01 April 2013

Electricity Tariff Increase - First, Operate Hydro Plants in an Optimum Manner, Improve Plant Efficiencies, Cut Losses and Switch to more Economical Fuel

31st March 2013, www.srilankanaturegroup.org, By Dr Janaka Ratnasiri

The Public Utilities Commission (PUC) has announced a proposal for electricity tariff increase as highlighted in The Island of 12.03.2013, and has called for public comments. Apparently, CEB has proposed this increase to defray Rs. 60 billion from the cost of producing electricity in 2013 estimated as Rs. 268 billion. 

The major cost component of CEB is on thermal power plants operated with imported fossil fuel generating more than half the total electrical energy consumed in the country. In 2011, the total cost of fuel consumed for operating its thermal power plants has been Rs. 33 billion, according to the values given in CEB Statistical Digest (SD) for 2011.  Assuming the rates for cost of generation given in CEB Annual Report for 2010 (Rs. 15.77/kWh) applies for 2011 as well, the total cost of generating thermal power from oil in 2011 has been Rs. 90 billion. CEB has also incurred a cost of Rs. 5.4 billion in 2011 for operating its hydro power plants (Rs. 1.17/kWh), though there is no fuel cost involved. CEB has further incurred a sum of Rs. 6.7 billion on fuel for its coal power plant (Rs. 6.49/kWh) in 2011. Thus, out of a total of Rs. 102 billion described as cost of generation in 2011, only a sum of Rs. 33 billion has been actually spent on fuel.

Generally, the CEB losses have been attributed to the escalating fuel price which is beyond its control. However, if one takes a close look at CEB’s generation statistics, there appears to be some other factors contributing to its losses and one can see ways and means of cutting the losses.

Hydro power and petroleum oil were the main sources of electricity in Sri Lanka up to 2010, and in 2011, coal power was introduced. According to the values given in CEB Statistical Digest (SD), the share of hydro electricity during 2002 – 2011 has been varying in the range 39% to 52%, with an average of 43%. The most logical way to keep the electricity production cost low is to optimize the hydro power output, as CEB does not pay any fuel charges to the Mahaweli Authority. Higher the hydro share, lower is the thermal share and hence the cost of generation.

Hydro power plants

From 1950 to about mid-seventies, Sri Lanka was totally dependent on the Laxapana Hydro Power complex for its electricity needs. With the launching of the Mahaweli Development Programme in the seventies, several large hydro power plants were built including Victoria (210 MW), Kotmale (201 MW), Randenigala (122 MW) and Rantembe (49 MW) on the main river and its tributary Kotmale Oya, which were commissioned in the eighties and nineties. Prior to that two smaller plants were built at Ukuwela (38 MW) and Bowatenna (40 MW) operating with the water diverted for irrigation.

If one looks at the output of each of these hydro power plants during 2002-2011, it appears that these plants have been operating very much below the designed output. Table 1 gives the expected plant factor for the four main power plants - Victoria, Kotmale, Randenigala and Rantembe (VKRR) – calculated using the installed capacity and expected annual average energy values given in CEB Long Term Generation Expansion Plan report. This table also gives the average of their actual plant factors for these 10 years, calculated using generation data given in Mahaweli Authority Statistical Handbook. These figures are about 2/3 the design values except the Kotmale plant which shows a figure of 3/4.

A key factor that controls the output of a hydro power plant is the availability of water which depends on the rainfall in the catchment area. Any diversion of water for irrigation could also reduce the generation output.

Fig. 1 gives the average annual rainfall received at 11 rain gauging stations upstream of Victoria reservoir for the period 2001-2011. The average for the entire period is about 2500 mm with peaks in 2006 and 2010 and a dip in 2003. One would expect that there would be a close correlation between the rainfall received and the generation output, but it does not appear to be so.

Fig. 2 gives the combined generation from the above four power plants (VKRR) as well as the combined generation of the two power plants operating from the diverted water ie. Ukuwela and Bowatenne (UB) with data taken from Mahaweli Handbook 2011-2012. There is a deeper fluctuation in the power output of these four power plants than what is seen in the rainfall variation. For example, in 2010, with more than average rainfall received (3356 mm), generation output too showed a peak (2195 GWh), the highest seen since 1995. However, in 2009 when the rainfall received reached 2909 mm, significantly above the average value, the generation output dipped to a below average value of 1035 GWh, which is below 50% of the following year’s output.

Again in 2006, the curve shows a peak with a value of 1890 GWh while in the two previous years 2004 and 2005 the generation had a dip with outputs of 877 GWh and 1047 GWh, respectively. However, the rainfall curve does not show such a deep variation corresponding to these years. It is not clear why there had been such a low hydro energy output in 2009 when the rainfall had been above normal. The UB output shows a steady value indicating that there had been no increased diversion of water for irrigation that year. 

Any low output of hydro generation means increased thermal energy production costing an enormous sum of money. If we assume that during 2008 and 2009, the hydro output had been 1500 GWh, the same output shown in 2007 when the rainfall was the same as in these two years, the system could have saved nearly 600 GWh of energy. The fuel cost of the CEB’s combined cycle gas turbine (CCGT) plant according to CEB Statistical Digest (SD) had been Rs. 11.87 and Rs. 18.24, respectively for these two years. If the operation of this plant was avoided had the hydro output had been normal at 1500 GWh during these two years, the saving achieved could have been about Rs. 10 billion at 2007/08 prices.  

Even in 2004, the hydro output has been below 900 GWh while the rainfall has been normal. This again has resulted in excessive burning of fossil fuel to operate the thermal plants to compensate for the reduced hydro output incurring extra cost. The high output of Victoria plant in 2010 with 971 GWh exceeding the design value of 865 GWh was an unusual case resulting from the exceedingly high rainfall received that year. But, during normal rainy years, the performance has been far below the design values and this needs further investigation to avoid recurring of similar situations in the future. 

Thermal power plants

Sri Lanka’s thermal power system comprises several diesel plants operated with auto diesel or fuel oil, gas turbines and combined cycle gas turbines (CCGT), owned by both CEB and independent power producers (IPP). The CEB has to pay the private operators for the electricity they purchase from them at an agreed rate and also a fixed capacity charge for keeping the generators available. Hence the use of private plants will result in extra expenditure for the CEB than when using its own generators, and in turn an extra burden to the consumer.

In an article published in the The Island on 30.08.2012 titled Decline in CEB thermal output, I pointed out the following based on performance data given in CEB Statistical Digest reports.

•    The CEB’s share in thermal power output has dropped from 55% in 2004 to 26% in 2011.
•    The output of CEB’s 165 MW CCGT plant at Kelanitissa which is its main thermal power plant has dropped from 1100 GWh in 2004 to about 250 GWh in 2011.
•    The thermal efficiency of the CEB’s CCGT plant has dropped from about 46% when operated with naphtha during 2004 – 2008, to about 30% in 2011.

The main reason for the overall decline in thermal energy output has been the poor performance of the CCGT plant. The CEB’s performance report for 2012 has not been released yet to find out whether any remedial measures have been taken during 2012 to restore the efficiency of this plant. If it has not been done, the plant will continue to cause losses to CEB. There has been no comment from the CEB on this. The efficiency of a thermal plant indicates the fraction of chemical energy contained in the burnt fuel that is converted into electrical energy, the balance being wasted as heat.

CEB Combined cycle gas turbine

The CEB CCGT plant comprises two units, a gas turbine (110 MW) and a steam turbine (55MW), and hence the term combined cycle. The gas turbine is operated with fossil fuel, either diesel or naphtha, while the steam turbine does not consume any fuel as it is operated with the hot exhaust gas of the gas turbine. Because of this feature, a CCGT plant can achieve a high efficiency, normally greater than 50% which is not possible with other internal combustion engines. The latest generators operated with natural gas in temperate countries are reported to achieve efficiencies exceeding 60%. 

However, in Sri Lanka, the CCGT plants were operating at somewhat lower efficiencies - 46% when operated with naphtha and 42% when operated with diesel.  Naphtha is the preferred fuel as it gives a higher efficiency and is cleaner. However, the supply of naphtha is limited as it is a byproduct of the refinery and hence the need to operate with diesel also. An assessment carried out by a JICA team in 2004 found the efficiency of this plant to be 48% with naphtha, the same value given in its EIA report. However, in 2011, the efficiency of the CCGT plant has dropped to 27% with diesel and 31% with naphtha.

The most plausible explanation for this drop in efficiency could be that the plant’s steam turbine has not been functioning. This means that all the flue gas containing energy equivalent to that contained in fuel required to operate a 55 MW thermal plant has been wasted by releasing it to the atmosphere. According to the CEB’s SD of 2011, CEB has spent a sum of Rs. 8814 million for fuel to operate the CCGT plant in 2010, and a sum of Rs. 7290 million in 2011. Had the efficiency of this plant been an average of 46% during 2010 and 2011, instead of 38% and 30%, respectively as reported in the 2011 SD, a total sum of about Rs. 4 billion could have been saved in these two years. These losses have been estimated using the prices CEB has been paying for the fuel as given in its SDs – Rs. 77 for auto Diesel in 2010 and Rs. 95 in 2011, which are in fact below the market prices.

If the CCGT plant could be operated at a higher efficiency with naphtha which is cheaper also– Rs. 66 per litre for naphtha and Rs. 95 per litre for diesel (CEB SD 2011) the logical step would be to operate the plant with naphtha 100% of the time. The shortfall that CPC is unable to supply could be imported from the closest supplier. The cost of fuel for generating one unit of electricity when estimated using above cost figures works out to Rs. 20 for diesel and Rs. 16 for naphtha, a 4 Rupee per kWh advantage. Naphtha has a density 18% less than that of diesel, but has a calorific value 4-5 percent higher than that of diesel. Hence, naphtha requires storage capacity about 16.5% more than for diesel for feeding a power plant.

In recent years, the CCGT plant has been generating energy in the range 300-500 GWh with diesel (SEA database), and if this same amount of energy is generated using naphtha purchased at Rs. 66 per litre, a sum in the range Rs. 1.2 – 2 billion could have been saved each year. According to prices of fuel at Singapore appearing in the internet, naphtha price at Singapore is about US$ 300-350 per tonne which is less than half what the CEB has been paying for the fuel it has consumed. Even after accounting for freight and other transport and storage costs, a saving in the range Rs. 2-4 billion could be achieved if CEB switches to imported naphtha from diesel to operate the CCGT plant. Operating with naphtha also has other advantages such as less carbon emission (~9%), zero emission of particulates and reduced levels of other emissions such as methane, oxides of nitrogen and sulphur dioxide.  

IPP Combined cycle gas turbine

There are in addition two IPP operated CCGT plants, one at Kelanitissa (163 MW) and the other at Kerawalapitiya (300 MW). The high efficiency of CCGT plants should make it possible for them to supply electricity to a consumer at a lower price than what is possible with other thermal plants. Hence, one would expect that these plants are operated under optimum conditions at all times. However, during 2003 – 2009, the average plant factor of the Kelanitissa plant has been only 42%, while in 2010, it has dropped to 32.5%. This plant operates with auto diesel.

The Kerawalapitiya CCGT plant commissioned its first phase in 2008 and the second phase in early 2010. It is operated with imported furnace oil with low sulphur content. Furnace oil has the advantage that it is cheaper than diesel, but it is not as clean, particularly in respect of sulphur and ash content. Even with imported low sulphur oil, the SO2 emissions exceed the permitted value and permission was apparently granted on the promise that it will be switched to natural gas once gas is available but with no time limit specified – a kind of bending the rules. The plant has been operating at very low plant factor, being 23% in 2010, partly due to a break down in mid-2012.

According to media reports, this plant ran into difficulties in getting its fuel supply on time as it depended on the Petroleum Corporation for the fuel and was forced to stop generation when the supply broke down.  Apparently, this was because of a payment dispute between the supplier of fuel and the purchaser of energy. Such situations could be avoided if the monopoly for importing fuel is exempted for bulk users and permission granted to them to import their own fuel requirements themselves. It is quite an unnecessary exercise for ministry officials to sit at tender board meetings when it could be done more efficiently and promptly by the plant operator himself. It is a pity that after investing over US$ 300 million on the plant, it has not been operated in an optimum manner because of government red tape. The result is the consumer is deprived of getting cheaper electricity.

This plant has been operating with imported furnace oil while violating environmental regulations. Instead, if it is operated with imported naphtha, it could easily comply with emission regulations, spend less money on maintenance and save billions of rupees annually as in the case of CEB. The price of naphtha at Singapore is significantly less than the price of low sulphur fuel/furnace oil according to what is posted in the internet. There may be problems in storage and transport, but these could be surmounted considering the potential saving. Once the responsibility of importing fuel is given to the bulk user, they can decide the best fuel they should obtain to generate electricity at the least cost and beneficial to the environment, without having to be subjected to ministry red tape.   

Coal power plant

When the coal power plant was planned, it was mentioned that coal power will replace expensive oil power which will result in an overall reduction of cost of electricity production. However, this does not appear to have happened. The gross generation from oil-fired plants owned by CEB and IPP has been 4994 GWh in 2010 and 5748 GWh in 2011, respectively. On the other hand, the total hydro power generated has been 5634 GWh in 2010 and 4622 GWh in 2011, a reduction of 1012 GWh from that produced in 2010. This may be partly due to low rainfall in 2011 compared to that in 2010 though. Nevertheless, what has happened is a reduction of the hydro power generation, while oil power has increased further. This means that under such situations there will not be any reduction of overall cost of production of electricity by using coal as claimed by coal proponents.    

Conclusion

The low usage of hydro power plants even in normal rainy years would have resulted in the escalation of cost of generation because of greater dependence of thermal power. There is potential to save billions of rupees during years of normal rainfall if the hydro plants are operated in an optimum manner. The operation of CEB’s key thermal plant at low efficiencies for long periods without taking prompt remedial measures has resulted in losses amounting to billions of rupees annually.

Further, there is potential to save several billions of rupees annually by switching from auto-diesel to imported naphtha for the operation of CEB’s CCGT plant. Similarly, the Kerawalapitiya CCGT plant also could switch from furnace oil to naphtha for cheaper and cleaner operation while improving the plant factor and complying with environmental regulations. In order to implement these proposals, the present monopoly vested with the CPC for importing petroleum fuel should be removed for bulk users and the freedom given them to handle the import of fuel they need by themselves. It is another way of improving the efficiency of the system.

It is important that both CEB and IPPs should optimize the utilization of their CCGT plants with improved efficiencies enabling the consumer to benefit. An upward revision of tariff should be considered only after all the measures suggested for cutting down losses - improving plant efficiencies and switching to more economic fuels - are implemented.

Related Info :

Sri Lanka Combined Cycle Power Plants more Expensive than Diesel Engines - Information on Power Sector not Available in the Past Now Coming Out

Feasibility of Solar Electricity in Sri Lanka. Overview of Solar PV Installation in Hotel Industry by SWITCH-Asia Greening Sri Lanka Hotels Programme

Sri Lankan Households Can Sell Solar Power to Ceylon Electricity Board. Pilot Project for Domestic Net Metering Started

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