by Eng Parakrama Jayasinghe
E Mail: parajayasinghe@gmail.com

Are we out of the woods on Consumer Tariff?

If I had made this statement a few years ago, I would have been labeled insane. The ground reality at that time would have clearly supported that view. But much has changed since then. The basic resources available are natural renewable resources such as sunshine, wind, water. Of particular interest are the solar energy technologies, which have now made it possible for electricity consumers to become “Prosumers”.

Exciting future ahead?

The electricity tariff reduction has come as some relief to consumers. However, it was only temporary respite. What was achieved was the removal of the 18% average increase in tariff imposed in October 2023. But the consumers are required to bear two massive tariff increases imposed in August 2022 and February 2023. They would make Sri Lanka’s consumer tariff the highest in the region. The PUCSL has called submissions for the next tariff revision due in June.

The dynamics of consumer tariff calculations

The Ceylon Electricity Board (CEB) claims that it has to be paid an adequate tariff to cover its costs, but it does not admit the fact that it has not striven to keep such costs at economical levels in keeping with its mandate.

The reduction of 22% was achieved only because of last year’s abundant rainfall, which enabled the CEB to do without most expensive oil-based generation. (See graph 1)

The Generation Mix on 1st January 2024- PUCSL Data

On 01 Jan., 2024 the use of oil came down to 2%. It was zero on some days. We should try to maintain that but it has now completely reversed as shown below. The oil-based generation has increased to 24% and Coal to 44%. (See Graph 2)

Generation mix of 9March 2024

With the reduced contribution from hydro resources, the cost of generation is bound to rise to the previous level. The CEB has already asked for 100 MW of emergency power, which will prompt it to seek further increases in tariff, sooner than later. We are back to square one.

Therefore, an alternative pathway is essential. Perhaps, Sri Lanka can find dollars to buy oil and coal only because we are yet to commence repaying some of our externa debt. The government should take urgent measures to address this situation.

Feasible immediate future and short-term measures

The highest tariff in the region has gravely affected the competitiveness of our exports of manufactured goods and is delaying the possible economic recovery. Hundreds of SMEs may not recover at all.

Rains helped improve the finances of the CEB, enabling it to mitigate some of these negative impacts, but care should be exercised to avoid the past mistakes which led to the recent mess. Its overdependence on fossil fuel, oil in particular, is the main reason for trouble in the past.

The generation data for recent months clearly show that it is possible to do without any thermal generation if the slack is taken up by hydro and other renewables. This can be extended to the dry months too, if other measures are in place to cater to the reduced contribution from hydro generation. The impact of this in a practical way as a step by step process is illustrated below using data presented by the CEB. (See Tables 1 and 2)

But I believe that all these steps, stopping all oil based IPPs, followed by two stage reduction of CEB oil-based power generation, can be achieved within 2024, given the dire consequences of none commitment.

And once this is achieved there would be a further possibility of further tariff reduction by January 2025. What is more important is that there will be no need to increase the tariff.

It may be argued that we have to maintain some oil-based plants to cater to the variability of solar and wind power. But battery technologies are now commercial and continue to be coming down in price. They will be a far cheaper and more efficient solution.

The hitherto ignored promotion of the demand side management (DSM), particularly the savings possible with use of LED bulbs and energy efficient motors can add to this saving as well as the need for more centralized power generation.

Who will step to the breach to deliver energy?

This is the challenge I posed at the outset. Let us consumers more correctly “Prosumers” claim our right and accept the challenge. The experience of the past few years has given us the confidence that this is indeed possible. We have to be thankful to the Ministry and the CEB for providing a viable tariff for the rooftop solar PV and making several important concessions on the permitted scope to enable the “Prosumers” to raise their interest and scope of engagement to take up this challenge with confidence.

The current 825 MW of roof top solar contributing 1200 GWh (about 6%) of energy annually is evidence enough. There is a need for national policies and the country’s needs should be recognised by the CEB and LECO staff at the field level and they have to be much more committed and co-operative than at present to assist in this nationally critical endeavour.

There is much discussions going on regarding large solar and wind projects, some of which are given to foreigners on a platter with scant regard for the prevailing laws and regulations. But none of these will make a contribution towards resolving the immediate crisis, as they will not deliver any energy for several years more; they will only block Sri Lankan developers’ access to the grid.

However, the immediate potential and challenge is for highly accelerated development of the rooftop solar PV sector, which currently has several positive drivers to attract investment by a large spectrum of “Prosumers” as noted below:

Well-established and tested regulations under the Surya Bala Sangraamaya Much-widened scope of capacities for investment Current reduced prices of systems supported by appreciated rupee

Large number of competent local EPC Contractors Interest evinced by even domestic sector consumers driven by the significantly high electricity bills Lowered loan interest and increasing engagement of local banking sector Attractive business case possible under the Net Accounting system even for medium level domestic consumers.

The hope for the resumption of the ADB loan scheme

(The author will be happy to share the financial analysis on the different modes of engagement possible)

The estimated contribution needed for elimination of use of oil-based generation which is estimated to provide 3440 GWH for the year 2024 are: (See Table 3)

Given the demonstrated progress none of these are impossible targets, and are primarily driven by local private investments, which, while being of value to the investors themselves, would also yield immeasurable benefits to the electricity Sector and the lower end consumers, by lowering the average cost of generation. (See graph 3)

The projected acceleration from 2024 is eminently feasible given the correct emphasis and urgency.

The important message I would like to convey is that it is time we, the true owners of our energy resources, commenced staking our claim which is demonstrably feasible. We will not only be protecting our own interest and wellbeing but also be helping the country immensely. The double benefit of increased “Prosumer” contribution is the reduction of demand on the grid and the need for the projected level of additional generation capacity even from RE sources.

Role of demand side management.

There is absolutely no excuse for the CEB not to initiate a very aggressive DSM programme starting with the replacement of all remaining incandescent bulbs and CFL bulbs with LED bulbs.

There are many other avenues of DSM which require urgent action to implement.

How can govt. and the energy authorities help?

They can do so by refraining from causing obstructions if they are not willing or able to facilitate and accelerate this change in addition to:

Doing away with disincentives like the recent VAT on import of solar panels

Making it the mandatory for the CEB and LECO to ensure reaching the 70% RE target by 2030. This change must have year-by-year milestones and rooftop solar power is the low hanging fruit. Since this can be developed only by the “Prosumers” and not by the CEB nor LECO, it is hoped that they will pass this mandate and responsibility on to the lowest depot level staff, who are best placed to provide the favourable ecosystem to encourage the development Ensuring that banks allocate a reasonable portfolio of credit for the sector without imposing impractical and unfair demands on collateral Maintaining the current favourable fixed feed in tariff (Nov 2022 Gazette) at least until 2026.

Accelerating the process to obtain the next ADB concessional loan facility. While the government keeps stressing the need to increase export income, we can help reduce the outflow of forex.