Sri Lanka's New Renewable Energy Tariffs Displace Wind as the Most Expensive

03rd December 2010, www.lankabusinessonline.com

Sri Lanka's new tariffs for renewable energy show that dendro (wood) would be more expensive than wind and municipal waste heat would be paid the highest tariff, displacing wind as the most expensive source.

New tariffs released by the Public Utilities Commission in November 2010 say that municipal waste fired plants would be paid 22.02 rupees a unit (kilowatt hour), up from 15.31 rupees listed last year, under the so-called flat tariff scheme.

Municipal waste disposal is increasingly becoming a problem in Sri Lanka.

Dendro or wood based energy would now be paid a higher 20.70 rupees, up from 18.56 rupees, while the exorbitant rate 23.07 rupee rate paid for wind under the previous scheme had been cut to 19.97 rupees.

Renewables plants under standard contracts cannot be 'dispatched' or dis-connected from the grid during off peak times. They only have an energy charge and no capacity charge.

There have been suggestions by industry experts to give a peak and off-peak tariff for dendro plants so that they will have an incentive to operate at peak times.

Plants such as wind and mini-hydros do not have 'storage' but biomass (including municipal waste) can be run when needed.

At the moment, the CEB's cheapest thermal plant run on residual oil has a energy charge (variable cost) about 9.45 rupees a unit, while private combined cycles costs up to 16.00 rupees.

Biomass from agricultural and industrial waste would be paid 14.53 rupees, up from 13.88 rupees. Waste head recovery plants would be paid 6.64 rupees down from 9.55 rupees earlier.

Mini-hydro plants fabricated locally will be paid 13.32 rupees and others will be 13.04 rupees a unit.

Renewable plants smaller than 10 MegaWatts are connected to Sri Lanka's state-run Ceylon Electricity Board's grid on 20-year standard power purchase agreements, either on the flat tariff scheme or on a tiered scheme.

Under the tiered tariff, plant operators are paid a higher rate in the early years with a commitment to pay a royalty after the end of year 16.