Consumer Electricity Tariff - Need is for a Long Term Vision - Eng Parakrama Jayasinghe

08th April 2013,By Eng Parakrama Jayasinghe


Energy Security is within our grasp!

What is needed is the courage to grab it.


The current mire

• The tariff is the highest in the region
• The cross subsidies cause dissatisfaction
• The CEB continues to lose money every year
• There is no solution in sight
• World energy trends are ignored

Who pays for the subsidies?

• The electricity bill may seem low with the subsidies
• But the Billions of deficit is covered by public funds – that is all of us
• The real beneficiaries are the Oil and Coal suppliers and their local agents

Who is responsible?

• We all are paying for the cardinal sin of believing the myths of cheap electricity round the corner and abdicating our responsibility to speak out.
• The latest is Coal power at Rs 7.50 according to the Minister when the fuel price alone per unit is about Rs 7.00
• Many excuses are offered but !
• Those in authority has not been able to offer a viable solution and have let the country down
• It is time for the consumers to make a stand
• But the solution is not to expect more and more subsidies

How the high tariff should have worked - The Rice Story Vs The Electricity Story





































The problem of Peak Load

• The current generation capacity is enough to meet the average demand. ( 3100 MW Vs 2100 )
• New coal plants are proposed to meet the additions to peak load ignoring the ever increasing price of coal
• Indigenous alternatives are not even considered as candidates in the planning

The way out

The tariff policy must have the objectives of :-

• Time based target for limiting fossil fuel usage to a minimum
• Do not build new coal plants to meet the peak load  demand – there is enough capacity for many years to come to meet the average demand
• Promote self generation at least during peak hours to avoid the need for any more coal plants

Recommendations

• Impose limits on total generation cost  for the coming years.  The current expectation that what ever amount CEB spends have to be recovered from consumers is untenable and unsustainable. The expectation that the fuel surcharge can be removed with termination of oil based power is a fallacy as the coal prices too are moving up
• Phase out the subsidies gradually
• Offer time of day tariff to all segments – GP 1 and HP 1 to start with this year
• Make the peak time tariff cost reflective and the off peak tariff low enough to incentivize self generation
• Provide additional incentives for self generation using indigenous resources

Daily Load Curve – Up to 2007
 















Predicted Daily Load Curve - From 2007 to 2026
















Fossil Fuels Price Movement

Related Info :

• Cost Relective Tariffs for Large Consumers to Encourage Self Generation by Indigenous Sources to Cover Part of Their Requirements. Reduced Burden on CEB May Help Do Away with Coal Power Plants - Eng Parakrama Jayasinghe

• Sri Lanka Should Reduce Peak Power Demand and Trim Most Expensive 5pct of Energy to Eliminate Losses at CEB - LirneAsia, a Regional Think Tank

• Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

• Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

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

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

Cost Reflective Tariffs for Large Consumers to Encourage Self Generation by Indigenous Sources to Cover Part of Their Requirements. Reduced Burden on CEB May Help Do Away with Coal Power Plants - Eng Parakrama Jayasinghe

22nd March 2013, By Eng Parakrama Jayasinghe

From written submission to Public Utilities Commission of Sri Lanka in reference to the call for public comments on the proposed consumer tariff to be applied form the 1st of April 2013. The author, Eng Parakrama Jayasinghe, is the Hony. President  of Bio Energy Association of Sri Lanka,  a Member of the Board of Directors – Sustainable Energy Authority, and a Member of the Board of Directors – NERD Centre.

Preliminary

Achieving a stable and sustainable energy supply, as well as a tariff structure affordable to all segments of consumers requires a long term vision and strategies, applied year by year on a consistent basis.

Subsidies provided for maintaining a generation mix dominated by imported oil or coal is non sustainable and such subsides will only flow to the pockets of the oil and coal suppliers. The deficit run by the CEB is made good by the treasury which means that the supposedly low electricity bill is a myth.

Therefore the only lasting solution is to move towards a generation mix which is by far dominated by indigenous sources of energy as was the case prior to 1995, when 95 % of the generation was from major hydro. The tariff proposals should therefore have this long term goal and everyone must be ready to pay that extra amount now, to overcome the sad situation, created due to lack of proper vision in the past decades, so that we can move towards a more rational and secure energy system. Until such a situation is achieved it is to the advantage of both the CEB and the country to reduce the generation using fossil fuels either by CEB or the IPPs as much as possible.

Recommendations

• The tariff system should be designed to promote maximizing the indigenous sources. The true cost of generation using oil or coal must be calculated without direct or indirect subsidies and state facilitation provided for such generation. Thus any subsidies given to the consumer is a conscious decision based on the true costs. Since such subsidies are not sustainable in the long run, this would encourage self generation by the high end consumers, thus lowering the burden on the CEB and the treasury.

• The problem of managing the peak load is not addressed. The time of day metering facility should be extended on optional basis to the domestic consumers with a  demand of over 180 units per month and for the General Purpose GP 1 and Hotels HP 1 consumers. The price per unit during the peak hours should also be the true cost of the fossil fuel based generation, as the lower end users needs could have been met from the lower cost sources such as hydro already in place.

• The tariff for the high end users should also be cost reflective.  They must be encouraged to use indigenous sources and install self generation to meet at least part of their requirements. This too will reduce the burden on the CEB and will be a means by which the consumers can reduce their electricity cost.

Back Ground for the Recommendations

The CEB is continuing to make losses due to

• High Cost of Generation quoted as Rs 20.84 per KWh, average , but is likely to be much higher. The low cost of the major hydro capital cost of which have been paid up many years ago is the reason that the average unit cost is so low.

• Sale of electricity at rates lower than the cost

This is not a sustainable situation and has to be arrested sooner than later. The deficit is covered by public funds. Therefore it is a fallacy to pretend that any of the consumers are receiving “cheap “ electricity. The burden of funding the deficit is carried by all Sri Lankans, now that we are nearly 100% grid connected, irrespective of the level of consumption.

Thus all Sri Lankans should be ready to accept the burden of an increase in the tariff, provided that plans are in place for a more sustainable future. 

Although the proportional increase of tariff for the lower end consumers has been portrayed as high percentage ( 59%) increase, even the increased tariff at Rs 6.25 (Rs. 5.00 per unit with the fuel adjustment of 25% ) is less than 25% of the current average cost of generation of Rs 20.84 Similar situations has existed for many years. The current increase to be paid is only about Rs 200.00 per month, far less than the amount paid for such luxuries as mobile phones. The CEB has quite correctly extended the grid to nearly 100 %  at costs far in excess of the returns that could be expected. This is a subsidy that is fair and proper so that all Sri Lankans are given access to electricity.

It is however not correct for the consumers to expect the energy at prices far less than the cost of generation.

Thus each unit consumed by this segment carries a subsidy of Rs 20.84-6.25 = Rs 14.59

Since the predicted generation mix is 50% thermal based on fossil fuels, this subsidy is in fact a means of subsidizing the suppliers of oil and coal and not the Sri Lankans at any level. This will worsen in the years to come with the contribution by fossil fuels increasing to over 75% as per the current long term generation plans.

Thus there has to be a concerted effort to change the generation mix to maximize the uses of hydro and other indigenous sources of energy. While this cannot be achieved in a year, the tariff policy in the current year and the years to come must be consistently designed to encourage this change continuously.

Contrary to the popular myth, the cost of indigenous energy is cheaper than that of coal power, touted as the cheapest source and promoted aggressively by the CEB, quoting totally erroneous figures and hiding the important elements of cost in coal power generation. The table below of the fuel costs alone for power generation using different fuels illustrates this fact.

•   Diesel 0.28l/kWh  @ Rs 117.00/l                Rs 32.76
•   Residual Oil 0.231 l/kWh @ Rs 67.00/l        Rs 15.41
•   Coal  0.39 kg/kWh @ Rs 17.92/kg             Rs 6.98
•   SRC Wood 1.0 kg/kWh @ Rs 4.50/kg        Rs 4.50    
•   Agro waste  2.0 kg/kWh @ Rs 2.50 /kg      Rs  5.00

Applying similar conditions , the balance costs on capital, O& M etc has to be similar for both coal and Wood, leading to a decidedly lower cost of generation using SRC wood.

The world price trends and the continually depreciating rupee pressured by the huge import bill on oil and coal will make this difference wider in the years to come.

This fact has been demonstrated by the use of the WASP program used by the CEB for the determination of the least cost  long term generation plan. Dendro has been included as the only source of firm energy from renewable sources, accepted by the CEB as a candidate. 

However the outcome of this analysis which clearly indicated Dendro as the least cost option, was newer published.

The cost of generation using Solar PV is coming down year by year.

Thus the only way the tariff can come down or at least be maintained at present levels is by changing the generation mix.

Also since the CEB appears to have no solution other than fossil fuels to meet the future demands which will drive the percentage contribution by indigenous sources even further, the change may have to come from investments on generation by others, mainly the private sector through NCRE.

The problem of the daily peak load

The long term generation plan of CEB is promoting large scale development of coal power plants. This is done only to be able to serve the peak load between 6.30 PM – 10.30 PM  , as even the current installed capacity is adequate to meet the average day time demand for many years to come.

However, the current generation  strategy  discourages  using the abundant solar energy , and perhaps even the wind resource, whichever is available during the off peak hours. The need to operate the coal power plants at near full capacity, even during the off peak hours, acts as a deterrent for the development of the indigenous and potentially cheaper sources.  The lack of interest in promoting the “net metering” concept is evidence of this.

However, there could be many individuals and organizations who would be willing to install self generation facilities, even using such non firm sources , to reduce the burden on the CEB to cater to the high demand over a few hours on a daily basis.

Therefore in order to promote such self generation and also to encourage use of such capacity , primarily during the peak hours, it is proposed that the time of day metering facility be made available to the domestic consumers who consume over 180 units per month and to the G P 1 and HP 1 categories of consumers.

This can be made optional at the beginning and made mandatory in the coming years.

A typical installation would be a 2 kW solar PV domestic installation with adequate battery storage to cater to the four hours of peak . The cost of such an installation could be recovered in less than four years based on current world market prices of PV systems.

The potential saving of the peak load capacity that needs to be provided by the CEB would be in the order of 500 MW by this change, by a  fraction of domestic consumers alone. The details of this calculation can be provided.

Self Generation by large Consumers

The CEB statistics indicate that 11% of the consumers are responsible for 60% of the total demand for electricity.

This is a potential segment where self generation could be promoted even during the off peak hours. In the past CEB was in the habit of calling on such consumers to use their diesel generators during the dry months with incentive payments. There is no reason why this promotion should not be continued, as there are indigenous sources with the potential for generation at much lower costs. The difficulties faced by the CEB and the government in finding the capital for adding new generation capacity can also be overcome by this means.  The proposed tariff structure should provide incentives for such consumers to move in this direction.

Related Info :

• Sri Lanka Should Reduce Peak Power Demand and Trim Most Expensive 5pct of Energy to Eliminate Losses at CEB - LirneAsia, a Regional Think Tank

• Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

• Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

Sri Lanka Should Reduce Peak Power Demand and Trim Most Expensive 5pct of Energy to Eliminate Losses at CEB - LirneAsia, a Regional Think Tank

04th April 2013, www.lankabusinessonline.com

Sri Lanka should push harder on cutting peak power demand as 'average' costs are meaningless and trimming the most expensive 5.0 percent of energy has the potential to eliminate losses at Ceylon Electricity Board, a think tank has said.

About 17 percent of the generation costs of state-run Ceylon Electricity Board went towards the most expensive last five percent of energy purchased, LirneAsia, a regional think tank said in public consultation called by the Public Utilities Commission of Sri Lanka.

The CEB also spent 17 percent of its costs on the least expensive energy, which amounted to 50 percent of the total energy purchased.

"Thus, if energy purchases could be reduced by 5 per cent, it is possible that the losses of the CEB could be eliminated," LirneAsia chair Rohan Samarajiva said.

"This is the importance of managing demand. Not all the demand needs to be reduced in absolute amounts. Shifting it to off-peak, (when the sole base load coal plant, producing inexpensive energy is asked to back down) could also provide substantial relief.

"If peak demand is lowered, the overall costs of supplying electricity will be reduced."

'Average' Cost

Costs range from less than 5.0 rupees a unit of electricity for hydro to around 30 rupees for thermal energy. Average costs have been determined by the regulator at around 20 rupees based on a tariff proposal filed by the CEB, after disallowing at least three thermal plants.

Sri Lanka CEB cost curve

 In a power grid where different sources of energy have different costs, 'average' costs are meaningless and are simply driven by peaks and which types of plants are used and for how long.

"The cost models that underlie the tariff proposal are based on assumptions of levels of use that may change because of the radical redesign of the tariff structure," Samarajiva said.

"If demand is lower than projected, especially at the peak, it is possible that the proposed tariff will yield excessive earnings."

Some of the most expensive power is used during the late evening peak from around 7.00 to 9.00 pm local time, when households light up and demand goes up to 2000MegaWatts

The cheapest large hydros are also used during that time as peaking plants. Hydro is also vital as load following plants to balance generation with fluctuating demand, but the most expensive energy including gas turbines are switched on at that time.

The cost of delivering power at different times therefore is radically different.

Off-peak

 But from around midnight to early morning, when Sri Lanka's power demand plunges to about 1,000 MegaWatts, a 300MW coal plant is operated below full output to accommodate a rule that says a single plant should not be more than 20 percent of total load.

The rule has been put in place to prevent the grid from failing when a large plant goes out of the system. But sources at the CEB say the floor could now be improved to 25 percent or more with load management techniques which has been already developed.

Samarajiva said CEB could also set up a pump storage system, where late night and early morning coal power (where the incremental energy charge is around 8.30 rupees, compared to average costs of 20 rupees) water is pumped back to a reservoir.

Selling energy to India through a proposed cable could also achieve the same effect.

Sri Lanka has cascade reservoirs where such a pump storage system could be set up.

A flatter daily demand curve could substantially cut overall costs, bringing down average costs even with the existing plants.

Samarajiva says investments should be made in demand management. Investments in demand management could be the same as building completely new plants.

Smart Metering

Samarajiva said the proposed tariffs for 2013 where, households are charged at the highest rated block instead of slabs will give an incentive to conserve energy but CEB should communicate better through mass media and text messages to tell people how to save energy.

"In particular, targeted messages printed on the electricity bill of high-consumption households stating that they are paying X rupees more than similar households have proven to be effective in several countries," Samarajiva said.

"A redesigned and more informative electricity bill appears a necessity."

Smart meters where even domestic customers could benefit by shifting activity to off-peak cheaper power (such as running a washing machine cycle), should be promoted.

"For example, it should be mandated that CEB/LECO install smart meters in all new condominium towers with immediate effect," Samarajiva said.

"Next, it should be mandated that the distributors should install smart meters in at least 50% of currently-high-consumption households (possibly defined as those using above 180 units per month) within the next 24-36 months.

"Such metering would enable subtle, yet sophisticated programs that change consumer consumption patterns."

"More importantly, such meters would also enable more sophisticated policy solutions, such as time-of-day pricing and other alternative tariff structures that enable cost-reflective pricing in the future."

 CEB has already proposed low rates for the late night off-peak especially for industries, who could potentially operate a late night to morning production run.

Samarajiva said subsidies could be directed at those who most needed them, perhaps by increasing payments to the poorest Samurdhi receivers.

Related Info :

• Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

• Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

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

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

Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

04th April 2013, www.lankabusinessonline.com

Costs claimed by Sri Lanka's power monopoly Ceylon Electricity Board are murky, the efficiency of expensive plants and other costs are not independently audited, respondents at a public hearing on a proposed tariff hike said.

Disallowing around 30 billion rupees from the tariff filing also raised more questions about cost transparency he said.

Siyambalapitiya said the inclusion of three retired power plants for dispatch in 2013 by the CEB, and PUCSL’s assumption that such energy can be provided by hydropower plants, were both irresponsible actions.

He said CEB's tariff methodology misinterpreted an established tariff methodology. A bulk supply account which was supposed to have been set up in 2011, which would make many costs transparent, was still not in existence.

Siyambalapitiya said the regulator should also have clawed back 13 billion rupees allowed in 2011. The claw back alone could cut the tariff by 6.0 percent.

He said transmission and distribution losses of both CEB had Lanka Electricity Company (LECO) had come down to 12 percent ahead of target for which they should be commended.

But the CEB's transmission unit had losses of 4.4 percent which was higher than the 3.0 percent target for 2012.

There was no independent calibration of transfer metres between transmission and distribution and also between generation and transmission and most were related parties.

Tilak Siyambalapitiya, a top energy sector expert said the basis on which power plants were to be used in 2013 (dispatch schedule) was unknown.

The dispatch schedule was not according to the tariff methodology required by the regulator but even if another methodology was used, it has not been disclosed, he told a hearing called by the Public Utilities Commission of Sri Lanka.

The efficiency of the plants was not known, he told a public hearing on a proposed tariff hike called by the regulator. The actual heat rates were supposed to be tested by a certified technical auditor.

"Where are these tests?" he asked.

Sri Lanka's thermal plants have peculiar costs with combined cycle plants being more expensive than less efficient than smaller diesel plants.

Laxman Siriwardene, from Pathfinder, think tank said costs at the CEB; a state monopoly was not transparent.

He said the regulator itself has removed 15 billion rupees in costs and refused to allow three plants whose contracts had expired.

Siriwardene said while there was a principle that tariffs should be cost-reflective, there was no way to determine the actual costs. He said there was no information about other expenses of the CEB which had 17,000 employees.

Related Info :

• Sri Lanka Hydro Power Generation Picks up Sharply in 2013

• Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

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

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

Sri Lanka Hydro Power Generation Picks up Sharply in 2013

02nd April 2013, www.lankabusinessonline.com

Hydro power generation has picked up sharply in Sri Lanka allowing state-run Ceylon Electricity Board to cut thermal power, while demand was barely growing in January 2013, official data shows.

Total power generation in the month rose just 0.6 percent to 987 GigaWatt hours (millions of units of electricity) from a year earlier.

In December total generation fell in absolute terms by one percent to 988GWh amid a slowing economy and higher tariffs which promote conservation.

In 2012 total generation grew just 2.4 percent to 11,807GWh as the economy slowed, with some power cuts also reducing generation, as a large coal plant broke down repeatedly.

This year the CEB is expecting to sell 10,950GWh of energy. Sales could be lower than generation due to system losses.

Data released by the Central Bank shows CEB's hydro power generation grew 270 percent to 593GWh in January 2013 from a year earlier, while purchases from private power producers plunged 60 percent to 214GWh.

CEB's own thermal generation - which includes coal power - was also down 21 percent to 234GWh.

CEB has sought a price hike from April. The regulator removed three thermal plants whose power purchase agreements had expired but which were listed in the generation schedule for 2013 shaving off 15 billion rupees in costs filed by the power firm.

From late 2011, low rainfall triggered a steep increase in thermal generation, creating large losses in both the CEB and state-run Ceylon Petroleum Corporation which sold subsidized fuel to the power firm.

The losses which were filled by bank loans, was ultimately accommodated by Central Bank credit (printed money), making the Sri Lanka rupee fall from 110 to 134 to the US dollar.

Market pricing energy helps reduce bank credit demand and avoid money printing which in turn helps keep inflation low and the exchange rate stable.

Related Info :

• Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

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

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

NTPC of India to Pursue Coal Power Project in Sri Lanka

28th March 2013, www.business-standard.com, By Sanjay Jog

Undeterred by current political developments in Sri Lanka and Bangladesh, NTPC is quite firm to pursue development of imported coal-based power projects in these countries.

The company has rubbished reports appearing in a section of press relating to losing the projects to China.

NTPC and Sri Lankan team held talks in New Delhi to discuss changes to the power purchase agreement (PPA) and the implementation agreement for the 2x250 MW imported coal-based power project at Sampur in Trincomalee district, Sri Lanka.

These negotiations took place close on the heels of India's decision to vote in favour of a US-sponsored resolution censuring Sri Lanka on its human rights record and the subsequent postures from political parties in both the countries.

Similarly, NTPC is also not perturbed over the present situation due to the faceoff between the ruling and opposition parties in Bangladesh. The company is going ahead with the development of 2x660 MW imported coal based project at Khulna division of Bangladesh.

A NTPC spokesperson told Business Standard, “In Sri Lanka, NTPC is going ahead with the proposed 2x250 MW coal based JV Project in Trincomalee, Sri Lanka. A JV Company (Trincomalee Power Company Limited) between NTPC and Ceylon Electricity Board (CEB) has already been incorporated and the project agreements including Power Purchase Agreement are expected to be signed soon.”

NTPC and CEB had signed an agreement in 2011 to set up a coal fuel-based 500 MW plant at a cost of over Rs 4,000 crore at Sampur.

NTPC’s team led by chairman and managing director Arup Roy Choudhury was in Sri Lanka in February and held talks with the authorities there with regard to project at Sampur. Sri Lanka’s Treasury Secretary PB Jayasundera had already dismissed news reports that NTPC was pulling out of the project.

As far as project in Bangladesh is concerned, the NTPC spokesperson said, “NTPC is going ahead to develop a 2x660 MW imported coal-based project at Khulna division of Bangladesh in joint venture with Bangladesh Power Development Board (BPDP). NTPC and BPDP have already signed a JV Agreement in January 2012. Feasibility report for the project has been finalised. The project agreements like PPA are expected to be signed soon.”

It must be mentioned here that NTPC, with total installed capacity of 40,674 MW (including JVs), has set a target to have an installed power generating capacity of 1,28,000 MW by the year 2032.

Related Info :

• Sri Lanka - India 500MW Coal Plant to be Built in Muttur, Trincomalee District; Formal Agreements to be Signed in November

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

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

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.

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

30th March 2013, www.lankabusinessonline.com

Sri Lanka's combined cycle power plants which are supposed to be efficient and cheaper have turned out to be more expensive than internal combustion plants, published data show.

According to a consultation document released by the Public Utilities Commission, Sri Lanka's power regulator, private plants running IC engines including Heladanavi and ACE Embilipitiya cost a little over 20 rupees to generate a unit of electricity.

The data was released ahead of a public consultation to be held on April 04.

But combined cycle plants including the West Coast Plant in Kerawalapitiya, AES Kelanitissa and CEB's own plant in the Kelanitissa Complex cost, costs nearly 30 rupees or more per unit of electricity produced.

Combined cycle plant uses a gas turbine and the exhaust is used to produce steam, generating more power with the same fuel, which is expected to off-set the capital investment of additional equipment.

A private producer is paid by the grid operator, Ceylon Electricity Board, based on two criteria; a fixed monthly capacity charge, which covers the cost of building the plant and gives the firm its profit, and an energy charge.

The energy charge is a pass-though based on the amount of power delivered to CEB as the plant is operated on its instructions (dispatched). A plant is expected to be run efficiently enough to use the least amount of fuel which is called the heat rate.

Competitive Bidding

Under a competitive bidding process, bidders will compete to offer a plant on the capacity charge (minimizing their profits) and also the heat rate (maximizing efficiency).

If plants can be operated more efficiently than the promised heat rate, a power producer can make a profit on the energy charge as well. In a highly competitive bidding process, a producer may even lose money on energy towards the end of their contracts as plants age.

The real profits however are made on the capacity charge.

Diesel-type plants such 99 MegaWatt Helandanavi and Aitken Spence plants which seem among the least expensive (see graphic) have come on competitive bidding, industry analysts say, while the West Coast plant in Kerawalapitiya for example was 'negotiated'.

These generators however helped avoid power cuts before the coal plant came on stream.

The controversial Kerawalapitiya 270MW combined cycle plant was built by the Lanka Transformers group, which is affiliated to the CEB with equity from state entities as well as Treasury guarantees.

Consultation documents released by the regulator now show that capacity charges of 630 million rupees a month are being paid on the plant.

This compares to 271 million rupees for a 165MW capacity plant operated by AES, which was built earlier.

A 2011 document by the power regulator calculated capacity charges at 4.12 rupees per unit generated by Kerawalapitiya based on the dispatch at that time.

This compared to 2.36 rupees a unit for Aitken Spence Embilitiya and 1.72 rupees for Heladanavi, built by Lanka Transformers, both of which are internal combustion engines.

Heat Rates

Some analysts have also raised queries about the heat-rates or efficiency, details which are not easily available. The efficiency of some of the combined cycle plants, appear to be as low as 42 percent according to some estimates.

The best plants in temperate countries (where intake air is cooler) achieve efficiencies of 50 percent or more, but a plant in Sri Lanka could achieve rates a little less, industry analysts say.

2013 Generation cost per plant determined by PUCSL In the 2012 document energy charges per unit for Heladanavi (IC engine) which runs on furnace oil is 21.34 rupees in May after prices are raised in April 2013, to 90 rupees a litre.

The AES combined cycle which uses auto diesel - the most expensive fuel at 115 rupees a litre- costs 26.60 rupees a unit.

Kerawalapitiya, needing a special low sulfur fuel to run (blend of fuel oil and diesel), which costs 100 rupees a costs 26.06 rupees to generate a litre, despite using a fuel which is 10 percent or more cheaper than AES.

In the case of Kerawalapitiya, which was a somewhat obscure type of plant, the rate was to be renegotiated in the second year, but that appeared not to have been done, according to some sources.

Some critics believe there may be merit in re-negotiating contracts which were not taken on competitive bidding. Renegotiating plants however could hit investor confidence, which had already been dented through expropriation of some firms by the state.

To make the CEB system more efficient analysts say audit of heat rates and dispatch of plants may also be needed.

The CEB is trying re-negotiate the power purchase agreement with India's state-run NTPC on a coal plant yet to be built, after discovering unfavourable heat rates in initial agreements, according sources familiar with the matter.

 Industry analysts say negotiated plants based on secretive power purchase agreements must be avoided in the future to prevent abuse and costs being loaded to the consumer, as there is no competitive bidding for energy in Sri Lanka on a daily basis.

Ghost Plants

In another startling revelation, the consultative document showed that, three plants ACE power Horana, ACE power Matara and Lakdhanavi whose contracts had expired had been included for dispatch for 2013 in the tariff proposal apparently on the same terms as before.

"Total generation scheduled for already retired ACE power Horana, ACE power Matara and Lakdhanavi power plants were removed and added to hydro generation, since their licenses are expired," the consultative document said.

The regulator instead said a forecasted 800 GigaWatt hours of energy should be produced from hydro, which would save about 15 billion rupees.

Though the independence of Sri Lanka's power regulator has been questioned in the past, analysts say lot of information about the power sector that was not available in the past is now coming out.

Sri Lanka also has other problems, including steep night peak, which needs demand management and peak tariffs which the CEB has addressed to some extent in the 2013 proposal.

Sri Lanka now charges as much as 50 rupees per unit for higher end domestic customers.

In Singapore which has a system run almost entirely of natural gas based combined cycles, domestic users are charged 27.60 Singapore cents a unit which is about 28 Sri Lanka rupees.

Singapore however has a completely competitive market involving electronic bidding in a spot market.

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

29th March 2013, www.dailymirror.lk, By Srilal Miththapala & Suranga Karavita

An overview of the state of Solar PV installation in the Sri Lankan hotel industry was carried out recently by the SWITCH-Asia Greening Sri Lanka Hotels programme project team. While doing this study, the project team also analysed the impact of the proposed electricity increases on domestic Solar PV installations as well. A ready reckoner feasibility chart for evaluating financial feasibility of Solar PV installations for residences was also prepared. The following paper discusses these aspects.

Introduction

Of late, there has been much discussion about the generation of electricity from solar energy. This is usually called solar photovoltaic generation (Solar PV), where an array of solar cells, typically mounted on the roof of a building, will capture the solar energy and transform it to electrical energy.

In a conventional or standalone system, the solar electricity has to be stored, since usage (demand) does not always coincide with supply (generation).  Hence, in a typical installation, electricity is generated in the form of direct current (DC) and usually stored in batteries. The size of such battery banks required will depend on the size of the installation and the days for which the system can operate on battery power alone, with no input from other generation sources.

In addition, the system requires an inverter to convert the electricity stored in the battery in the form of direct current (DC), to alternate current (AC) at a higher voltage, to be compatible with the downstream installation. The cost of a battery bank can be as much as a Solar PV panel for a well-designed system, which can provide power for several days when the Solar PV is not generating electricity. Batteries are still in the development stage and they are prone to premature failure. So, it is common that in Solar PV installations with a battery bank, some of the batteries have to be replaced before the specified lifetime.

Cost of installation

The high cost of Solar PV panels and the large amount of batteries required for storage resulted in the cost of such installations being prohibitively high and not feasible for installation as alternate energy sources.

With rapidly increasing electricity rates, reduction in price of Solar PV panels and  acceptance by the Ceylon Electricity Board (CEB)  to trade electricity units with the grid, Solar PV installations are at present becoming more financially attractive.

‘Trading’ of electricity

This ‘trading’ of electricity units, recently allowed by the CEB, is referred to as net metering or grid tie. This is where an electricity consumer is able to generate electricity at the consumer’s own premises, using any form of alternate energy source and can then synchronize the electricity thus produced with the CEB system and ‘export’ it to the CEB.

The consumer is not paid for this ‘exported’ electricity but is given credit (in kWh), which is set off against his normal electricity consumption off the grid. There will be metering for consumption as well for export of energy to the CEB network.

Each month, consumption and export of energy will be compared. If the export is more than the consumption, credit is given (in kWh). If consumption is higher than export, the consumer is charged for net amount of consumption (consumption - export).

 This is effectively a ‘win-win’ situation for both the consumer and the electricity service provider (the CEB or LECO). The consumer benefits by being able to export the electricity he generates without having to store it, thereby reducing the need and the cost for a storage battery bank.

From the CEB’s/LECO’s point of view, there is some form of electricity demand reduction from the grid, since the consumer is now producing some quantum of electrical energy.

At present, the cost of investing in a grid tie Solar PV is around Rs.350,000 per kW and the cost of investing in a conventional Solar PV system is around Rs.700,000.

Solar PV installation in hotel industry

In spite of grid tie options being available, the reduction in cost of Solar PV panels and increased cost of electricity, Solar PV for larger industrial applications is still not financially attractive, due to the long pay back periods of around 15 years for a grid tied system and around 30 years for standalone systems.

Hence, from the surveys and studies carried out by the SWITCH-Asia Greening Sri Lanka Hotels programme, it has been found that Solar PV installation in hotels is still few and far between. In fact, from the 350 odd hotels working with the Greening Hotels programme, there are only three hotels, which have some form of Solar PV installations.

Ulagalla Resort

This 80 roomed resort hotel in Anuradhapura has been the trailblazer in taking a bold step in installing the largest Solar PV system in a hotel so far. It has a bank of Solar PV panels covering 900 sqms, generating 120 KW of electrical energy, which amounts to about 40 percent of the hotel’s total electrical demand.

The system operates on a net metering platform and cost about Rs.125 million for the entire installation, which was done with the commissioning of the hotel in 2010. While certainly the hotel has taken a bold and pioneering step in having such a large Solar PV installation, payback periods are still quite high.

However, the hotel has been able to market this unique installation to give it a strong identity as a hotel which embraces good sustainable consumption practices.

Jetwing Sea and Jetwing Blue

When the former Jetwing Seashell Hotel was refurbished and relaunched as Jetwing Sea, a self-contained (inclusive of battery bank) Solar PV was installed for one wing of the guest rooms in the hotel. The installation cost was about Rs.12 million in 2010 and generates approximately 15 kW.

Former Jetwing Blue Oceanic was also refurbished and relaunched in the same year as Jetwing Blue and a Solar PV system, similar to Jetwing Sea was installed of capacity 20 kW, at a cost of Rs.16 million.

More than being a financial consideration, here again, it has become a unique selling proposition (USP) and a powerful marketing tool. The hotel proudly advertises itself that most of its rooms’ electrical energy is powered by the sun and each room has an indicator to show when the room is powered by solar (green light) and when it is powered by the mains, during low sunlight periods (red light).

Hence, other than for selective marketing and differentiating propositions, currently, larger Solar PV installations, either grid tied or standalone systems do not seem to be that viable in large scale hotel applications.

Solar PV for residences

However, with the rapid increase in electricity rates for residential buildings which consume higher loads, grid tie Solar PV installations are becoming a very much more feasible option. 

Provided adequate roof area or space on the ground is available, any residence utilizing more than 300 units of electricity (kWh) per month, with the grid tie Solar PV installation at current cost and new electricity rates (which are being proposed),  will pay back in just about less than six years. 

The project has developed a ready reckoner, which gives a quick approximate indication of the financial feasibility of a Solar PV installation for residences.

It is evident from the table below, which shows the co-relation of payback periods for Solar PV installations and units consumed, it is evident that the moment a domestic consumer exceeds the lower thresholds of consumption of around 250 units, the effective electricity charges increase exponentially, bringing the payback period rapidly down to  seven years and less.

(Srilal Miththapala, an Electrical Engineer by profession and a senior tourism professional and Suranga Karavita, a Mechanical Engineer, are Project Director and Industry Technical Services Manager of EU SWITCH-ASIA Programme Greening Sri Lanka Hotels project implemented by Ceylon Chamber of Commerce respectively).

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Strategic Plan Vital for Energy Security in Sri Lanka - Dr Nishantha Nanayakkara. Energy Sector Expert Proposes Cost Based Tariff for Renewable Energy, Stand Alone Household Systems, Hydrogen Generation by Wind Power & Fuel Cell Use

04th March 2012, www.sundayobserver.lk

The world is on the brink of a major energy crisis due to the trade embargo and a imminent attack on Iran, a large oil producing country.

Trade experts said that developing countries will be the most affected due to the staggering rise in world fuel prices. Sri Lanka is already facing serious trade and commercial issues due to the crisis in the Middle East which has boosted oil prices to $ 125 a barrel.

Oil rose to a 10-month high above $125 a barrel last week, prompting responses from policymakers around the world including U.S. Europe may have more to fear as its fragile economic growth falters. Italy and Spain look for alternative sources to the crude they currently import from Iran, where an EU oil embargo, intended to make Iran abandon what the West fears are efforts to develop nuclear weapons, comes into force in June.

Major Operation
Analysts said that the United States and NATO allies are planning a major operation in the Gulf region which could be a direct attack on Iran. Instability and escalation of tension in the Middle East would skyrocket oil prices.

Energy sector experts said that coal prices will also jack up and it would affect the newly built coal power plants. Sri Lanka would face not only an energy crisis but also a foreign reserve crisis due to its dependence on imported energy. Hence a strategic plan for the energy sector is vital to face crises and boost industrial and economic growth in the country.

Chairman/ Managing Director HPI Group of Companies and International Expert for Renewable Energy for United Nations Industrial Development Organisation, Dr. Nishantha Nanayakkara said energy security is vital for the development of a country. “We need to have strategic plan by recalling the famous saying by King Parakramabahu which is applicable even to date. We need to have a strategic plan to accomplish that vision.

The vision should be energy security and self sufficiency in energy needs,” he said.

Dr. Nanayakkara said a strategic plan will ensure that very citizen will have access to electricity and a good public transportation system with a reduction of traffic congestion in the cities.

“Promoting renewable energy sources on a cost-based tariff structure, introduction of alternative fuel, encouraging private sector investments, phasing out dependency on imported oil with an electricity generation plan by the Ceylon Electricity Board (CEB) with the Public Utilities Commission of Sri Lanka to phase out oil-based power generation are vital to achieve the goals of the strategic plan”, Dr. Nanayakkara said.

We need to take into account the foreign exchange drain we incur for truck transport service from source to consumer demand point. We need to go up to grassroot level to calculate how much we spend in foreign currency for traffic in Colombo, traffic along the Kandy Road, transport of sand from Mahiyangana to the Central Province and the transport of cement from source points to cities. Should we use any other alternative and energy efficient transport system even at a heavy initial infrastructure cost.

Secondly, household energy consumption is not efficient and rural electrification is not at all commercially viable due to heavy distribution losses for which other consumers have to pay the price. It is time to consider a stand-alone energy system for households.

Hydrogen Generation
He said Sri Lanka should focus on hydrogen generation by means of wind power and use fuel cell technology which is the most clean source of energy. Since solar power is expensive and limited in capacity, we can generate energy for cooking and lighting, if we use fuel cells.

What is required is to change the hydrogen tank similar to replacing a gas tank. The need of energy for hydrogen generation can be eliminated, by using wind power for hydrogen generation. This will ease our electricity bills and will be a massive saving for the CEB thus reducing the heavy dependency on oil and coal.

He said that “We have come to a critical point as far as energy security and self-sufficiency in energy are concerned, due to the crisis situation in Sri Lanka as well as in the world.

Almost 100 percent of our oil imports were from Iran but we are compelled to find another source before July 2012, which is not an easy task. According to statistics, we fall into the 65th slot, with around 90,000 barrels of oil imports per day, whereas the US consumes 20 million barrels per day.

In other words, our annual import of oil is just below two days consumption of the US (the US produces it’s own oil of 7.4 Million Barrels per day)”.

Sri Lanka uses very little as far as petroleum and electricity is concerned. We are able to manage consumption without being dependent on oil imports. We had plans to refurbish the Sapugaskanda refinery with Iranian assistance but those plans are crippled due to the recent oil embargo on Iran.

We will have to depend on our ageing refineries which cannot produce a high percentage of light distillates compared to modern refineries.

The Sapugaskanda refinery produces a larger percentage of furnace oil, while we have to import substantial quantities of auto diesel and petrol to cope with the demand. For instance, the 2010 statistics show that from 1.819 million tonnes of crude oil from which we could produce 157,900 tones of petrol, 441,500 of diesel and 685,800 tonnes of furnace oil, whereas we had to import another 326,000 tonnes of petrol, 984,000 tonnes of diesel and 365,000 tonnes of furnace oil.

The Central Bank expected to reduce oil imports after commissioning the 300 MW coal plant but expected results could not be achieved due to constant breakdowns of the coal plant and its under-utilisation during off-peak hours.

Commercially exploitable wind potential in Sri Lanka can go to even more than one thousand Megawatts, but system control restrictions of the CEB have limited wind power penetration to less than 100 MW. Even the CEB never expected a mini hydro to boom. The annual transfer of mini hydro units to the National Grid is 190 million units which saved 60.5 million litres of auto diesel if the same power had to be generated by CEB-owned diesel engines. Even a much higher amount of 77.1 million litres of diesel would be consumed if 190 million units of energy had to be produced by CEB-owned gas turbines.

In the recent past, the CEB has shown a favourable response and supporting role for all non-conventional renewable energy sources to reduce it’s dependence on imported fuels and to harness low cost energy sources by extending a conducive policy framework.

“If we are looking for energy security and self -sufficiency in energy, we should catch both ends of the energy picture, i.e. saving as well as cheap and reliable energy sources for power generation.

This can only be achieved by cost reflective tariff policy and visionary government policy with long-term objectives. The Public Utility Commission of Sri Lanka (PUCSL) should play a major role in this game and it was established to play an independent role while adhering to government policy guidelines.

The PUCSL can be the government arm to advise law makers and the Treasury on tariff policy to save energy and to reduce government debt due to loss- making energy consumption and generation”, Dr. Nanayakkara said.

Subsidies
Whether we like it or not, we should accept the fact that we live in a country where the Government takes the debt burden to give subsidies to the public to release consumer burden. It is due to the subsidy package in all sectors, not restricting to electricity or transport, that the cost of living is far lower than it should be.

We practised a cost- reflective pricing, while increasing salaries of the government and private sector employment enabling them to lead a comfortable life. It is due to the subsidies in education, farming, health, transport, electricity and food that we don’t know where we are heading to and whether this country can bear all the burden.

It would have been much better if a market-driven economy and cost-reflective tariff is in place, while the Government concentrates on subsidising or giving free supplies to identified poor people and also to have a well-planned scheme to upgrade the poor to middle class, by some sort of capacity building.

“Our energy sector is a very good model case to study on how cross subsidy and adhoc policy decisions affects the economy of the nation which was dragged down by the insecurity of energy and unreasonable tariff and the suffering caused to one sector, while some people enjoy heavy subsidies.

It is due to this wide disparity that the CEB is faced with technical constraints in system control and not the low cost generation principle”, he said.

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