Oddamavadi 100 MW solar project sparks debate over high tariff
Sri Lanka is set to commission a 100 MW solar power plant in Oddamawadi, Batticaloa, by next year amidst allegations of manipulations in power purchasing agreement with Ceylon Electricity Board (CEB).
The project will operate on a Build, Own and Operate (BOO) basis for a 20-year period, with the CEB agreeing to purchase electricity at a higher price that could lead to significant financial losses, several senior engineers of the board alleged.
A senior official from the Ministry of Power and Energy noted that the Cabinet-appointed negotiating and technical evaluation committees had taken into account the realistically achievable energy output to ensure cost recovery, as overly optimistic projections could lead to artificially lower tariff
The Cabinet of Ministers, upon the proposal by the Minister of Power and Energy, approved the project to be awarded to Solar Forge Batticaloa.
This decision followed an evaluation process of expressions of interest (EOIs) that were solicited in 2021. The developer secured necessary land clearances.
The Environmental Impact Assessment (EIA) clearance and an energy permit were secured in 2022 and 2023. The project is expected to begin development sometime in 2024 and be operational by 2025.
A Technical Evaluation Committee recommended a unit price of $0.0666 (6.66 cents) for the electricity, but the power purchase agreement (PPA) was ultimately negotiated at $0.0875 (8.75 cents) per unit, despite Solar Forge Batticaloa’s initial proposal of $0.0978 (9.78 cents) per unit, according to official documents. .
This has sparked concerns as the CEB is projected to face an annual loss of Rs. 1.39 billion, accumulating to Rs. 27.85 billion over the 20-year span of the agreement.
This solar project is part of a broader initiative by the Sri Lankan government to boost renewable energy capacity, following a Cabinet decision on 31 August 2021 to invite EOIs for projects with capacities of 50 MW or more.
A total of 533 EOIs were received with 136 submissions coming from a single developer for a specific location. In March 2023, the Cabinet approved the appointment of a Standing Cabinet-Appointed Negotiating Committee (SCANC) and a Project Committee to oversee large-scale renewable projects.
The Oddamavadi solar power project, developed by Solar Forge Batticaloa, successfully navigated this process and obtained the necessary energy permits from the Sri Lanka Sustainable Energy Authority (SLSEA), according to cabinet memorandum.
However, the procurement process has been criticised for allegedly circumventing competitive bidding, potentially leading to inflated tariff rates.
CEB engineers have expressed concerns, arguing that current global market rates should place wind power projects below $0.05 (5 cents) per unit and solar power projects at approximately $0.06 (6 cents) per unit.
The Technical Evaluation Committee recommended a unit price of $0.0666 (6.66 cents) for the Oddamavadi project, supported by detailed justifications in their report.
Despite the concerns, the project is moving forward, highlighting the challenges in balancing the expansion of renewable energy with financial sustainability for state-run utilities like the CEB.
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