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Twenty-five years of private sector-led renewable energy development

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by Dr Tilak Siyambalapitiya

A policy change in 1995 to allow private investments in electricity generation into the grid, a standard agreement and a standard price for electricity produced, enabled such investments to pick-up faster than in other countries. The first mini-hydro power project with entirely private sector funding and private ownership commenced operations in May 1996.

 

The agreement and the price

Dubbed the “most investor friendly agreement in the world”, Sri Lanka’s renewable energy developers were offered, since 1996, a non-negotiable 15-year agreement (20-years for projects signed after 2008). The agreement says, literally, “I will buy all your electricity produced for the next 15 years, any day any time; I will not penalize you for delays in your project or for not producing electricity at all or producing less electricity than you promised; I will not ask you to start or stop your power plant”. There is no other agreement in the business world 25 years ago or now, where such agreements are offered to a seller.

Then the price. The agreement carries a price, which too is not negotiable. It says: “I will pay you a price that reflects the fuel saved in major power plants; in case fuel prices go down, I will not drop the price below 90% of the price when you signed; if the fuel prices go up, I will keep on increasing the prices without any limit”.

I shall buy all your all your product at the following price for 20 years. If you do not produce too, even when I need it badly, I will only greet you with a smile !

Government procurements have to be on competitive basis. This policy of competition was further reinforced by the Electricity Act 2009, required to be implemented by the Public Utilities Commission (PUCSL). The legal validity of such renewable energy agreements and price offers, that make a mockery of rules of “competition”, has been debated in many quarters over the past 25 years.

 

Has it been good ?

Well, yes and no, depending on whom you speak to and your convictions. To the credit of the program, Sri Lanka’s renewable energy development accelerated after 1996. These are smaller power plants using hydropower, wind, wood and more recently, waste. If the government attempted to develop them through a state entity, excessive overheads and inefficiency would most likely creep-in. There would have been a politically appointed Chairman and a fleet of vehicles going up and down, to run a tiny minihydro.

On the other hand, had the state rigidly controlled what is developed and where, renewable energy projects developed would have been more efficient, well-engineered and certainly more environment friendly. Stories are many, where a private mini-hydro project agreed with the Central Environmental Authority to release water for downstream users, but later blocked it 100%. As the saying goes, “Sri Lanka’s streams and rivers are now flowing in tubes”, but we are proud about a vibrant renewable energy industry !

Renewable energy from such smaller private investments reached 1% of total in year 2000 and 4% by 2006. Buoyed by another policy change in 2007 that offered a contract for 20 years and an even more attractive prices, renewable energy from small power plants raced toward a 10% policy target for 2015. It reached the target indeed, with 11% of electricity produced in 2015 from the combined production in 147 minihydros, 15 wind and 3 each of grown biomass, wood waste and solar parks. Unlike many countries who make headlines by stating their renewable energy contribution in megawatt, Sri Lanka’s targets and achievement are stated in kilowatthour, honestly reflecting the true benefits to save fuel and to reduce emissions.

Continuing its race for development, by 2020 (provisional figures) electricity produced from smaller private renewable energy power plants reached 12%. Adding major hydros, the energy share from all renewable energy was 37% by 2020, a share unmatched by all countries and expatriate Sri Lankans that preach Sri Lanka on how to develop renewable energy.

 

Has the price been good to the investor?

The policy of paying renewable energy projects signed over 1996-2016 was to pay the value of fuel saved in the grid, calculated and published in advance every year. Agreements signed after 2007 enjoy an even more attractive pricing formula: a technology-specific, cost-reflective price. That means minihydros are paid a price to make that a profitable investment; wind power is paid to make that technology, a profitable investment.

Once signed, price paid does not change. If costs go up or down after signing, or bank interest rates go up or down, the price remains the same. Fortunately for all who signed in 2008-2009 or later, equipment costs and bank interest rates both have been on a downward trend. Projects that borrowed at 18% in 2018 possibly borrowed at 8% this year, but still enjoy the price paid calculated at 18% interest. By way of equipment costs, solar power has seen the deepest reduction in costs. More on that later.

 

What was the benefit to the public?

Why did the government offer such attractive rates and terms to private investors? Sri Lanka did not throw Rs 10 at renewable energy investors and say “do it if you can”. The key principle in the pricing policy was: price paid makes investments profitable (not just profitable but excessively profitable). The agreement still remains the “most investor friendly agreement” in the world.

In other words, the public of this country, through their electricity bills and through taxes, have paid for the investments, bank interest, and profits (above market rates), to make privately-owned renewable energy an excessively profitable venture. Other benefits of renewable energy need not be repeated here; they are all well known. So what is the benefit to the public who fully paid (and continue to pay) for these investments, of which the ownership is private?

It should be the longer-term benefit of cheaper renewable energy. That’s why the 2008 announcement on the revised policy said as follows: “Renewable energy, which is a natural resource, belongs to the State. Developers are provided with a high tariff to cover their expenses and to earn reasonable profits for an adequately long period (in this case the first fifteen years). Thereafter, the benefit of the resource should flow to the electricity customers, while continuing to provide an operating fee to the small power producers and full recovery of maintenance costs”.

The closest example is the CEB-owned fleet of hydropower plants, which are bigger. The familiar ones are Laxapana, Kotmale and Victoria, among a total of 15 power plants. The public of the country paid for those too, starting from 1950. How? Through electricity bills (because loans and government investments were apportioned between CEB and Mahaweli Authority), taxes and benefits foregone. The major hydros today produce at a cost of Rs 3.35 per unit of electricity. True, that except for Upper Kotmale, all are 20 years or more of age. The fleet of minihydros, too, as they mature into their contracts, after 15 years of good profits to investors, should deliver benefits to electricity customers. That’s why the 2008 announcement said: Therefore, once the developers’ costs and profits are paid, it is inevitable that in the long-term, renewable energy should flow into the national grid at prices significantly lower than the cost of thermal energy.

However, information published indicates that the principles on which small power producers were enabled in 1996 and then enhanced in 2008, are indeed being followed. CEB produces electricity from mature hydros at Rs 3.35 per unit (PUCSL assessment 2019). The price for mature hydropower in the private sector was Rs 5.38 per unit (CEB publication 2019), precisely following the principle of fairness: good profits to investor for 15 years, benefits to electricity customer in the longer term.

As more and more minihydros mature, later wind, biomass and solar projects mature, we should be seeing finally, that ALL renewables produce electricity at prices very significantly lower than all the alternatives. Renewables replace thermal power and we should be paid the same price, will not be an argument, now or then, or in the future. “My power plant is not so good, it does not have water, is not an argument”, because no one defined where to build the minihydro; the investor selected it.

The argument that private renewables can produce below the price of oil, gas or coal does not hold, then, now or in the future. Renewables were allowed because fossil fuels were expensive and bad. The price of fossil fuels comprise royalties, production and delivery costs. If one needs a comparison, royalties for renewables have to be paid to the “republic” (the treasury) and production costs paid by electricity customers. Since royalties are not charged for renewables, both CEB and private, then renewable energy prices should be compared only with production costs. The investment has already been fully paid by the republic.

I conclude with a quotation from the 2008 announcement: “Small power producers opting not to migrate to the new agreement by 30th April 2008, will be offered the tier 3 tariff announced for the relevant technology in the year in which the existing agreement expires, after its full tenure of 15 years is completed”. That means, retiring minihydros should be offered prices in the range of Rs 6 per unit.

It is yet to be seen whether the PUCSL and consumer rights groups are willing to fully and comprehensively understand the issue, step-in, and ensure that “renewable energy belongs to the republic”, as stated in the Sri Lanka Sustainable Energy Authority Act 2007.

The country’s streams are now flowing in tubes, but do benefits flow to the public who have fully paid the investors with profits?



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Features

Record breakers in a Covid disaster

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Sri Lanka has certainly scored another world record.

Just look at the number of vehicles on the streets every day at a time when the country is in a lockdown. The Police Spokesman is pleased to tell us how many thousand vehicles were on the streets each day. They have moved to the pasting of stickers – from a single sticker to different coloured stickers to give different messages, and then to stop all stickers!

Just think about how the streets of all major cities were virtually empty when lockdowns took place in other countries, when the Covid pandemic began spreading. We are not like that. Why should we take examples from other countries – East or West? We must have our own traditions, with our Presidential Task Forces to handle Covid-19 and the Economy, and a celebration uniformed Army Commander to give us contradictory messages.

Sri Lanka is truly proud of having more vehicles on our streets than any other country amidst a Covid pandemic lockdown. Who will ever break such a record?

This is certainly in keeping with that other huge record of having 25 violations of the Constitution in the Bill to establish the Port City Economic Commission. Who would get the prize for this record – the Legal Draftsman and/or the former Attorney General, or either or both of them and the Minister of Justice?  The Podujana Peremuna must be planning a special prize day to celebrate this.

The Media people in the President’s Office must be having a special delight in telling us matters that are wrong and uncertain about foreign responses to requests by the President. Can we forget how the WHO contradicted the report that the Sinopharm vaccine had been approved soon after the request made by our President?

We have another such situation now. Japan has refused to confirm reports that it is considering giving Sri Lanka 600,000 doses of the AstraZeneca COVID-19 vaccine.

The President’s Media Division reported this week that Japan was considering a request from President Gotabaya Rajapaksa for 600,000 doses of the AstraZeneca COVID-19 vaccine. This request had been made by President Rajapaksa to Prime Minister Yoshihide Suga.

What the Japanese Embassy had told the local media was that Japan will allocate around 30 million doses of vaccines manufactured in Japan to other countries and regions, including through the COVAX Facility.

Is this another record for the President’s Media Division?

The six lakhs of Sri Lankans who received the first dose of the AstraZeneca vaccine, must keep hoping against hope, about getting the next dose. Looks like even the President or his office cannot do much to get those vaccines.

All of this uncertainty is in the midst of the supposedly unavailable AstraZeneca vaccines being used with other Chinese or Russian vaccines in the vaccine exercises in many parts of the country. The 600,000 plus citizens waiting for AstraZeneca must be thinking if they can form a Citizens Vaccine Trade Union, like the GMOA, to get the vaccines to themselves, as well as members of their families, friends, relations and catcher’s too.

While on the subject of vaccines, it is interesting to read that President Gotabaya Rajapaksa, so thoughtful of the people and their needs, has instructed the officials to order a batch of vaccine for a third dose, taking the ongoing global situation into account and based on the recommendations by the medical experts.

He is said to be following the pattern of leading countries that have already ordered vaccines for the third dose. This is great. Ensure a third dose is ordered, while we are not sure what will be done about the missing 600,000 plus of the much-needed AstraZeneca.

Are we moving to a Third-Dose record?

Is this not the time to make a special request to the US to get the vaccines we urgently need, from the vaccines that President Biden has announced will be given to the world? Or from the other millions that the G7 countries will soon give to the world? Have we gone too close to China to make such a request from the western world? Is this moving away from the Cheena Saubhagyaya that is the motto of Rajapaksa Rule?

We are now told that the lockdown will be lifted from June 14, with new rules to be introduced. Let’s see what these new rules are. Will they help to bring down the rates of infection from Covid-19? Will it help bring down the deaths from this pandemic? How many more people will be infected, taken ill with all symptoms and die at home, or while being admitted to hospital, as the records keep showing?

We are now in the midst of increasing tragedies bringing alarm to the minds of the people, whatever the planners of the lockdowns or its relaxations may be thinking. 

We are also in the midst of contradictory quarantine rules imposed by the Police. The people, including two foreigners, who had a party at the rooftop of a Colombo building, have been ordered to quarantine at home. But the beauty and cosmetics names and models who were partying at the Shangri-La Hotel, were sent to a special guesthouse far away from home, with plenty of good food too, to spend their quarantine. Looks like we are dealing with a double-angled Police. Or, could the Police be even triple-angled seeing how they have been enjoying the huge traffic amidst a lockdown, and looking on as politicos and agents send their catchers to beat the public at vaccination centres.

This is the land of the record breakers in lockdown travel and the misuse of Covid vaccinations. Will we soon have new records on the Covid infected and deceased, possibly even beating India in under reporting of Covid tragedies?

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Luxury cars for MPs; floods, disease and death for electors

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Never has Cassandra been so downcast and heart-sick. It certainly is not what she terms lockdown fatigue like metal fatigue that was identified after parts of planes just snapped off. This was long ago. Now in the third week of lockdown, we could break under the stress of being shut in but we Ordinaries are made of sterner stuff. We have our support system – friends and relatives whom we keep close in touch with via telephone and electronic media. We have our safety net – our several religions. Speaking as a Buddhist, Cass can vouch for the strength of this safety net and how beneficial it is. Just being mindful most of her waking hours she keeps away depression and a sinking of her heart each time she reads news on-line or sees TV news broadcasts. If meditation is attempted it is even more efficacious. Mercifully Cass and her ilk order veggies, fruit and groceries on-line. Most certainly bare essentials in consideration of those many near starvation. We are totally sorrowful about the plight of daily wage earners, but cannot right wrongs such as poverty and impecuniousness of the less well to do. That is what governments are elected to achieve.

Reasons for deflation of spirits

We are battered and bruised by the pandemic; inundated by incessant rain and floods, some suffering landslides too. And we had an acid leaking ship sneaking to our waters, catching fire, and being made welcome as a money earner through claimed damages. Now we are told marine pollution will last a hundred years. Can you imagine that – our beautiful blue seas with shining sand now a death dealing home to marine life? Turtles have been washed ashore, dead. Dr Anoja Perera in her heartfelt speech in which she let the present leaders have it, said that the nitric acid that leaked into the sea will destroy even the cartilaginous bones of fish. Their gills have been suffocated by plastic pellets let loose from the burning ship. In all the debris there is a stinking rat or rats too – rousing suspicion. The Sri Lankan Agent of the parent company that owns the ship has proved himself elusive; secrecy reeks. MPS and Ministers who claimed SL would be rich with compensating dollars are sure to lose their parliamentary seats next time around, of course that is if the Sri Lankan indigenous malaise of short memories does not afflict us four years hence and we vote the same rotters in to govern us.

Those who are card holders testifying they received the first A-Z shot in February/March are in the blues wondering when the second jab of A-Z will be given to them. The US, thanks to Biden’s mercy, promised to include Sri Lanka in its list of beneficiaries to receive the A-Z vaccine from what it stockpiled. Prime Minister Wickremanayake’s daughter in England appealed to Boris Johnson to donate vaccines to us. Not only the government but even individuals have started begging for vaccines. We heard Mangala Samaraweera was another. Cass is surprised that fair play on the part of these rich countries supersedes the fact that we are obviously open-armed supplicants to the Chinese. Surprises Cass their mercy prompts then to help us. They hear the cry of the Ordinaries.

 

The final straw that breaks our spirit

Unbelievable, implausible, impossible such crude greed and feathering their own nests, this time not with money but with luxury cars. Cass did not believe it when she heard that Prime Minister Mahinda Rajapaksa had ordered a whole fleet of cars for MPs, not just ese mese vehicles but most luxurious and thus very, very expensive. Cass not realising such greed and injustice could prevail, especially at this very bad time for Sri Lanka, surmised the news of the Cabinet passing the proposal to import 399 luxury cars to be fake news. But it turned out to be true and nearly kicked the life out of Cass, she finding it difficult to breathe – not asthma or C19 but through sheer disbelief of such selfish, unthinking, gross act of importing cars for MPs and other favoured persons while the majority of Sri Lankans suffer and many near starve. I quote Shamindra Ferdinando in his article titled LCs opened before Cabinet rescinded its own decision in The Island of Wednesday June 9.

“In spite of the Finance Ministry decision to withdraw an earlier Cabinet paper for the import of 399 vehicles at a cost of Rs 3.7 bn, the cash-strapped government was not in a position to unilaterally cancel what Media Minister and co-Cabinet spokesperson Keheliya Rambukwella called a tripartite transaction. (Why did the govt place the order in the first place, Cass asks).

The Island yesterday (8) sought an explanation from Minister Rambukwella regarding the status of the high profile leasing arrangement pertaining to 399 vehicles. Minister Rambukwella said that he was not aware of how the state bank that had opened the Letters of Credit handled the issue at hand. However, as the opening of Letters of Credit meant guaranteed payment, Sri Lanka faced the prospect of being blacklisted if a unilateral decision was taken on the matter. The minister explained the difficulty in reversing the original decision.”(Fine howdy)

Later in Ferdinando’s article is this even more damning statement which really hits us a second whammy.  “None of the Opposition political parties have criticised the government move on vehicles made at a time the country was struggling to cope with Covid-19 fallout.

“SLPP’s 2019 presidential election manifesto, too, assured that vehicles wouldn’t be imported for members of parliament for a period of three years.”

“After the change of government in 2019, the SLPP put in place a much-touted project to expedite repairs to state-owned vehicles as part of the overall measures to meet what co-cabinet spokesmen Ministers Rambukwella, Udaya Gammanpila and Dr. Ramesh Pathirana called immediate shortfall.” (It all sucks!)

The roads are choc-a-block with posh cars which give the impression we are far from being Third World, but one that is rich, prosperous and with no short falls or poverty anywhere within it. When one sees those in the legislator convene for meetings at the old parliament building down Galle Face road, one is shocked at the luxuriousness of the vehicles that shed the VIPs – all local – from within. Are we a poor country, one asks. The sight of most of the alighting VIPs confirms that question – so well set are they: obese in simple language. Sri Lanka had no money to buy vaccines for its people and went begging hither and thither. But on the quiet the PM himself, approved by his Cabinet, orders 399 luxury cars. Are royal kids and pets to be given cars too? While the hard-working farmer cries, some with tears, for fertiliser; the village mother moans her husband dead from Covid 19 and all beg for inoculation. No wonder Kuveni’s spirit is active at present, and her curse is heard and experienced. We are cursed with totally unnecessary luxuries for some; inoculations given entire extended families and friends of those with clout; floods devastating the country; a sure forecast of a poor rice harvest and starvation staring us in the face; tea prices falling due to lack of needed fertiliser, caused by a sudden, stubborn, trigger decision to ban imported chemical fertiliers. Disease and death pile up because vaccination was not carried out en masse. This could have been done.

That is Free Sri Lanka of now, that once resplendent isle, touted to be like no other. Yes, it is unique in its mismanagement and obvious contrasts between those with political clout and us Ordinaries.

 

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Features

How to gamble with floods

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by Eng. Mahinda Panapitiya and

Eng. Wasantha Lal (PhD)

(Two residents from Attanagalu Oya Basin)

Introduction

Flooding during heavy rains and water pollution during normal time in natural streams is a common problem all over the world when human settlements are located near flood prone areas. For example, about 7-10% land area, in the US, under human settlements, are prone to flooding. In ancient cultures, flooding was perceived as a blessing in disguise because it was the main transportation method of fertilisers, free of charge, for agriculture activities in temporary submergence areas called flood plains. After moving people into flood plains because of shortage of space for settlement, floods have become a curse for humans. Deciding to settle down in flood prone area is a gamble. However, there are modern technologies called flood modelling available for us to overcome this problem.

 

Flood Modelling

For an example, it is now possible to simulate different flood conditions that may arise due to heavy rains, before it actually occurs, using satellite and survey data. This is called “modelling” in engineering. Any area prone to floods can be modelled and divided into zones so that land users will know in advance how deep their lands will get submerged. This type of performance-based methods also evaluates how an existing or newly introduced flood mitigation effort, performs under different flooding events.

Hidden reasons behind frequent flooding and water pollution of natural streams

* Unplanned real estate development by clearing local tree cover resulting in impervious areas (roofs, carpeted roads, etc.,) prevents water infiltrating the soil. This increases the runoff rate, causing flash floods during heavy rains. On the other hand, during droughts, all the natural tributary streams and wells in those areas dry up soon after the rain. This is very common in basin such as the Attanagalu Oya.

* The obstruction of natural stream and their tributaries due to poor maintenance. This is very common along the Kelani River basin

* Illicit encroachment causes the filling of wetlands in the flood plains. As a result, rain water has no designated place to collect before flowing out gradually. Most of the floods in Gampaha, Ja-ela and Wattala are due to this issue.

* Deposition of sediments washed down from upland areas due to lack of tree cover and also the erosion of stream banks whose reservations are encroached on either for agriculture in rural areas or for settlement in urban areas

* Inadequate flow capacity in local streams due to invasive weed growth associated with polluted water and lack of riparian tree cover. (Wattala)

* Lack of awareness among officials who manage water resources in natural streams about the role of riverine environments in flood plains which act as kidneys in our ecosystem while preventing flash floods.

 

How the community could face these challenges

Those who are already living in flood-prone areas or are planning to do so should be aware of the different risk levels in the areas concerned. For that, there is a need to do an exercise called Flood Hazard Zoning, This approach is very common in the developed world. This exercise will also enhance the community participation for government intervention such as canal cleaning and discouraging further encroachment on flood plains by land fillings.

 

Available Technologies

A sketch above extracted from a technical guideline adapted in the US shows a typical flood zoning map, which could be used by a community to decide whether they should or should not build houses in a particular location.

 

For example, in this map, people who are in Zone A are in a high-risk area subject to flooding. Zone C is a low risk area. A person who wants to build a house in Zone A, which is designated as “100 Year Flood Zone”, will have a 26% chance his house being submerged once in 30 years, which is the normal bank lending period of a housing loan. For the next 70 years, which is the normal lifetime of a building, the chance of being flooded is 50%. For a person who wants to build a house in Zone B designated as “500 Year Flood Zone” will have 18% chance of his residence being submerged once in 70 years. By knowing in advance through these flood zoning maps, people themselves become aware of flood danger before it occurs and, therefore, they prepare themselves for the challenges during flood situations. When there is no such initial warnings, governments will have to bear the whole responsibility.

This type of mapping would also be a useful guide for land valuation as well as for insurances against flood risks. With flood zoning, flood insurance becomes an option that adds a financial component in designing buildings to address those future risks. For example, people can build their houses at elevated levels on columns to suit predicted flood levels. Also the sewerage systems can be introduced to suit the wetland environments.

 

Lessons from the US

Every state in the US is required by law (water policy) to demonstrate that (a) the public is protected from floods; (b) the public has sufficient water available for drinking and farmin, etc. (d) there is enough water to support the environment. Computer models simulating the year-round hydrology are used for the purpose. Those models show how water from the rains could be saved for use during the dry season. Government agencies in the US do not use the models currently in use in Sri Lanka. They have developed their own models to simulate flooding. Models used in Sri Lanka are bought primarily from two European countries. They are normally used only to study individual flood events. The fundamental ideas used in these models have not changed since 1980s in Sri Lanka, and these models are still sold primarily to developing countries like Sri Lanka. On the other hand, teams of senior engineers are employed for developing those models used in the US, before permits are issued for new development projects. There are also Sri Lankans engineers among those teams in the US, as primary developers.

 

Opposite of flood

Wetlands of flood plain are the interface between aquatic and terrestrial areas. Plants in those wetlands play a very vital role in cleaning water biologically before it falls into the main streams. Wetlands are in fact the kidneys of ecosystems. Over the years, due to the so-called development, the environmental features of flood plains have undergone changes, causing not only floods during heavy rains but also malfunctioning natural water cleaning process, especially during droughts.

Note that those new technologies address not only flood situations but also help face drought situations, too, by identifying areas suitable for temporary water storages within flood plains. For example, during a previous drought situation there was a water shortage in the Attanagalu Oya basin, and the people had to purchase water from trucks, though annually the Oya releases into the sea a volume of water equal to that of the Parakrama Samudraya! Severe drought situations are even worse than floods, especially in view of the current pollution levels of natural streams bordering urban areas. To address this issue also, technologies could be used to identify naturally available water cleaning wetlands to be preserved.

King Parakramabahu’s famous quote about water conservation and utilization—“Do not release even a drop of rain water to the sea without using”—applies not only to our dry zone but also to the west zone.

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