Stakeholders raise concerns on new power agreements
Industry stakeholders on Wednesday submitted a comprehensive document to the Ministry of Power and Energy on issues relating to the new Special Power Purchase Agreement (SPPA).
The document was submitted through the Ceylon Chamber of Commerce on four important issues in the new agreement, a renewable energy producer told The Business Times. “One critical issue that was discussed was curtailment, which is where the Ceylon Electricity Board (CEB) can download any plant without notice and run at low capacity if they think that more energy is coming from this particular plant.”
Private commercial banks had also participated in this meeting, he said.
A participant banker said they had pointed out that the new SPPA would not be feasible for them to bank new renewable energy projects. “We pointed out that the curtailment clause in the new agreement is very prohibitive for us to lend cash to the developers. The international bankability of these projects is in question. With such clauses, we cannot draw funds from international agencies and climate funds to give long-term financing to the renewable energy projects hereafter,” the banker further said.
Ministry officials had requested the bankers to submit a document with their issues about the SPPA by May 20. By soliciting this input, the ministry can ensure that the SPPA is designed in a way that considers the concerns and requirements of the banking sector, fostering collaboration and alignment between the power sector and financial institutions.
Overall, the document represents the collective views and recommendations of industry stakeholders, emphasising the importance of addressing these issues to promote a sustainable and thriving power sector in the country.
A senior banker pointed out that unlike earlier, when things were simpler before the new Act, renewable energy financing is getting a bit more complex. With energy production increasing, the CEB needs to balance the electricity load as the country does not still have a storage capacity for renewable energy. “We are still an island grid and whatever electricity. that is produced needs to be instantly consumed as we do not have a storage unit which is the basic reason a curtailment clause is needed.”
The total renewable energy share continues to be significant over the next 20-year period mainly due to the scaling up of integration of other renewable energy technologies.
This is primarily driven by the increasing adoption of solar and wind power, which are expected to see significant growth in the coming years.
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