Power Ministry’s prohibitive tariff stalls lucrative solar projects
The unviable new tariff is annihilating the solar industry by stopping new entrants while 50 megawatts of solar projects are still to be connected to the national grid.
The Solar Industries Association (SIA) estimates that 43,000 rooftops in the country are powered by solar worth 630 megawatts.
“Not a single company has applied to take on solar power projects in the recent past owing to the low tariff. It is commercially unviable. The high Treasury Bill and interest rates also need to be considered when deciding the new tariff. Considering the delayed payments by the Ceylon Electricity Board (CEB), it is a very long-term risk that investors and solar companies are taking with this tariff.
The Treasury Bill rate is at 30 per cent plus and the Average Weighted Prime Lending Rate (AWPLR) is at about 25 per cent. These two are the parameters used to calculate the tariff. The Ministry of Power and Energy has calculated both these rates at 13.5 per cent,” SIA Secretary Lakmal Fernando told the Business Times.
He added that earlier the tariff was Rs. 22 per kWh (kilowatt) and now it has been increased to Rs. 34 per kWh. “When one arrives at the tariff with cooked and bogus numbers, it will destroy the rooftop solar industry.”
He said these estimates compel investors to pitch in at least 55 per cent of equity, which is why the numbers are not bankable. “To service the debt, we need at least 55 per cent of the equity. To that end, we cannot service the plant and pay the debt. Therefore, companies are struggling,” he added.
Acknowledging this, another industry official said that they are struggling to pay the next month salaries after paying the current month’s one.
Sri Lanka has over 6.5 million electricity customers and if at least 20 per cent can be converted – which is a million customers, with Rooftop Solar systems, installing a 3 kW system per location, 3, 000 megawatts (3 gigawatts) of energy can be added to the national grid, according to industry estimates.
The official added that rooftop solar has faster deployment because the rooftops are dispersed across the country, and electricity supply to the grid can remain relatively stable compared to a single system breaking down such as the Norochcholai power plant.
Industry officials the business Times spoke to expressed strong suspicions about the Solar Tariff Committee report on the tariffs. No details were available of this report.
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