Government approves USD 57.4 million financing package — then moves to scrap net metering for new rooftop solar connections

By Ifham Nizam

Questions are mounting over the Government’s policy consistency after Sri Lanka secured a USD 57.4 million Asian Development Bank (ADB) financing package for a rooftop solar aggregation and virtual net metering project, while the Energy Ministry has subsequently directed that new rooftop solar connections operate exclusively under the Net Plus scheme.

The issue is not simply whether conventional Net Metering and the ADB-funded Virtual Net Metering (VNM) project are technically identical. They are not. The more fundamental question is why the Government negotiated and approved an ADB project specifically designed around a virtual net metering model and then introduced a major policy change affecting the country’s broader net-metering framework.

The ADB approved the USD 57.4 million financing package on June 25, 2026, comprising a USD 35 million

concessional loan, USD 16.9 million in grants from the European Union and USD 5.5 million from the Japan Fund for the Joint Crediting Mechanism. Counterpart funding brings the total estimated project cost to USD 80.5 million.

The project is intended to establish a utility-led rooftop solar aggregation and VNM model through Electricity Distribution Lanka (EDL) and Lanka Electricity Company (LECO). Under the model, electricity generated from large rooftop solar installations would be pooled and credits virtually distributed to eligible consumers.

The project is therefore not a proposal that emerged outside the Government’s policy framework.

Cabinet approved negotiations with the ADB and other development partners for the project on November 3, 2025. Following the negotiations, Cabinet approved the agreements for a USD 35 million ADB concessional loan and USD 5.5 million Japanese grant, together with a EUR 15.4 million EU grant.

The ADB project itself was approved on June 25, 2026, and remains listed by the Bank as an approved project, with EDL and LECO identified as the executing agencies. ADB records also show that project tenders were subsequently issued in June 2026.

Yet, on September 11, the Energy Ministry issued a directive to EDL discontinuing Net Metering and Net Accounting for new rooftop solar connections and extensions, with new agreements to operate under Net Plus. The directive applies to grid clearances granted after September 11, while existing agreements are to continue under their existing terms.

This has prompted a crucial question among energy-sector stakeholders:

If the Government had already approved and negotiated an ADB project centred on virtual net metering, why was the country’s rooftop solar policy subsequently changed in a manner that removes two established net-metering options for new customers?

A senior energy-sector official, speaking to The Island, said the Government must clarify whether the September policy decision has any implications for the ADB-funded project.

“The important issue is policy consistency. If the Government negotiated an internationally financed project based on a virtual net-metering model, there must be a clear explanation of how the subsequent policy decision fits into that project,” the official said.

The official stressed that Virtual Net Metering should not be confused with conventional Net Metering.

The ADB project involves a utility-led model in which rooftop solar PV systems installed and owned by the utilities generate electricity that can be virtually allocated to eligible consumers. The project is also intended to modernise distribution networks and establish the infrastructure required to support the system.

However, another authoritative energy-sector source questioned whether the policy change had been fully reconciled with the ADB project during the Government’s decision-making process.

“The question is whether the regulatory assumptions and policy framework under which the project was negotiated remain unchanged. If they have changed, the Government should explain whether the ADB was consulted and whether any project documents or implementation arrangements have to be revised,” the source said.

The chronology is significant.

November 3, 2025: Cabinet approves negotiations with the ADB and other development partners for the Rooftop Solar Aggregation and Virtual Net Metering Project.

June 25, 2026: ADB approves the project.

June 26, 2026: ADB announces the USD 57.4 million financing package, with the total project cost estimated at USD 80.5 million.

June-August 2026: Project procurement proceeds, with ADB records showing tenders for the project.

September 11, 2026: The Energy Ministry directs EDL to discontinue Net Metering and Net Accounting for new rooftop solar connections and extensions.

The timing raises questions about coordination between the Ministry of Energy, the utilities and the agencies involved in negotiating the ADB financing.

An energy-sector policymaker told The Island that the Government should make clear whether the new policy affects the VNM component of the ADB project.

“There is a distinction between Net Metering and Virtual Net Metering. But when a major externally financed project is specifically designed to establish a virtual net-metering business model, any major change to the national rooftop solar policy needs to be transparently explained,” the policymaker said.

The ADB describes the project as a mechanism to help consumers who lack either the financing or suitable rooftop space to benefit from solar power through a virtual net-metering mechanism using rooftop solar PV systems installed and owned by the two utilities.

The Government’s latest rooftop solar policy, meanwhile, moves new customers towards Net Plus. Under Net Plus, electricity generated by a rooftop solar system is sold to the utility separately from the electricity consumed by the customer; generation and consumption are therefore treated as separate transactions.

This makes the Government’s explanation particularly important because the ADB project is designed to create a new utility-led VNM model, rather than simply preserve the existing household Net Metering arrangement.

The Government has not publicly stated, in the material examined by The Island, that the ADB financing has been cancelled or suspended. The ADB continues to list the project as approved.

Internet Media Action (IMA) has strongly condemned the government’s attempt, through the gazette “Protection of the State from Terrorism Bill” (PSTA) (22 September 2026), to restrict citizens’ freedom of expression (FOE), media freedom and digital rights in an extremely repressive manner.

IMA’s convener Sampath Samarakoon, issued the following statement: “Under local and international pressure, the government has moved to amend certain provisions of the original draft, such as Clause 55 (powers of interception of communications and Decryption). However, the gazetted bill has not changed the government’s fundamentally repressive nature. It is clear that the proposed PSTA Bill is a new digital dictatorship that polishes the repressive shackles of the old PTA with digital technology and imposes them on democratic space.

Although Clause 11 claims to provide some protection for legitimate media reporting, the fear of arrest and the practical difficulty of having to prove that one acted “in good faith” create a serious risk of pushing the whole of society into a state of “digital self-censorship,” in which people restrict their own expression.

Serious threats to freedom of expression and the media:

= Digital space and the interpretation of “protest as terrorism” (Clause 3): “Unlawfully compelling the government” and “seriously disrupting communication systems” are included as terrorist offences.

This creates a risk that online campaigns, online petitions and hashtag rallies organized through social media against government policies could be charged as terrorist acts. (For example, in 2022 the #GotaGoHome hashtag led the movement in the digital space, alongside the physical public uprising across the country, including Galle Face in Colombo.)

= Restrictions on creativity and satire (Clause 9): Using vague and broad wording such as “indirectly inciting,” the bill allows rigorous imprisonment of up to 15 years if posters, memes, political satire, Reels/TikTok videos and symbolic creations widely used on social media are identified as relevant offences.

= Prohibition of sharing, retweeting and posting links (Clause 10 and 59): Sharing, retweeting or forwarding a document or post, or including links (URLs) to it, could be defined as “circulating terrorist publications.” In such cases, the President is empowered to directly censor online publications through gazette notifications.

= Abolition of confidentiality of media sources (Clause 15): By making failure to provide information an offence punishable by 7 years’ imprisonment, the bill removes the right of investigative journalists and citizen journalists to protect the confidentiality of the sources (whistleblowers) who provide them with information.

= Restrictions on reporting and photography (Clause 61 and 74): The bill enables the Defense Secretary to declare “prohibited places” for 72 hours and restrict taking photographs/videos there, and to define the movements and investigations of the security forces as “classified information,” thereby obstructing media reporting.

Accordingly, we stress that this PSTA (Bill), which is contrary to international human rights standards and civil rights, cannot be fixed through mere piecemeal amendments. We also reiterate our strong objection to the National People’s Power (NPP) government’s betrayal of its election pledge to repeal the Prevention of Terrorism Act (PTA) in its entirety, by instead advancing an even more repressive bill (PSTA) that gravely endangers civil rights.”

Police yesterday arrested a cameraman attached to a private media organisation in connection with the alleged assault of a security officer attached to former President Ranil Wickremesinghe.

The incident occurred on Wednesday (30) as Wickremesinghe was leaving the Colombo Fort Magistrate’s Court following proceedings in a case concerning the alleged misuse of public funds. Footage recorded by other journalists at the scene reportedly shows the cameraman striking the security officer on the head with his camera. The security officer was subsequently admitted to hospital for treatment after lodging a complaint with the police. The cameraman was arrested yesterday after reporting to the Kompannavidiya Police to give a statement, accompanied by a lawyer.