The government should step into mobilizing long term project lending for the small hydro-power sector, especially from state banks, with loan tenures of 15 years and longer moratoriums at project inception up to 5 years. At present, the typical loan tenure is 8 years. The cost of the loan and its repayment account for over 50 % of the unit cost from a typical small hydro-plant, the Small Hydro-Power Association said.
The high cost of developing plants and increased fuel prices, downward tariff revision, high exchange rates and the sharp increase in interest rates have slowed down the momentum of the sector.
Small Hydro-Power Developers’ Association said a fair tariff system should be formulated to assure the future growth of the sector.
According to the government policy, 10 % of total energy requirement shall be given from renewable energy by 2015.
The present levels are approximately 5 % grown over period of 15-20 years. Many of the mini hydro power projects are located in rural villages creating infrastructure development and new employment opportunities to village youth.
At present, 94 plants with 201 MW capacity every year saves approximately Rs 17 billion annually to the nation by substituting high cost thermal generation.
The government could play an important role in facilitating the industry thereby attracting foreign and local investments needed to further develop the sector.
The government should also intervene to prevent undue interference from local authorities, especially Pradeshiya Sabhas, and imposition of unfair payments, rentals and fees from other government agencies.
The Small Hydro Developers’ Association with the assistance of government as well as its members was expected to develop at least 250 megawatts more of small hydro-power in Sri Lanka, which will save Rs. 50 billion annually to the country by the substitution of thermal generation.