News
Govt. committed to renewable energy targets, but priority is to make tariffs affordable
View(s):- No EOIs from next year; only open competitive bidding and e-bidding for power sector contracts
By Namini Wijedasa
Sri Lanka will honour its commitments under the Paris Agreement—to generate 70 percent of electricity from renewable energy sources by 2030 and achieve net zero carbon emissions by 2050—but will change the process by which this is fulfilled based on what is affordable to the public, Power and Energy Ministry Secretary K.T.M. Udayanga Hemapala told The Sunday Times.
“Yes, we have to achieve the targets, but number one is social sustainability,” he said. “Whatever we do, the benefits should go to the customer in terms of cost. Therefore, we aim to reduce generation costs and, with that, the tariff. That is number one (priority).”
He reiterated that lower electricity tariffs were the foremost concern, adding that the government aimed to streamline procurement to achieve better costs. Previously, the strategy had been to call for expressions of interest (EoIs) for various renewable energy (RE) projects. Several of these are now in various stages of execution.
“They had simply called for EoIs,” Prof. Hemapala explained. “There were no proper power purchase agreements prioritising lowest cost. The government then entered into separate negotiations with different entities to reduce their prices.”
For instance, he said, Adani Green Energy Ltd. (AGEL) has offered to provide electricity from wind power to Sri Lanka at 8.26 US cents per kilowatt-hour. But the pricing of local companies, at 5 US cents, was significantly lower.
From next year, the government will not adopt expressions of interest, strike government-to-government deals, or enter into negotiated price agreements with individual entities. It will only use open competitive bidding and, eventually, e-bidding for power sector contracts.
The controversial Adani wind power, however, is a government-to-government project for which the previous administration signed a memorandum of understanding (MoU). A power purchase contract has not been entered into.
“We are having some discussions with them as well,” Prof. Hemapala said. He was of the view that the MoU could be changed. However, a decision had to be taken at a higher level because “India is our close friend.”
To cut costs, the government intends to provide the private sector with a ceiling price for renewable energy projects before calling for bids. The lowest bidder will qualify. “Our target is to drop the generation cost below 5 US cents,” he said. “Otherwise we cannot reduce the tariff.”
“Even now, there is an average cost,” he said. “Our policy is to go for whatever projects that fall below that average.” It would be counterproductive to achieve the 70 percent renewable energy target if it meant a majority of people couldn’t afford electricity.
The government will not go for more diesel or coal-powered plants. However, the LNG sector will expand—all diesel-fired plants will be converted to LNG. “One strategy therefore is adopting LNG, which has lower emissions and is cheaper,” he said. “The other is renewable energy at low cost. These will run in parallel. We are also targeting nuclear power, which, again, is not a fossil fuel and is low-cost. We must have a proper energy mix and energy security or we cannot run the system.”
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