Focus on solar and wind energy expansion
Sri Lanka’s government until now has focused primarily on the fossil fuels coal, oil and LNG (liquefied natural gas) – and will probably continue to do so in the short term. The economy has grown rapidly in recent decades, which has driven up electricity generation costs. In the medium to long term, however, the expansion of renewable energies (RE) will be a priority.
The advantages for renewables are obvious: water, wind and sun are abundant in Sri Lanka, unlike coal and oil, which have to be imported. Although the country is granting exploration rights for oil and gas off-shore and expects to find commercially exploitable deposits there, this is still a long way off.
According to a study by the United Nations Development Programme (UNDP), the country would save at least US$ 18 billion in fossil fuel imports by 2050 in the transition to renewable energy. These savings are offset by investments of around US$ 50 billion for generation, transmission and storage. However, financing should be feasible – in some cases at preferential conditions – through international lenders such as the World Bank, Asian Development Bank (ADB) and others.
By 2050 Sri Lanka will need an estimated 34 GW of electricity production capacity, of which – according to estimates – the lion’s share will be solar (16 GW) and wind (15 GW); the rest will come from small hydroelectric power plants and biomass. The country also needs a flexible transmission grid, as well as storage solutions.
Solar energy has excellent prospects for the future
Sri Lanka currently has more than 100 MW of solar capacity installed and aims to reach 1 GW by 2025. The driver until now has been the solar roof program initiated by the government in 2016 (“Soorya Bala Sangramaya” – struggle for solar energy). The country’s largest energy company, Ceylon Electricity Board CEB, and the Sri Lanka Sustainable Energy Authority (SEA) are implementing the program.
Among the largest donors are the ADB (US$ 50 million) and the Indian government (US$ 100 million). The Sri Lankan government also invests, but the amount varies every year and is published in the budget. For 2018 it was US$ 4.5 million. The goal is to equip one million households with microsolar power plants. In 2018, the CEB approved 90 small solar projects as part of the second phase of the solar roof program.
Sri Lanka’s companies share an interest in no longer covering their electricity needs with generators, but with renewables. Many textile companies in the country already obtain their electricity from their own solar systems, including the textile company MAS Holdings, which has installed 24 systems on its roofs.
A hybrid complex (solar and wind) in Pooneryn is part of the Least Cost Long Term Generation Extension Plan 2018 to 2037 (LCLTGEP). Once finished, the plant will generate 800 MW of photovoltaic power and 240 MW of wind power. Three phases are planned for the project: 12 MW of solar power and 150 MW of wind energy by 2022, another 100 MW of solar power and 100 MW of wind energy by 2025, and overall completion by 2030.
Wind energy is on the verge of a breakthrough
Sri Lanka has many regions with excellent wind energy potential – especially in the north and east as well as in the mountainous inland. According to the US National Renewable Energy Laboratory, the country has the potential for more than 20 GW of wind power.
Many projects are planned. Sri Lanka aims to increase installed wind power capacity to at least 799 MW by 2025. In particular, windy areas in the north will be developed.
One of the largest projects is the Mannar Wind Farm Project with a capacity of 100 MW with commissioning planned for 2021. Construction will start in the first quarter of 2019. The ADB has agreed to grant CEB a loan of US$ 200 million. The project will cost US$ 256.7 million, the rest to be borne by CEB. It will include infrastructure (cabling and access roads), a network control center and transformers to manage voltage levels. The Danish Vestas Group has been awarded the contract to supply 30 turbines.
Other renewables are also possible
Even though hydropower has been central to the energy mix up to now, there is hardly any potential for new large-scale power plants. Besides, the unpredictable monsoon season and the resulting droughts of recent years have led to low usage of capacity. Small hydropower plants, on the other hand, continue to be part of long-term capacity planning and are also promoted within the framework of rural development. The 182 existing small hydropower plants, mainly private, can generate 356 MW. A further 215 MW are to be added by 2037.
Firewood remains central to the rural energy supply, albeit in simple use (not in the form of special power plants). Three-quarters of the rural population and businesses, above all tea plantations, use it to cover their energy needs. According to LCLTGEP and PUCSL demands, a total of 85 MW of modern biomass power plants will be built by 2037. In addition, geothermal energy would be conceivable due to hot springs, but it has not yet been included in any initiative.
Implementation will be difficult
According to industry experts, the Sri Lankan government is not doing enough to promote the industry. “Sri Lanka’s energy market needs better framework conditions, transparent tenders, clear areas of responsibility and consistent and clear legislation that applies to all,” several industry experts have complained.
In fact, apart from a modest reduction in tariffs on components and the tax on profits from renewable energy plants, this island country has hardly launched any programs of its own to promote the expansion of renewable energy (in addition to the ADB credit lines). The poor budgetary discipline of recent years means that the government has little financial room for maneuver. Without international donors, the government is not in a position to finance urgently needed investments in renewable energy.
One positive development has been the establishment of a PPP agency called for by the World Bank, which, together with Sri Lanka’s Ministry of Environment and Renewable Energy and the Public Utilities Commission of Sri Lanka (PUCSL), is trying to improve framework conditions for investors and accelerate project implementation. However, it remains to be seen whether Sri Lanka will achieve its ambitious target of 50% renewable energy by 2030.