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Ministry proposes fourth coal unit at ‘always breakdown’ Norochcholai
The same company that built the ‘always breakdown’ US$ 1.34bn Lakvijaya coal power plant in Norochcholai—China Machinery Engineering Corporation (CMEC)—will add a 300 megawatt “extension” to the existing facility using a one hundred percent loan from China, reveals a Cabinet paper approved by Ministers this week. Under the proposal from Power and Energy Minister Ravi Karunanayake, a fourth unit will be added to Lakvijaya by CMEC through an engineering, procurement and construction contract. The financial cost is yet to be estimated.
The procedure to be followed is similar to that of the past. CMEC did not go through a competitive bidding process for the construction of the first three units and was nominated by the Chinese Government which provided the loan. One unit was commissioned in July 2011 while the other two have been running since May and October 2014.
The Ceylon Electricity Board (CEB) proposed the extension to reduce the high cost of power generation and to “cure” the “extremely unhealthy financial situation” of the utility and of its fuel supplier, Ceylon Petroleum Corporation. The request was made in writing in mid-August by the CEB General Manager.
While setting up a coal power plant could take five to seven years owing to land acquisition, resettlement, compensation, design and approvals, an extension to Lakvijaya could be completed at lesser cost within two to three years at the same premises, the Cabinet paper says. Much of the existing infrastructure could be shared. Overhead costs will be lower as trained staff and spare parts can be used in common.
For the fourth unit, the terms and conditions can be negotiated based on the previous credit facilities, the Cabinet paper says. The funds can be requested from the Chinese Government under two agreements: the 2016 ‘Memorandum of Understanding between Sri Lanka and China on Comprehensive Implementation of Investment, Economic, and Technological Cooperation’ and the 2017 ‘Framework Agreement between Sri Lanka and China for the Promotion of Investment and Economic Cooperation’.
Project completion is envisaged as 2023. CMEC is already carrying out the feasibility study. Technical and commercial proposals will be invited from the company. And the General Treasury will nominate a Cabinet Appointed Negotiating Committee and a Technical Evaluation Committee to evaluate the input and made recommendations to Cabinet.
The Ministry makes a strong pitch for coal. During the last five years, it says, Lakvijaya met 35 percent of the country’s electricity demand at a price significantly cheaper than diesel. And over eight-and-a-half years, it produced 29.4bn units of electricity saving a reported 441bn rupees on generation. The unit cost of coal power, it says, is the lowest other than large hydro power.
But there is no mention in the Cabinet paper of “high efficient coal”, a term the Ministry previously depended on to canvass for more coal power plants. There has also been no uniformity from Minister Karunanayake on how many coal power plants he is campaigning for.
In June, the Cabinet approved a memorandum seeking four new coal power plants—two in Norochcholai and two in Trincomalee. Each was to produce 300mw of electricity or a total of 1,200mw. Three were to use “high efficient coal” while the fourth was termed as a “contingency power” or “buffer power plant”.
Sri Lanka is embracing coal at a time when most nations are ditching it over strong pollution and climate change concerns. A wave of retirements across the European Union and the US have taken 227gigawatts off the global grid, says carbonbrief.org. Combined with a rapid slowdown in the number of new plants being built, the number of coal units operating worldwide fell for the first time last year.
Another 186gw is set to retire by 2030 while fourteen of the world’s 78 coal-powered countries plan a total phase out, it states. Electricity generated from coal has flattened since 2014, so the expanding fleet is running fewer hours than ever.
If the fourth unit goes ahead, this will be the second business CMEC has secured at Lakvijaya in recent times. In March, it won a contract worth more than Rs 4.6bn to expand the coal yard. It also has agreements running into millions of dollars for maintenance of turbine and related accessories in two out of three of Lakvijaya units.
Separately, CMEC is building the 400mw natural gas power plant in Hambantota and the Rs 35.8bn Basnagoda-Attanagalu Oya water supply project. And it is behind the Greater Kurunegala Water Supply and Sewage Project and the Jaffna Kilinochchi Water Supply and Sanitation Project.