Champika Set To Electrify Power Sector

By Mandana Ismail Abeywickrema

The government is to add 1,000 MW of relatively cheap power to the country’s power grid within the next three years following the completion of the Upper Kotmale and Norochcholai coal power plants.
During a discussion on the country’s energy sector with The Sunday Leader, newly appointed Power and Energy Minister Champika Ranawaka observed that apart from the mega projects, the government was planning on adding 250MW through medium scale hydropower projects, another 50MW through wing energy and 180MW through mini hydropower projects.

He emphasized the need to streamline the country’s energy sector, while addressing the issues faced by the cash strapped Ceylon Electricity Board (CEB).
Ranawaka explained that following the completion of the Upper Kotmale and Norochcholai projects, the average cost per unit would be around Rs. 17.50.
The per unit cost of coal power is expected to be around Rs. 7-8 and diesel around Rs. 20.
The first phase of the Norochcholai coal power plant is to inject 300MW to the main grid by 2011. This phase of the project has received US$ 455 million from China’s Exim Bank, and the Government of Sri Lanka has pumped in Rs. 5,300 million.
The second phase of the Norochcholai plant is scheduled to be completed by 2013 and is expected to inject 600MW to the country’s grid.
The Upper Kotmale plant is expected to inject 150MW to the grid by 2012. The project received 37,817 million Yen from JICA, Rs. 7,936 million from the CEB and another 496 million Yen received by the CEB.
Ranawaka explained that the government was also looking into completing several medium scale hydropower projects that would add another 250MW to the existing power grid.
The medium scale hydropower projects include the Iran funded Uma Oya project, Broadland, Moragolla and Ginganga projects.
The Minister observed that tenders are to be called for the Broadland project, which is to be constructed along the Kelani River.
“The biggest issue faced by the country’s power and energy sector was the lack of implementing any power projects from 1990-2005,” he said adding that the crisis in the energy sector commenced after 1992 when the demand for electricity saw a 7% annual growth and respective governments delaying proposed projects.
During the tenure of Anuruddha Ratwatte as Power and Energy Minister, the proposals to implement the Upper Kotmale project and the coal power plant were delayed due to protests from political parties, religious groups and environmentalists.
The government, while delaying the proposed projects, did not make any alternative proposals to address the demand. “The power sector would now be able to meet the demand and is targeting a 100% electricity penetration level to cover every part of the island through a three year rural electrification programme,” Ranawaka said.
However, one of the key concerns in the country’s power sector is the loss incurred by the CEB.
Explaining CEB’s financial situation for 2010, Ranawaka said that the institution would incur a Rs. 40 billion loss.
He noted that the CEB would incur a total cost of Rs. 159 billion for generation, distribution and transmission of 9,132GW hours for this year. However, CEB’s revenue is expected to be Rs. 119 billion through the sale of a unit of electricity at an average Rs. 13.
In addition to the Rs. 119 billion, the CEB is to pay Rs. 87 billion to independent power producers (IPPs). Apart from billions of rupees of its debt component, the CEB has to pay 70% of its revenue to 11 IPPs.
“The accumulated losses of the CEB amount to Rs. 148 billion for the last 20 years,” Ranawaka said.
IPPs were the solution sought by the government in 1996 and 1997 when the country’s power system became unstable, with power cuts during the dry season, and the CEB recording internal issues as well.
By the year 2000, an electricity unit cost between Rs. 4.60 and Rs. 4.80, but the CEB had to purchase power at between Rs. 10-12 from IPPs, resulting in 30% of all electricity bills being directed for power purchasing.
However, the roots of the CEB crisis according to Ranawaka could be traced back to the Accelerated Mahaweli Project in the 1980s.
Considering most countries in South Asia, Sri Lanka has had very high local expertise. Following the establishment of the CEB in 1969, engineers attached to the institution have played a
key role in the cascading Kelani Complex, which include the New and Old Laxapana, Maussakele and Castlereigh.
Between 1970-1980, the country’s power generation was based 100% on hydropower. The electricity penetration level in the country at the time was 10% and a unit cost only 18 cents.
However, 30 years later, the unit cost is close to Rs. 18, which is an almost 100% increase in prices.
In the 1980s, the then government decided to inject 550MW of electricity into the country’s grid through the Accelerated Mahaweli Project (Kotmale, Victoria, Randenigala and Rantembe). The electricity demand in the country at the time was 250MW.
Although a project that benefited the country’s power sector, the Accelerated Mahaweli Project became the first step of the CEB’s downfall according to Ranawaka.
Projects under the Accelerated Mahaweli system were all outsourced to foreign companies, resulting in the stagnation of local expertise. The CEB’s engineering capacity was affected as a result. On the other hand, following the completion of the Accelerated Mahaweli Project, the cost was apportioned and part of the debt component was allocated to the CEB.
The CEB was allocated a Rs. 50 billion debt to be paid for the Accelerated Mahaweli Project.
“Even 30 years later, the CEB is still carrying a debt component of Rs. 60 billion from the Accelerated Mahaweli Project,” he said.
The CEB crisis continued further due to bad decision making by government authorities. Citing one such example, Ranawaka said the construction of the Samanalawewa project by the government without heeding advice from the engineers resulted in a leak in the dam and the hydropower plant running under capacity. The CEB was also burdened with a Rs. 12 billion additional debt form the Samanalawewa project as well.
“The CEB is faced with three key crises – system instability, financial crisis and social unrest. The Ministry has planned a six month short term programme commencing June 1 aimed at addressing the social unrest in the institution,” Ranawaka said.
As for the financial crisis, he said steps would be taken to retire the IPPs at the earliest by re-negotiating long term agreements between the CEB and the IPPs.
“We are looking at optimizing plant fuel and renewable energy mix and would take all ad hoc renewable energy programmes under system controls,” he said, adding that while structural changes to the sector would be made within the next six months, a mid term plan would be introduced on January 1, 2011.