Sri Lanka’s power authority, Ceylon Electricity Board (CEB) is mulling the option of not renewing existing Power Purchase Agreements (PPAs) entered into with thermal power based, Independent Power Producers (IPPs) in the country once they come up for renewal in the future due to a variety of reasons, according to a top official from the Ministry of Power and Energy. Long-term PPAs entered with private sector firms such as Aitken Spence Plc Lakdhanavi Ltd are to come up for renewal by the end of this year while an already expired agreement with blue chip conglomerate Aitken Spence for their 20MW thermal power plant at Matara is presently under negotiation for extension.
“With the expansion of the coal and hydropower plants in the island, it is doubtful that some of the PPAs will be extended as it is going to be expensive for the CEB to purchase from Thermal based IPPs,” Secretary to the Ministry of Power and Energy M M C Ferdinando told The Nation last week.
At present, Sri Lanka has eleven thermal power-based IPPs besides many others that produce energy through alternative sources but the island’s dependency on thermal increased by about 36% to about 59% last year, statistics showed.
“However, when the extensions are sought most probably IPPs will be quoting a lower rate. This is because they are expected to have recovered their capital costs during the 10 year PPA which will now be beneficial for the CEB. However, the rates quoted will still be higher than the unit rates offered by IPPs that use non-thermal sources,” Deputy General Manager of the Energy Purchasing branch at the CEB Ajith Fernando said.
According to the 2011 Central Bank Annual Report, the average purchase price of power per unit from the private sector amounted to Rs.17.24 in 2011 whereas the average tariff of a unit was Rs.13.22. Commenting on the progress of negotiations with regard to the extension of the expired PPA of Aitken Spence’s thermal power plant at Matara, for which the firm had sought an extension for another five years, Fernando said that a technical evaluation committee is presently evaluating the new tariff proposals put forward.
“The final decision will be made by the Cabinet in due course. According to our plan we might not have to extend any other PPAs. But if the demand for electricity goes up coinciding with the industrial boom in the country we might have to continue our relationship with the private thermal power producers,” he said. However, if the PPA with Aitken Spence is not extended, the group is not likely to take a drastic hit although it would leave some impact in their bottom line, analysts say. The Government has reinforced its commitment to sustainable energy by continuing to support renewable power projects. The previous National Energy Policy target to reach 10% of the country’s energy generation through renewable energy sources by 2015 has now been revised to achieve a target of 20% by 2020.