the Short Rotation Coppicing trees can provide for the Economy, Environment, Rural Development and Social Equity in Sri Lanka. As such we have selected the theme “ Towards a Bio mass Economy for Sri Lanka” in our deliberations during the annual seminar for this year. The continued efforts of the BEASL to foster the development of this sector and to fight against some efforts to hinder our progress are of utmost importance. In this task the support given by my colleagues in the council and by the general membership is gratefully acknowledged. I would like to appeal for your continued support in the coming year for the new council as well.
1.0 Highlights of the Year
The efforts of the BEASL since the last AGM have yielded some significant results. We have to be patient to see the tangible results of these gains which we hope would commence appearing in the coming year. We are cautiously optimistic of the possibility of seeing some significant results in the coming months.
2.0 Positive Advances Made
2.1 Non Conventional Renewable Energy Tariff Structure
The principle of this tariff structure was supposed to be Technology based and Cost Reflective. The concerns we expressed at the time on the basic philosophy itself which one might argue supports expensive technologies while there is no special incentives for the more economical technologies, still remain. However, we welcome this initiative of the Ministry and the improved tariff announced earlier this year , as a stepping stone to a more realistic tariff structure and a very significant advance from the totally unacceptable ‘avoided cost system’ that was in place in the past. The points of greater concern are the actual numbers and indices used in the calculation of the tariff for different technologies. This has led to a lower tariff being announced for the use of agricultural waste, based entirely on an incorrect and inadequate understanding of the sector. We maintain that this is due to the fact that there is no representation of the developers in the tariff fixing committees. The decisions are arrived at by persons who are not in a position to appreciate the issues faced by the developers as evidenced by the arguments brought forward to justify their decisions. There is nothing gained by the present practice of calling stake holder meetings after deciding on the tariff by these committees. We will not give up this effort to gain representation in this process as the developers are expected to carry all the risks and are assigned the responsibility of achieving the NCRE targets set by National Energy Policy.
The positive result of the announcement of the NCRE tariff of course has been the renewed interest in renewable energy and on bio energy. However it must be noted that the time taken for a developer to reach the point of signing the SPPA, so that the tariff for a particular project is assured, is still a long drawn and arduous process. This certainly cannot be achieved in a 12 month period, presently allowed by the SEA act, after which the provisional approval lapses automatically.
Under these circumstances, it is essential that the tariff announced in 2009 is held firm if not raised until the projects which are in the pipeline have progressed adequately to sign the SPPA. Accordingly, we have requested that this tariff should be maintained for a further period of two years during which we hope arrive at a more transparent and practical mode of tariff calculations.
2.2 Amendment of the SPPA
The new NCRE tariff structure and the SPPA have now matured with several project developers having signed the power purchase agreements under this scheme. The final version is still a two party agreement between the CEB and the developer and the CEB will pay the avoided fuel cost and there is still some lack of clarity on the methodology of payment of the top up component which is expected top be made by the SEA. It is hoped that the actual payments will not pose any problems when these projects are completed and are ready to export power.
2.3 Sustainable Energy Authority
The SEA has been in existence for over two years now. An important step taken by the SEA has been the call for new project proposals targeting the new NCRE Tariff structure. This evoked a large number of applications mostly from the mini hydro sector. Of greater interest to us is the fact that from a satisfactory number of applications for dendro power projects, 16 projects have received the provisional approval of the SEA amounting to 46 MW. Unfortunately, the strict time restriction in the SEA Act, of only one six month extension of this approval limiting the total period to 12 months, has created a problem for these developers to reach the point of signing the SPPA within this time, and a number of these project approvals have now been canceled. The SEA is conscious of this problem and moves are under way to seek amendments to the act to overcome this and other issues.
The SEA is also making efforts to help the developers to obtain the multitude of approvals needed through program of awareness sessions to the state agencies. However, a long and difficult path still awaits the NCRE developers. It is hoped that the rest of the state agencies recognize the fact that the development of renewable resources as a national imperative, rather than a mere business venture by some individuals. The SEA’s task to simplify this process will be made that much easier if this paradigm shift can be achieved.
BEASL has provided whatever assistance and support possible for these developers who have approached us.
We have also lobbied with the SEA to be more proactive in supporting these developers to help them overcome the considerable amount of bureaucratic and other barriers that still hinder their reaching the stage for commencement of the projects.
The greater efforts and resources of the SEA are still focused on the continuation of the themes undertaken by The Energy Conservation Fund. It is our opinion that the achievement of the targets set by the National Energy Policy, low as they are, should be the responsibility of the SEA and their focus must be directed towards reaching this goal. In this regard, the contribution that can be made by the Bio Energy Sector is immense. It is regrettable that this is not reflected in the programs of the SEA and there is no effort to develop the bio mass resource as a formal recognized sector, which is the most important barrier hindering the private sector developers.
2.4 Sub Station Augmentation
A most encouraging development that has taken place is the commencement of the projects by the CEB to augment nine substations and the construction of a number of new grid substations This has been a major barrier for expansion of the renewable energy sector in the grid connected power sector due to the lack of capacity in the gird substations to absorb the power generated. We are trying to obtain (planned) or? authenticated time programs of these projects to assist the potential developers by locating their power plants in optimal locations to export the power generated.
2.5 Carbon Trading
The Lanka Carbon Fund which was expected to make a significant contribution to exploit the Carbon Credit Potential in Sri Lanka of which the Renewable Energy sector is a major player, is yet to make an impact. However, two bio mass power generation projects have made contribution with one project already registered and the other in the process of pre-registration checks by the Executive Board of the UNFCCC
The BEASL is collaborating with a Japanese Company Ex-Corp to promote this sector targeting the thermal energy sector, particularly the industries with the potential to switch from fossil fuel to bio mass.
3.0 BEASL Projects
3.1 Glriricidia Plantation Project at Thirukkovil
A small project to establish a nursery and promote the plantation of Glricidia was successfully completed in Thirukkovil , with funding form the IUCN.
The project consisted of establishing a plant nursery of 50,000 plants, awareness sessions and plantations. The nursery plants have now been transferred to the field and a significant number of plants have been successfully established.
3.2 Programmatic CDM Project
BEASL has signed an agreement with the Ex Corp of Japan to assist them in establishing a Programmatic Clean Development Mechanism project in Sri Lanka. The importance of this project is that it enables the small and medium industries, presently using fossil fuels for their thermal energy needs, to convert to the use of bio mass and gain the benefits of carbon credits. The normal CDM process is too complicated and expensive for such small industries to achieve this as the amount of credits is too small taken individually.
This project is presently underway with several meetings held with the stake holders.
3.3 New Thermal Energy Projects in Industry
The financial advantages of conversion of industrial thermal energy generation from fossil fuel to fire wood has been advocated by the BEASL for several years. Although, the very significant costs savings are appreciated by the industries the adoption of this change has been slow. However, over the last year a several large industries have made the conversion and we are pleased to note a fuel wood market of about 250 tons a day is now established.
However, the progress of this program has been severely affected by the unfortunate retrogressive action taken by the state to provide a significant subsidy to keep the price of fossil fuel at artificial low level, even when the world oil prices have more than doubled from levels experienced during the short-lived dip in prices. At present, the industries enjoy a subsidy of Rs 23 per litre while the power generation companies enjoy an even larger subsidy. (can we give this a s a percentage?)
BEASL has made representations, pointing out the shortsightedness of this action and has sought a similar subsidy for those industries who have taken the progressive step of conversion to bio mass usage with benefits to the country at large.
4.0 Promotional Activities
The BEASL participated in several exhibitions, albeit with meager funds available, to continue dissemination of information on the value of growing Gliricidia and its uses for different segments of the society. Our stalls were well attended and the results of these efforts will only be seen in the years to come.
5.0 Problems and Barriers
Of the many problems and barriers that are still prevalent two major issues have surfaced which require the concerted efforts of the BEASL.
The most pressing need is the expansion of the fuel wood supply to overcome the diffidence of both investors and the lending institutions to enter into the dendro industry. It is unfortunate that this is a problem that should not exist if the true value of the Gliricidia leaves is appreciated adequately. Our efforts to create this awareness has had some measure of success as there are now some avenues for the sale of the dried leaves. The NLDB is already in the market for this purpose and a private sector company has expressed its willingness to buy leaves if adequate quantities can be generated. We are attempting to create the conducive situation so that this market segment would move forward giving the right signal for others to expand their cultivation.
We have pointed out the great opportunity available at the moment by incorporating Gliricidia cultivation as an integral part in the re settlement process for the IDPs in the North and East. This possibility was highlighted by newspaper article’s and representations made to relevant authorities. However, it is regretted that none of the concerned parties seem to appreciate this opportunity of providing a source of income for the settlers as well as contributing immensely to embarking on a path of non dependence for the country for imported fertilizer and fossil fuels. The detailed article and proposal made are available to those who may be able to pursue this initiative.
The second barrier which is of greater concern is the lack of capital for the dendro power projects. While the investments needed for fuel switching is relatively small and will not pose a problem if the fuel wood supply issue is adequately solved, the investments needed for the dendro power projects are considerably larger. For the projects to be viable and to justify the considerable efforts required to develop a project, the size of the project should be a minimum of 1.5 MW, and 5.0 MW being the preferred size. However, at this level there is a distinct reluctance by the lending institutions to provide the loan capital which is essential for the development of the projects. Even those banks which are participant of the RERED projects show some reluctance. Another significant concern for the lending institutes is the fact that we have only a single buyer, the CEB. Unfortunately, the CEB is considered financially a risk, based on their financial performance. As such those banks which are even willing to listen, demand a sovereign guarantee for the debt.
The larger power projects are undertaken by the government with international loans and funding schemes at low interest and the loans are guaranteed by the state. These avenues are not available for the dendro developers and even though some foreign investors are available they would like to see the same level of state support at least by providing sovereign guarantees.
If the National Energy Policy of the government of Sri Lanka is to have any credibility there should be such measures instituted to ensure that the NCRE sector is supported at least to the same level as the fossil fuel based power generation.
6.0 Staff Movements
We are sorry to report the departure of Mr. Harsha Vithanage who served as a project coordinator in which capacity he contributed significantly to our efforts. Mr Jayantha Munesinghe has provided us much help in the recent times and we are trying to formalize his contribution in the near future to be able to handle the increased work load.
7.0 Financial Status and Membership
The BEASL manages to survive on the interest received from the fixed deposits. However, this drastically limits the scope of activities that can be undertaken. In particular, there is a grave need to repeat the public awareness campaign we conducted some year ago as the time is ripe for our message to be appreciated by the general public. As such the generation of some project activities or other means of generating funds is urgently needed. All members are requested to bring up to date their subscriptions as well as to bring in more members to the association. The impact we can make is bolstered by a large membership. Those who are engaged in projects for whom the BEASL has provided much help are solicited to become corporate members.
L.P Jayasinghe
President
22nd December 2009