Much of the hydropower capacity has been developed already for electricity generation: 1,390 megawatts (MW) in larger power plants by the state-owned utility, Ceylon Electricity Board (CEB) and 350 MW in smaller power plants by private investors. About 250 MW of hydropower capacity is in various stages of development, which would most likely be the last medium-scale hydropower plants to be developed. A few more small power plants remain to be developed, by the private sector. The technical resource potential for solar power generation is estimated to be 6,000 MW. Net-metered rooftop solar photovoltaic (PV) was allowed since 2008, and since 2016, surplus energy sent out to the
grid was paid. The target capacity of rooftop solar PV is 200 MW by 2020. The exploitable wind power potential is estimated to be 5,600 MW, of which about 130 MW has been developed, with a further 130 MW under construction.
Fossil fuels. Exploration for gas and petroleum have not resulted in commercial production, although some deposits of gas have been discovered in Mannar basin, offshore on the western coast. More exploration is planned in other offshore areas on the west and east coast. About 30% of petroleum requirement is imported as crude oil and processed in the country’s single refinery, while the balance requirements are imported as refined products. Liquefied petroleum gas is imported and supplemented with the output of the refinery, bottled and delivered to customers. Coal is imported for electricity generation for the
900 MW power plant, and for smaller industrial applications.
Sector management and regulation. Two ministries are responsible for policy formulation and supervision of energy sector institutions and utilities. The Ministry of Power, Energy and Business Development prepares energy policy, supervises the main state-owned power sector utility CEB, the state-owned distribution utility Lanka Electricity Company, Sri Lanka Sustainable Energy Authority, and several other state-owned entities in the energy sector. The Ministry of Petroleum Resources Development oversees exploration for gas and petroleum, supervises state-owned Ceylon Petroleum Corporation (CPC) and several entities in the petroleum sector. The Public Utilities Commission of Sri Lanka (PUCSL) is the multisector regulator, which is presently empowered to perform the functions of technical, economic, commercial, and safety regulator of the electricity industry. Petroleum and water supply are expected to be assigned to PUCSL for regulation, in the near future.
Ownership of energy utilities. The electricity industry and the petroleum industry are both managed largely by state-owned corporations. Private sector participation in the electricity industry is limited to power generation, while in the petroleum industry, the private sector is engaged in petroleum distribution, bunker supplies, gas distribution, and oil exploration.
Electricity sector reforms. Electricity generation and supply in towns previously handled by private entities were taken over by the government in the 1950s, and in 1969, handed over to the government-owned corporation CEB. Electricity industry reforms commenced in 1983, when distribution previously handled by city councils was transferred to a government-owned company. In 1996, private investors were allowed to produce and sell electricity to the single-buyer CEB.
In the same year, feed-in tariffs to enable private investors to build, own, and operate small (up to 10 MW) power plants to use renewable energy, were announced. However, to this date, CEB remains substantially a vertically integrated electricity utility. Unbundling the utility into separate generating, transmission, and distribution companies proposed in the Electricity Reforms Act 2002 did not materialize. The Electricity Act 2009 introduced limited unbundling, where all businesses remain under one corporate ownership, while generation, transmission, and distribution functions were separately licensed. PUCSL commenced regulatory functions in 2009.
Petroleum industry reforms. Similarly, in the 1960s, the government-owned corporation CPC was established to import, refine, and supply petroleum products, previously marketed by private companies. CPC continues to operate the 50,000 barrels-per-day refinery, and imports and markets much of refined products. In 2004, about 35% of CPC’s retail outlets were transferred to Lanka IOC. Since 2004, most storage facilities are jointly owned by CPC and Lanka IOC, through a company. After years of planning, the Petroleum Industry Act, which would corporatize the presently government-owned corporation CPC and empower PUCSL to regulate economic, technical, commercial, and safety performance of the sector, has not been presented to Parliament as yet.
Electricity demand and supply. Sri Lanka’s per capita electricity consumption was 626 kWh/person in 2017, lower than India and many of the developing countries in Southeast Asia. In 2017, the share of sales to household customers was 37% and to industrial customers was 32%, and the sales to the commercial sector was 29%. As the economy moves toward higher growth in the services sector, the share of electricity sold to industries has been on the decline for several years. Annual sales growth in the past five years was below 9% per year, while the growth in peak demand was below 7% per year. Thus, the load factor has grown from 63% to 68% from 2010–2017, indicating that the mandatory time-of-use tariffs for industries since 2011 and to commercial customers since 2013 have the desired impacts. Completion of household electrification in 2017 and the higher growth in daytime sales to commercial customers also positively impact the load factor.
Electricity demand growth and investment needs. Single-buyer and transmission licensee CEB forecasts that sales will grow at the rate of about 7.5% until 2021, and then decline to about 5% per year by the end of the decade. The peak demand is forecasted to cross 3,000 MW by 2020 and reach 4,800 MW
by 2030. Significantly, the time of occurrence of the peak demand is expected to shift from the present late evening (typically 7 p.m.) to early afternoon (typically 1 p.m.), by 2027. To meet the growing demand at the lowest cost, CEB plans indicate the investment requirements for power generation to be $2,400 million from 2020–2025. Matching investments are required for transmission (to inter- connect generating facilities), estimated to be $320 million and in distribution (to serve the growing demand and to improve reliability of supply to customers) a further $60 million.
Petroleum sales growth. No formal forecasts are published by CPC, but it is expected that the growth in sales of petroleum products will remain at 5%– 10% per year. No specific investment plans are published by the petroleum industry entities.
Electricity industry outlook. At present, the electricity industry has three major constraints: (i) capacity shortage and delays in implementation of mainstream power plants; (ii) slow growth in renewable energy development; and (iii) severe financial crisis, mainly attributed to noncost reflective tariffs. The capacity shortage has to be resolved by building larger power plants. CEB has proposed that the two canceled coal-fired power plants be revived and built using the latest technology. Additionally, two combined cycle power plants are required to be built to cater to seasonal shortages of hydropower. CEB expects the liquefied natural gas (LNG) import terminal to be ready by 2023, already behind its previous schedule at 2020. Renewable energy development through solar and wind investments by the private sector is effectively at a standstill owing to legal impediments and lack of clarity on the feed-in tariffs. Solar and wind parks have been put out for competitive bids, but only a handful have materialized. These shortcomings have to be resolved, to create a healthy environment for private investors to build solar and wind power plants in the long term. The financial
crisis would only be managed by PUCSL, with CEB cooperating by submitting information to calculate allowed revenues, and then gradually working through a tariff increase and rebalancing process.
Unfinished reforms in the electricity supply industry. While unbundling of CEB is effectively stalled, it is still an integrated structure with functional units. CEB corporate remains largely intact although it is functionally unbundled. CEB corporate manages the entire institution, while licensed entities within CEB have not been made accountable to the allowed revenue they receive. The present methodology allows the penalties for increased network losses, and incentives
for reaching loss levels above the target. Lanka Electric Company (LECO), the only corporate entity in the power sector, distributes about 10% of the total energy and has experienced the benefits of economic regulations, as well as responding to energy efficiency targets. Quality of supply reliability is managed
by PUCSL, the direction should by now be catering to the needs of the electricity customers, by establishing reliability targets, measuring or estimating systems, and imposing penalties when targets are violated. Similarly, commercial quality of electricity service requires regulatory oversight. Currently, CEB does not submit to PUCSL, information required for economic, technical, and commercial regulatory activities. Accordingly, determination of allowed revenues and the cost of supply has not been done since 2017.
Reforms in gas and petroleum industry. The petroleum industry remains partially unbundled, while CPC remains intact as a large integrated entity. The Petroleum Industry Act that would establish unbundling and regulatory oversight requires to be completed soon and approved by Parliament. Petroleum pricing
is conducted by the Ministry of Finance, which is required to pass on to PUCSL, to establish a more transparent pricing procedure. Sri Lanka does not have a
gas industry law; a decision is required on whether a separate gas authority is
to be established to manage the planned import of LNG and distribution of regasified LNG, or whether CPC is to be empowered to manage the gas industry as well.
Energy efficiency outlook. Sri Lanka requires the completion of initiatives already in progress to establish and enforce appliance performance standards. Mandatory energy consumption reporting and submission of energy management plans by large customers have not been implemented, although these have been in the regulations for the past several years. Smart techniques to manage demand are still at pilot stage, requiring further efforts to use information technology to improved energy management through demand-side management and demand response techniques.
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