Rational look at electricity tariff and future energy security
Much agitation, demonstrations and a plethora of newspaper articles, TV discussions and even a general strike were generated by the recent hike in electricity consumer tariffs, all of which were only concentrating on the recent tariff announcement only. In this scenario it was indeed refreshing to read the article in the Business Times of May 5 titled “Long term solution needed for power crisis”. This is common sense indeed and one can only hope that the relevant authorities will adopt a long term vision at least now. I would like to propose some aspects of such a long term strategy which is still not too late to be considered carefully and pursued.
The topic of the hike in electricity consumer tariff is very much in the news. The Public Utilities Commission (PUCSL) held a stakeholder consultation meeting on April 4 which was attended by a wide spectrum of stakeholders.
It was reported subsequently that 95 per cent of the respondents opposed an increase in tariff. It is surprising that there is even 5 per cent who did not reject the proposed increase. Perhaps because they realized the need for a long term vision in the whole exercise, which was distinctly absent. The ad hoc approach of trying to agree on a tariff year by year just to meet the expenses of the CEB, does not lead to any viable solution. A tariff revision up or down, should be done with a long term vision with strategic features that would encourage, incentivise policies and actions leading to stabilize this problem which has grave national impacts.
Who is responsible?
The present system of trying to fix tariff levels, as a means of meeting the declared cost of the CEB and the General Treasury being expected to make up the deficit, is totally unsustainable. It would seem most ludicrous to continue this practice, whereby there is no compulsion at all on the CEB to reduce the cost of generation, which is the only way that the consumers can expect any relief at least in the future. The present scheme enables the CEB, which enjoys the status of the state monopoly as the sole authority for sale of electricity, to do as they please with total disregard to finding any means of reducing the cost of generation or other costs.
Hence the consumers themselves are paying for their sin of apathy and gullibility, not demanding that they are given the due place, as the captive victims with no other recourse, in determining the countries energy future.
As such we, the consumers, have no option but to prop up the CEB directly through the tariff or indirectly through the state subsidies. However, this situation must at least now be considered an interim status, until a more sustainable and acceptable system is developed. The tariff system must be designed to promote and incentivize such change.
Sri Lankan electricity consumers are a most gullible lot ready to accept the various promises dished out by the CEB and the Ministry of Power and Energy every time they try to foist a consumer tariff escalation. The carrot used in the past two decades or so has been the promise of cheap power from the coal power plants, totally ignoring a multitude of adverse impacts of the use of coal, economically, socially and environmentally and well documented health issues. The only reason for going for coal power, that of low cost is now questionable.
True cost of coal power, now and in the future
File photo shows a consumer looking on as a meter reader hands an electricity bill
It will be remembered that coal power was promised at Rs 3.50 a unit when the first coal power plant was being promoted. This price rose year by year and by the time the first plant was commissioned in 2011, the cost had exceeded Rs 13 by the CEB’s own admission. We have no access to the true cost as was pointed out by Dr. Lakshman Watawala at the stakeholder meeting, there being no mechanism for the public, to know accurately the true cost of generation from the different resources used by the CEB. What will be the cost of generation in a few years to come?
However, the statistical digest of the CEB itself gives us a clue on the likely cost of power from the Norochcholai coal power plant. The 2011 statistical digest provides the following information.
Total Generation using coal 103 GWh
Total consumption of coal 395 million kg Cost of coal Rs 6.4 billion Cost of fuel per kWh Rs 6.49. unit
The US dollar parity was about Rs 108 in 2011. Thus the depreciation of the rupee alone would raise this cost to Rs 7.69 per kWh. Also every time the coal plant is started after a shutdown, which is becoming rather frequent, on 19 occasions as recently reported in the “Lankadeepa”, a substantial amount of diesel has to be used driving up the cost of generation further.
Are the consumers ready to be hoodwinked again with a promise of coal power at Rs 7.50 per unit, as so shamelessly touted by the Ministry of Power and Energy, to claim that proposed consumer tariff escalation is temporary?
One more pertinent fact to bear in mind is that against the specific fuel consumption of 0.38 kg/kWh emerging from the data given for 2011, the CEB submission to the PUCSL indicates a specific fuel consumption of 0.46 kg/kWh. (It is also understood that the comparable figure for the proposed Sampur power plant is 0.73 kg/kWh). The expected purchase price of coal projected by the CEB is Rs 18.56 /kg. Thus the fuel cost alone would rise to Rs 8.53 for Norochcholai and Rs 13.55 for Sampur. It is presumed that this is the cost at the point of consumption.
The total cost of generation at the power plant must provide for many other costs over and above the fuel cost.
I believe we, as consumers and as citizens should have the right of access to this data, which will provide the true picture.
The data on world market prices of coal is readily available on the Internet.
Under these circumstances, what can the consumer expect in the coming years? Clearly the CEB has no acceptable solution as their long term generation plan is heavily loaded with more and more coal power plants, with scant regard to the obvious dangers to the country and the electricity consumers.
Problem of peak demand
The CEB needs the additional generation capacity mainly to meet the predicted rise in peak demand over the years. The current installed capacity of 3400 MW plus the 600 MW of the Norochcholai Stage 2 and several other projects such as Uma Oya and Moragaha Kanda would provide adequate generation capacity for several years to manage the average demand, if the growth in demand during the peak hours is kept in check. The CEB is also blocking the development of 348 MW of Non Conventional Renewable Energy projects for which the energy permit has been issued, by dilly dallying on the acceptance of the feed in tariff declared by the PUCSL in October 2012 in spite of the enforcement order issued by the PUCSL in February 27, 2013.
The current average demand is only about 1325.6 MW and the maximum demand is 1954.7 (PUCSL Web). And we will have over 4000 MW of installed capacity by the year end which is double the current maximum demand recorded. There would no doubt be many angry responses quoting problems of rainfall, non firm energy resources, installation capacity vs energy, etc. But that is why we have a CEB with hundreds of highly paid engineers to manage such issues.
Management of the peak load
The management of the peak load can take two forms. The first is energy conservation and improvement of efficiency of energy usage, which all of us should practice. However, there would be an inevitable increase in demand with the rapid development of the economy and the improvement of the life styles of the people. The vast majority of the consumers who are getting the benefit of electricity only in the recent years should not be deprived of its advantages and the comforts and conveniences.
As the CEB has clearly failed over the last two decades to provide acceptable solutions and since the current proposals for future generation are based on unrealistic prediction of the world coal pricing over which we have absolutely no control, there is no alternative but for the consumers to be encouraged to generate their own power, at least during the peak hours.
The CEB already appreciates the value of this strategy, as even now the day tariff is mandatory for the industries and larger consumers, with substantially higher tariff levels charged during the peak hours, which encourages them to reduce or look for alternatives for their energy during the peak hours. This facility can be given to smaller consumers as well on optional basis. The proposal submitted to the PUCSL to include this feature with the recent tariff revision has been ignored in spite of the fact that the very same proposal is included in their own strategic evaluation for the management of the peak load.
Sustainable options available
There are many proven technologies and equipment already available in the world market which would encourage a substantial number of consumers to take up this challenge to ensure some predictability of their energy costs in the coming years.
For Sri Lanka, a most viable technology is solar PV with limited storage capacity to cater to the 3 -4 hour peak period, for the larger domestic consumers. A typical installation of 2-3 kW range is now available in the world market at prices not exceeding $2.50 per Wp. With the added cost of the batteries this would still be less than $3.50 per Wp. In case of the larger PV installations suitable for the industries and smaller hotels over the 10 kW to 40 kW range the cost would be in the region $2.50 per Wp including the cost of batteries. It is also important that the government does not allow unreasonable duties and other barriers to be implemented leading to increased cost of the essential components such as solar panels, inverters and deep charging batteries, which at present have to be imported. The savings for the country in the long term by avoiding both the capital cost of large power plants and the continuing cost of imported fossil fuels will be much greater than the revenue that would be gained by such duties, etc.
Ignoring the consumers using up to 90 units per month, there are 997,000 customers who might be potential generators of electricity, who can contribute to lower the peak load. This cohort of customers consumes 1,846 GWh of electricity. Based on the assumption that 30 per cent of their consumption is during the three peak hours this demand will consume over 500 MW of generation capacity.
An early and well managed strategy to lower the demand on the national grid during the peak hours could make the proposed Sampur power plant redundant. There are more than enough consumers capable of generating the 500 MW expected from this plant. It is unfortunate that the PUCSL has seen it fit to ignore this recommendation which would not have affected the tariff system proposed by the CEB. There is absolutely no justification to go for more and more coal power plants as reported in the newspapers. This would be a most short sighted strategy considering that these plants require huge capital expenditure by the state as the CEB has no funds at all to invest and the public would be saddled with the cost of generation which is bound to rise year by year.
If this strategy is adopted then the CEB would be relieved of the burden of trying to generate the capital and the myriad of other problems of adding more and more generation capacity in the medium term. The time thus gained can be used to develop the many indigenous sources of energy, of which Dendro energy is the most useful with a multitude of other benefits. Being a firm source of energy there are no technical barriers for large scale absorption of Dendro power to the national grid.
The absorption of large scale wind and solar power to the national grid is hampered due to the present technical barriers.
The CEB must take up the challenge of overcoming these barriers with the long term goal of moving away from fossil fuel based power generation both oil and coal or even natural gas, none of which is under our control. If this barrier is overcome there are many investors waiting in line to implement such power plants, which has the advantage of relieving Sri Lanka of the dependence on fossil fuels, which is at the bottom of the present problem
The PUCSL must consider the veracity of the above proposals using the data accessible to them and if found to be of value, should take a firm stand before approving any ill-conceived fossil fuel- based power generation in the future.
(The writer can be reached at parajayasinghe@gmail.com).
Follow @timesonlinelk
comments powered by Disqus