Shortcomings of CEB Long Term Electricity Expansion Plan

A European Commission funded study has revealed financial and environmental shortcomings in the Ceylon Electricity Board (CEB) Plan for Long Term Electricity Generation Expansion.

The study, conducted by the Energy Forum, recreated the models used by the CEB and found them to be inconsistent with the current economic reality and lacking many modern principles of electricity generation.

Concerns were also raised about the missed financial, environmental and energy security benefits derived from indigenous resources that the nation’s projected reliance on imported coal has overlooked, the Forum said in a press release.

In the 15 years absence of an accepted electricity generation policy for Sri Lanka policy, to its credit, the CEB has conducted studies on long-term generation expansion.

Despite being considered as a commercial entity, these were designed to cater to the needs of the economy as opposed to their own financial gains.

However during this time, not a single long-term power plant option recommended by the CEB has been constructed.

The Energy Forum, in its release, said it felt the reason these plans were not implemented was that they were formulated without taking account of key stakeholder opinions. As a result, these stakeholders used their considerable influence to obstruct the implementation of these plans.

Study
The research consisted of several branches of study. Beginning with an analysis of the CEB’s Base Case using their existing planning tool, the WASP4+ (Wien Automatic System Planning Package) the group was critical of the input assumptions made.

The Base Case considered coal, oil and hydro as the only candidate options for power generation. By unrealistically assuming no price escalation on fossil fuels, no exchange rate increases, no taxes and duties imposed on imports and adopting a discount rate of 10% for calculations, hydro power is made to appear as an expensive option for long-term power generation. From the remaining two options it is obvious that coal is very much cheaper than oil, the Forum said.

“This is clearly not in line with the reality of Sri Lanka. The power generated from existing hydro plants is considerably cheaper than the thermal power plants.

It is likely that if the WASP model was used in the 1940's, 50's and 70's the Laxapane and Mahaweli complexes would not have been built.

Hydro power in Sri Lanka has a proven track record of running power plants over a period of 50 years.

However the CEB study considers only a period of 30 years for planning purposes.

The benefits beyond that period are neglected due to the discount rate principle.

The group found that by running scenarios where the cost of coal increased over time or where the social and environmental generation costs were internalised, all available hydro resources and dendro power were picked by the WASP model for power generation,” the statement said.

Multi criteria analysis
Since 1990, not a single scheme recommended by the CEB’s long term expansion plans has been constructed due to public protests and the resistance of civil society groups on social and environmental grounds.

In collaboration with eminent professors engaged with the subject, the Energy Forum sought to engage all stakeholders (including the CEB, though they declined) in identifying the key concerns and in calculating the true value of the external costs involved in power generation.

The Multi Criteria Analysis found that dendro, wind and LNG were found to be least expensive, hydro and diesel-combined cycle moderate and diesel-gas turbines and coal are most expensive, in terms of externalities.

An important political finding was that the key concerns of public, civil and private-sector stakeholder groups were national interests and the reliability of an uninterrupted power supply as opposed to financial concerns as was initially assumed.

Financial Analysis
The results of the financial analysis show that in the real world, though coal is very much cheaper than oil, it is not competitive with the indigenous resources.

By using more accurate input values for plant factors, service life and capital costs, hydro is rightly shown to be competitive with coal. Dendro is identified as being the most promising technological option and has the capability of replacing not only coal but also the oil plants as the construction period is shorter, yet due to lack of R&D a favourable environment is created for coal.
Recommendations

The release said that the study results make for very interesting reading and is an eye opener for policy makers. The results show that the WASP4+ model is not an appropriate tool for modern day power sector planning in Sri Lanka as it is unable to accommodate energy conservation, energy technologies that cannot be dispatched and the distributed nature of power plants.
Furthermore it was observed that the WASP model is not capable of accommodating newly promoted concepts of fuel diversification and energy mix.

The study as a whole shows that the long term electricity generation planning should not be carried out by commercial entities such as the CEB, but should be conducted by entities with strong national interests and who are responsible for the general public.

An example of such an entity is the Public Utility Commission of Sri Lanka.