Renewable energy – President’s target sabotaged by corrupt officials
www.ft.lk, 30th January 2020, By Tudor Wijenayake
The entire world is moving towards renewable energy. Wind power projects developed since 2010 were stopped in 2014 claiming corruption. If an acceptable system was established, the private sector would have installed over 1,000 MW of wind power projects by now, completely eliminating the power crisis.
The continuous electricity supply to citizens has become a serious problem. Since the establishment of the Norochcholai coal power plant in 2011-2014, no major power plant has been constructed. In 2012, for the first time in history, import of petroleum products passed 50% of all export earnings.
After Norochcholai some oil based power plants were retired. But non-establishment of power plants resulted in electricity shortages being met by re-hiring of retired power plants. Today if cost of coal is added to oil costs, we may have surpassed the 2012 scenario, resulting in CEB, the highest loss-making organisation, and the excessive import of oil dragging the foreign reserves down.
Gotabaya Rajapaksa was elected as President under such a background. His ‘National Policy Framework’ envisages generation of the country’s electricity requirement through hydro and renewable energy to 80% of overall energy mix by 2030.
Daily FT reported on 21 January, under ‘Govt. aiming to boost renewables to 50% by 2030’ the P&E Ministry spokesperson has lowered the President’s target from 80% to 50%, clearly indicating that CEB officials resent the President’s proposals that would disable coal and oil powered plants.
Contributions
In contributing to power generation capacities major hydro has already reached its limit with only additional 230 MW in the future. Meanwhile CEB’s generation plan expects mini-hydro of 10 to 15 MW and bio-mass 5 MW a year.
Next to hydro, wind power is the cheapest. However, solar and wind power have their own limitations. Solar is available only during the day reducing with cloud-cover. Wind is throughout but wavering, also with low periods between monsoon changes.
The envisaged conversion of 80% to renewable energy would require increasing renewable additions by 5,000 MW (omitting pumped storage), a massive task.
History
Premasiri Sumanasekara of Vidya Silpa in 1996 constructed the first private hydro-power plant at Dick-Oya of 1 MW capacity. Also CEB’s installed 3 MW capacity wind farm in Hambantota in March 1999, currently decommissioned.
In 2008 Sustainable Energy Authority announced the principle of ‘Technology Specific Cost Reflective Tariff,’ further amended by Cabinet appointed committee and approved in March 2014 for electricity supplied by private producers to CEB up to 10 MW with tariffs becoming effective from 1 January 2012, the approved rates were:
Mini-hydro: Rs.17.39/kWh
Wind: 23.35/kWh
Biomass: 23.44/kWh
Agricultural waste: 17.30/kWh
Any other renewable energy would be offered a flat tariff of Rs. 23.10/kWh.
Wind power
A World Bank report of August 2007 under ‘Private Sector, Small-scale, Renewable Power Generation in Sri Lanka’ identified that the country has nearly 5,000 sq.km with good-to-excellent wind resource potential. About 4,100 sq.km of land area and the balance 700 sq.km, lagoon, largely concentrated in the north western coast from Kalpitiya Peninsula north to Mannar Island, Jaffna Peninsula and the central highlands. On a conservative assumption these could support a potential of 24,000 MW of installed capacity.
Electricity through wind power
Electricity through wind power is supposed to be the cheapest. Wind power’s capabilities are shown in Denmark where wind power delivered almost 47% of electricity requirement in 2019.
After SEA’s tariffs, Mampuri wind farm first private-sector wind project was commissioned in 2010. By 2014 there were 15 privately owned wind power plants in operation, producing 127 MW, constructed by six companies and ten were of capacity over 10 MW.
Wind farms were accepted on “first-come, first-served” basis and became popular, but the system was suspended on Presidential order in 2014 after numerous scandals and political dealings surfaced by officials of Sustainable Energy Authority and CEB. Since then no private wind power plants were approved. However, based on a CEB tender, a 10 MW wind plant is under construction in Jaffna peninsula on CEB purchased land at a lower tariff.
Tenders for wind power plants
In November 2019, CEB called request for proposals for the establishment of 60 MW wind power plants 1-10 MW capacities on BOT basis; the tenders closing on 2020 February 26. But CEB overlooked that existing wind power plants, all owned by private investors, 10 units out of 15 equal or more than 10 MW. But the tender will give an indication of a reasonable purchase price payable to wind power producers.
CEB’s Mannar wind power plant
In 2014 CEB proposed a 100 MW wind power plant in Mannar Island with ADB assistance costing $ 120 million, expecting to call tenders in April 2016 for commissioning in June 2018. But by late 2018, Danish wind turbine manufacturer Vestas was selected and Access Engineering for civil works, but the progress is extremely slow. The President’s program proposes completion of Mannar project by 2021.
Bio energy
The Sri Lanka Bio-Energy Association claims they wish to contribute to renewable and indigenous energy towards Sri Lanka signed Paris Agreement of the UNFCCC. Having achieved target of 10% contribution of electricity to national grid ahead in 2015; however, achieving the next target of 20% contribution by 2020 was stalled due to stifling of renewable power generation since December 2015 by CEB citing ambiguities in Electricity Act No. 20 of 2013.
According to them dendro power projects of capacity over 80 MW in various stages of approval process are blocked over the past two years.
Solar power – capabilities
Sri Lanka being close to equator, receives an abundant supply solar radiation year around without a marked seasonal variation, though significant spatial distinction could be observed between the lowlands and mountain regions.
Rooftop solar is possible throughout the country except in higher elevations. Solar-parks are possible in western coastal belt from Kalpitiya to Jaffna, Northern Province, also Hambantota and Monaragala Districts due to flat dry terrain with low rain. In addition parts of lagoons, lakes and reservoirs could host solar parks. Thus the country’s solar and wind production capacity is beyond imagination, only needs implementation.
Government solar parks
The Buruthakanda Solar Park in Hambantota by Sri Lanka Sustainable Energy Authority (SLSEA) first commercial scale solar power station completed in 2012, producing 737 KW in the first stage and 500 KW in the second stage. Two solar parks of 100 MW are being planned since 2016 in Siyambalanduwa in Monaragala District and Pooneryn in Jaffna.
Rooftop solar
SLSEA introduced rooftop solar power units in 2010 which became a success. The success led to Surya Bala Sangramaya or the battle for solar energy in 2016. Electricity generated with solar panels were purchased under Net Metering, Net Accounting and Net Plus, with the original program becoming Net Metering. The new program targeted adding 200 MW of power to the national grid by 2020 and 1,000 MW by 2025. Currently 20,000 solar systems supply 215 MW to the national grid.
Improving household solar
Under Net Metering the customer is not paid for excess power produced, but could be set off in future up to 10 years. Under schemes Net Accounting and Net Plus electricity produced for the first seven years is paid Rs. 22 per unit and Rs. 15.50 thereafter.
Minister Ravi Karunanayake announced that from August 2019, only Net Plus would be in place. Under same, rooftop solar producing up to 50 KWs would be paid a Rs. 19.75 flat rate for 20 years while systems above 50 KWs be paid Rs.18.75.
Small solar power producers
Earlier, SLSEA accepted solar power produced by small private producers up to 5 MW. Since January 2016, CEB blocked all NCRE projects. The Small Solar Producers Association protested that 617 prospective producers with 1,555 MW capacity already registered with SLSEA and having paid over Rs.100 million were let down by CEB. The approved tariff for solar-power below 5 MW was Rs. 23.10 a unit, but the Minister wished to reduce the payment to Rs. 16 a unit, claiming that solar panel costs have come down in the world market.
Calling tenders for solar power
In June 2017 under Sooryabala Sangramaya Phase II, CEB called bids for 60 solar power plants of 1 MW capacity at 20 locations. Out of 63 bids received, 36 were accepted under rates of Rs.12.73 to Rs.18.37 per unit, averaging Rs.17.22, showing the reduced solar prices. Of the accepted projects, currently 6 MW of power has been connected, showing the poor progress after 2½ years. In the tender, some locations failed to attract even a single tender, possibly due to poor access.
The prices displayed the reduced costs of solar power production, in dry regions with low rain and cloud cover.
In August 2017 CEB called public tenders for 10 MW Vavunathivu Solar PV power project in Batticaloa District, to be developed on Build Own & Operate basis, CEB accepting power for 20 years with a ceiling price of Rs 18.37 /kWh. In March 2018 Aberdeen Group, had reportedly won the tender.
Hybrid energy park
In May 2017 Cabinet approved building a hybrid energy park of 240 MW of wind and 800 MW of solar power plants at Pooneryn in the north. The project to be implemented in three stages and investors to be selected through competitive bidding, a project included in the President’s program.
Power and plant costs
Wind and solar power plants are slightly more expensive than coal or natural gas, however, they have negligible running costs and would pay for themselves in a few years. For funding, number of European countries offer low interest loans for renewable power and if the government negotiates same could be utilised by investors, further reducing costs. Recently, delegates from Japan and Qatar met the President and have offered assistance for renewable energy.
With current power shortage all retired power plants have been brought into stream. Now that dry season is back, power consumption is rising, CEB has called tenders for emergency power.
Although a natural gas policy has been announced, supply, storage and distribution of imported gas, while accommodating Mannar gas has not even been discussed. Even if new coal or natural gas based power projects are awarded, they would be minimum four years away. Short term support could only be emergency power from foreign sources, costing around Rs. 30.
But power from renewable sources are possible earlier than new coal or gas plants. Roof-top solar power is possible in six months at Rs.19.75, 1 to 5 MW solar in two years at Rs. 17.22 and wind power in around three years, costing less than Rs. 15. Power plants exceeding 30 MW will provide still cheaper electricity. In addition, they will not require oil or coal draining foreign currency. Thus implementing renewable sources soonest is the best solution.
CEB’s tendered rates
CEB officials have opted for a tendering system claiming least cost principle is applied. With the tender payment rate for solar suppliers was arrived for 1 MW averaging Rs.17.22. In the tender called in June 2017 for 60 plants of 1 MW capacity, only 36 were accepted and coming into production now, the process taking two and half years.
CEB has called tenders for wind power plants of capacity below 10 MW, will be opened soon and fixing a rate for wind power be possible.
Renewables – step-motherly treatment
As shown above, a large number of renewable projects were accepted by the Cabinet. CEB engineers are interested in calling tenders but the progress is extremely slow.
Under CEB conditions: The selected developer needs to procure or lease the required land for the project; secure all environmental clearances, Governmental approvals and statutory licenses; and bear the entire cost of interconnection of the solar plant up to the gantry.
Thus, the investors are responsible for approvals, funding, procuring solar panels/wind turbines, transport, install, running and maintenance. CEB only absorbs power supplied by them. When the supplier absorbs all risks, CEB insists on long specifications and details from the investor delaying projects. Thus the red-tape from CEB need be eliminated.
CEB’s inadequate grid concurrence
A report presented by Sustainable Energy Authority in March 2019 revealed the holding back of NCRC Projects due to unavailability of grid connections at proposed locations.
Thus it is urgently needed for CEB to lay power lines to connect supplied power. For funding, if they inform the President of urgency, he would be sure to release the funds immediately.
Way forward
Rates for small solar projects were fixed based on tenders and the wind power tender will be opened in a few days. Thus rates payable for each type could be established early. The country’s power shortage is so huge an open invitation need be called for solar, wind, mini-hydro and bio-energy for a three-year period. Tenders could be called for projects above 25 MW.
Amend the Electricity Act
The Electricity Act amended by Act No. 31 of 2013 requires all NCRE projects be subject to tendering, made suspension of renewable power projects. The Act needs amending to allow award of contracts for projects under 25 MW based on power purchase price, on negotiated basis and tendering for large projects.
Rooftop solar
Government need to encourage rooftop solar on residences, factories, private and in own buildings. Current rate of Rs.19.75 would allow a reasonable return on investment. But CEB needs to accept proposals within a week.
Solar projects up to 5 MW
Small investors numbering 617 who were registered earlier could be given the option of proceeding their projects as planned, being paid Rs. 18.37 per unit (the rate agreed on tender). With lower solar panel prices investors would agree. But CEB needs to sign the contracts within one month. Any projects not completed within two years would be cancelled.
Wind power
Tenders were called for wind power under 10 MW and will be opened on 26 February. Based on tendered prices, rates for plants below 10 MW and up to 25 MW could be determined. Approvals for projects to be given within two months.
Solar and wind parks
A number of locations have been earmarked for large combined solar and wind parks to be implemented by private sector, each facility exceeding 30 MW. Investors would be selected on tender basis. Needs be implemented soon.
Discussion
The entire world is moving towards renewable energy. Wind power projects developed since 2010 were stopped in 2014 claiming corruption. If an acceptable system was established, the private sector would have installed over 1,000 MW of wind power projects by now, completely eliminating the power crisis. Even if they were paid the original Rs. 22 rate, still less than around Rs. 30 paid to PPPs, while reducing oil imports.
Since January 2016 small solar producers numbering 617 were denied by CEB to install 1-5 MW power projects of 1,555 MW capacity. In addition during 2019 a total of 80 solar power projects were pending approval from the CEB.
Last week Cabinet accepted two coal power plants and a natural gas plant all 300 MW without calling for tenders. But CEB wishes to call tenders for 1 MW renewable plants.
According to newspaper reports CEB is proposing to amend the Electricity Act to remove the principle of Least Cost Option, a tacit to accept proposed coal plants whose electricity generation costs are much higher than claimed.
The country’s power deficiency could be filled early with renewable sources if approvals are given freely without restrictions, for an initial period of three years, on first-come, first-served basis allocating project locations. However, the biggest issue is CEB needs to give them green light to commence work immediately. Based on condition if an investor fails to mobilise at the location within 18 months, the permit would be cancelled and the location be allocated to another.
The projects require numerous approvals from multiple sources need to be reduced to expedite renewable energy projects, possible with a circular from Presidential secretariat. Based on the progress over a three-year period, rates payable to different sectors could be revised for a win-win situation to the country.
The country’s failure to establish new power plants created the current situation. Meanwhile, private investors proposed to establish renewable power plants at their own cost and risk, which could have averted the crisis situation. But their efforts were nullified by CEB officials and politicians.
The President’s Manifesto team foresaw the impending power crisis and recommended the renewable energy option. Those who oppose progress need to note following from President’s manifesto. “We will remove all impediments and incentivise the private sector and entrepreneurs interested in setting up renewable energy projects i.e. solar and wind, and to this end, the government will provide assistance.”