CEB energy plan: Getting dirty to come clean

Sri Lanka needs to invest more in fossil energy not just to avoid blackouts but to make renewables like solar and wind viable, claims the state power utility

Sri Lanka has to invest in low-cost fossil energy like coal and LNG over the next five years to keep pace with rising demand as hydro reaches capacity and burning expensive liquid fuel for electricity continues to shove the state power utility CEB deeper into the red. It’s easy to criticise the CEB’s proposal to invest in ‘dirty energy,’ but fossil energy is a critical foundation to build ‘clean energy’ like solar and wind, the CEB’s engineers argue.

“We all want clean energy, but what Sri Lanka needs now is affordable uninterrupted power supply,” says Athula Wanniarachchi, past president of the engineers’ union at the CEB, under whose leadership the union unsuccessfully campaigned against the government’s decision to terminate the proposed coal-fired power plant at Sampur in 2016. “People often ask us why not invest in solar or wind, but switching to clean energy can’t happen as fast as we would like,” he says.

Sri Lanka generated 15 billion units of electricity in 2017 and demand is expected to grow by a billion units each year, according to the CEB. In order to meet the growing demand, Sri Lanka needs to find cheaper alternatives to diesel-powered electricity generation like coal and LNG. Hydropower cost was Rs4 per unit of electricity and is highly profitable, but Sri Lanka is reaching capacity. The next cheapest is coal at Rs11.34. Diesel-powered electricity generation costs between Rs25-30 per unit. Sri Lanka does not yet produce electricity from LNG, but it could cost around Rs15 per unit or more.

Hydro – which accounts for around 40% of the electricity mix – will decline to 25% by 2037 as it reaches capacity; there is a natural limit to dam-building. The balance 75% will have to come from fossil energy. The CEB favours low-cost power plants like LNG and coal, which produce electricity at lower cost than burning liquid fuels like diesel (which now accounts for over 60% of the electricity mix). The engineers at CEB say the decision to terminate the proposed Sampur plant built by the Indians will cost the already cashstrapped utility an additional Rs200 billion in the next five years as it must import fuel to run its thermal power plants to meet increasing energy demand.

The utility claims it lost Rs900 billion over 15 years because the existing coal-fired plant at Norochcholai was held up for that long. When the plant was finally commissioned, the average cost per unit of electricity fell to Rs15 from Rs24 and consumers benefited as the government cut electricity tariffs by 25% in 2015.

However, the Chinese-built plant was beset with problems, frequently breaking down and emitting high levels of pollutants. Both could have been avoided had Sri Lanka stuck with the original plans for a Japanese-built plant. Corrupt deals for coal supplies blackened the plant’s public image.

The CEB engineers claim the technology exists for low-cost coal power plants that are also less harmful to the environment with lower levels of CO2 emissions. However, the CEB’s arguments are met with upturned noses.

The global average cost of producing a unit of electricity from solar energy fell 73% between 2010-17. The average cost to produce a unit from onshore wind fell 23% in the same period, according to the International Renewable Energy Agency. In the US, wind and solar electricity generation costs have fallen below coal and gas.

The reduction in costs has much to do with scale than improving technology. Solar panels cannot be turned off. So prices go down with more electricity added to the grid, especially in markets where governments don’t control prices.

Storing energy for later use, dealing with fluctuations and trading surplus electricity across borders via direct-current power lines (one is being proposed between Africa and Europe) are difficult problems to solve globally. This is why renewable energy excluding hydro accounts for less than 10% in the OECD group of rich countries, according to the International Energy Agency. The share is 8% for the entire world.

In Sri Lanka, a tropical island, producing electricity from the abundant sunshine and winds is far more expensive than coal. In 2017, the energy utility paid Rs22 for a unit of electricity produced by wind power, and Rs23 for a unit of solar energy. The average price the CEB sells a unit of electricity to consumers is Rs16. The average cost to produce electricity from coal was Rs11.

Solar and wind account for less than 3% of the country’s electricity requirement, according to CEB data. However, the share will reach 25% by 2037, according to the utility’s power generation plan for the next 20 years, provided Sri Lanka invests more in fossil fuel energy.

“Solar and wind energy will have a larger share of the electricity mix as it becomes cheaper with improving technology, but it’s not a feasible option yet, nor is a rapid switch possible,” Wanniarachchi says.

Building renewable capacity also requires adequate backup in the form of conventional fossil energy plants.

Wanniarachchi says India is now proposing a 500MW solar park in Sampur instead. For him, it’s not good news.

“Let me tell you what will happen if the solar park does materialize. Whenever a cloud passes over the solar panels at Sampur there will be a sharp fall in electricity generation. Without a conventional power plant in place to fill the gap, the grid will keep breaking down each time this happens,” he says.

For the solar and wind energy mix to grow beyond 20%, Sri Lanka will also need to be able to export excess electricity or import the shortfall from India or the Maldives (which is not impossible, though politically challenging).

North African countries are investing in massive solar powerparks to harness the scorching  Saharan sun. The scale of these projects will drive down prices and the surplus imported to southern Europe. Tunisia and Morocco are investing a total of $20 billion on these mega projects.

However, for cross-border trade to be feasible Sri Lanka must build enough scale to achieve a competitive price. This can be challenging for an island with limited available land. It took 15 years to find the land, relocate residents and obtain environmental and regulatory approval for the Norochcholai project. The Sampur coal-fired power plant took 10 years to clear these hurdles, but President Sirisena blocked it in the end.

Since the last power plant at Norochcholai was built, the average cost for a unit of electricity increased 40% by 2017. The CEB now loses Rs5 per unit selling electricity to consumers below cost.

“When we prepare the power generation plan, we don’t really account for renewable energy sources like solar and wind. Instead we consider what is called firm energy sources,” he says. “Once we have stable firm energy supply we can switch to renewable energy”

“In 2017, the CEB made a Rs45 billion loss and this will only increase. It’s inevitable that we will make losses of about Rs50 billion annually over the next few years until we commission a low-cost power plant and wean ourselves from diesel-fired thermal power,” says Saumya Kumarawadu, president of the CEB engineers’ union. By 2037, coal and LNG will contribute 30% each to Sri Lanka’s electricity mix. Hydropower will account for 25% and diesel-powered turbines the balance 15%, Kumarawadu says.

“When we prepare the power generation plan, we don’t really account for renewable energy sources like solar and wind. Instead we consider what is called firm energy sources,” he says. “Once we have stable firm energy supply we can switch to renewable energy.”

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