52425_mr._nishantha_nanayakkara

8/9/2019 52425_Mr._Nishantha_Nanayakkara

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Small Hydro Power Industry in Sri Lanka

Policy and Progress

Presented byPresented by

NishanthaNishantha NanayakkaraNanayakkara Ph .D. ( Saga, Japan )Ph .D. ( Saga, Japan )

Senior Lecturer, Dept. of Electrical Engineering, University ofSenior Lecturer, Dept. of Electrical Engineering, University ofMoratuwaMoratuwa

President, Grid Connected Small Power Developers AssociationPresident, Grid Connected Small Power Developers Association


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Role of Small Hydro Power in Sri Lanka

Growth in the Small Hydro Power Sector (< 10 MW)

1.030.97 0

6.682.53

12.71

7.768.4

34.76

0

5

10

15

20

25

30

35

Capacity

Increase (MW)

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Source: Grid Connected Small Power Developers Association

First small hydro turbine in Sri Lanka was installed in 1887 by

Gilbert Gilkes. 369 plants ~ 10 MW were installed between1887 and 1950. Only 60 of these are still operational.


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1.030.97 0

6.682.53

12.71

7.768.4

34.76

0

5

10

15

20

25

30

35

Capacity

Increase (MW)

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year


First modern SHP plant was commissioned in 1996.


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1.030.97 0

6.682.53

12.71

7.768.4

34.76

0

5

10

15

20

25

30

35

Capacity

Increase (MW)

1996 1997 1998 1999 2000 2001 2002 2003 2004

Year


End 2005,Commissioned 85 MW

Under Construction 30 MW

LoIs Issued 140 MW

Pending Applications 771 MW


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2004 Power Sector Performance2004 Available Capacity (MW)

Thermal (Diesel)

45%

Wind

0%

Emergency

Power

1%

Hydro

54%

2004 Units Generated (GWh)

Thermal (Diesel)57%

Emergency Power

6%Wind

0%

Self Generation

1%

Hydro

36%

SourceSource MWMW GWhGWh

HydroHydro 1,2821,282 2,9602,960

ThermalThermal 1,0731,073 4,5714,571

WindWind 33 33

Emergency PowerEmergency Power 2020 509509

Self GeneratedSelf Generated -- 115115

Early 1990s self reliance in power over 90%

Today 63% of generation from petroleum



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Source: Central Bank Annual Report 2004

Government of Sri Lanka (GoSL) subsidizestariff to ease the burden on the consumer

S S


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Why is the Small Hydro Sector important to Sri Lanka?

Indigenous and renewable

Cheaper than any other IPP

Environmentally Friendly Distributed Generation

Speedy Commissioning

Improves energy mix and promotes self reliance

Enriches economy

Protects environment


Saves foreign exchange Local private investment

Local technical expertise Reduces factor costs

Rural employment and income generation

Rural electrification and infrastructure development


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Local technical expertiseLocal technical expertise

Cost per kW in 1996Cost per kW in 1996 -- US$ 1900 (first project)US$ 1900 (first project)

Cost per kW in 2003Cost per kW in 2003 -- US$ 1000 (accumulationUS$ 1000 (accumulation

of local technical knowof local technical know--how, and investorhow, and investor--technocrat partnerships)technocrat partnerships)

Cost per kW in 2005Cost per kW in 2005 -- US$ 1250 ( geographicalUS$ 1250 ( geographicaldifficulties, long distance distribution lines, highdifficulties, long distance distribution lines, highcost for pre operational expenses, and high steelcost for pre operational expenses, and high steelprice)price)

Very high tendency to use Chinese MachineryVery high tendency to use Chinese Machinery

Sri Lanka is blessed with nature, and all sites areSri Lanka is blessed with nature, and all sites are

within 150 km to the sea portwithin 150 km to the sea port Feasibility, designs, and construction by localFeasibility, designs, and construction by local

R l f S ll H d P i S i L k


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Having witnessed the successful development of SHP

sector

and

having realized the importance of developing indigenousresources,

GoSL is accordingly increasing priority tothe development of renewable energy in Sri Lanka.



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-

2,000

4,000

6,000

8,00010,000

12,000

14,000

16,000

18,00020,000

Generation

(GW

h)

2004 2006 2008 2010 2012 2014

Year

Generation Forecast 2005 - 2015

Dendro

Wind

Hydro (10 MW)

Thermal


Actual Contribution to Annual Demand

2004 Small Hydro 3% of annual demand

2004 All Renewables 32% of annual demand

Potential Contribution to Annual Demand

2015 Non-Conventional 26% of annual demand

2015 All Renewables 56% of annual demand


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Small Hydro Power Industry in Sri Lanka

Policy and Progress

Significance of Policy for SHP Industry in Sri Lanka


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ItemItem 19961996 19971997 19981998 19991999 20002000 20012001 20022002 20032003 20042004

AdditionsAdditions

(MW)(MW) 1.031.03 0.970.97 -- 6.686.68 2.532.5312.712.7

11 7.767.76 8.408.4034.734.7

66

TariffTariffDryDry

(SLR/ kWh)(SLR/ kWh)2.902.90 3.383.38 3.513.51 3.223.22 3.113.11 4.204.20 5.905.90 6.066.06 5.705.70

TariffTariffWetWet

(SLR/ kWh)(SLR/ kWh)2.902.90 2.892.89 3.143.14 2.742.74 2.762.76 4.004.00 5.655.65 5.855.85 4.954.95


Growth of SHP Industry

GROWTH Policy Initiatives

Letter of Intent Procedure

Standard Power Purchase Agreement

Published Small Power Purchase Tariff

BOI Incentives



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GROWTH Policy 1:

Priority of application

Any Independent Power Producer (IPP) wishing to develop arenewable energy project, which is less than 10 MW, can submitan application to the Ceylon Electricity Board for a Letter ofIntent (LoI).

Issued on a first-come, first-served basis to ensureimpartiality and transparency

No pre-qualification process to screen applicants, thusencouraging any person with an identified site to apply.

IPPs must fulfill the conditions stipulated in the LoI withinsix months and enter into a Standardised Power PurchaseAgreement (SPPA) with CEB.



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GROWTH Policy 2:

Standard Power Purchase Agreement

IPPs enter into a SPPA with CEB that defines the termsand conditions for the generation and sale of power.

SPPA is a standardised, non-negotiable, 15 yearcontract.

SPPA has provided a practical basis for privatesector involvement.



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GROWTH Policy 3:

Tariff based on avoided cost methodolgy

The rate for delivery of energy output is published by CEB every year,This is a two-part tariff. The rate for the dry season (February to April)

is higher than that for the wet season (May to January).

Based on the principle of avoided cost of marginalgeneration.

For the duration of the project, SPPA guarantees afloor price of 90% of the tariff applicable in the year

the Agreement was signed.

Level of tariff is a key criterion for the investment

decision



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GROWTH Policy 4:

Tax and import duty concessions

Under the Board of Investment Law, infrastructure

projects qualify for tax holidays that can range from5 to 10 years depending on the scale of theinvestment and capital goods are exempt from

import duty during the period of construction andimplementation.

These incentives enhance the attractiveness ofinvestments in small scale indigenous energyprojects.



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S g ca ce o o cy o S dust y S a a

Other Growth Factors

Commercial lending under theRERED Project of the World Bank

Local Investment Appetite

Local Technical Expertise



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g y y

Impediments to Future Growth

Tariff Structure

A sustainable tariff methodologymust be technology specific,

should not have drastic variationsand transparent.



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g y y


Lack of Innovative Project Financing



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Archaic Bureaucratic Procedures

GoSL intends to form a dedicatedRenewable Energy Development

Authority with the objective ofaccelerating development.



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Utilities Technical Limitations

1] System planning ignores small hydro energy

generation2] Absorption limit for embedded generation soon to beexceeded

3] Grid sub-stations in resource potential areas areclaimed to be at full capacity

Under the direction of the Ministry of Power andEnergy, these technical limitations are now beingassessed. Suitable steps are being taken to resolve

these issues in consultation with all stakeholders.



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Absence of national renewable energy policy

The Ministry of Power and Energy iscurrently drafting a national policy for

energy, which will also address thedevelopment of the renewable energysources in Sri Lanka.



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Two-Tier Policy Approach

The growth of the SHP sector was not based on a single policystatement, but was the result of a series of far-sighted and timelydecisions taken by GoSL that created a conducive environment forprivate sector investment to flourish.

The industry has now matured and this lax framework requires planning

and streamlining for the country to reap the optimum from herindigenous small hydro resources.

Policy decisions must be based on a cost benefitanalysis which is truly meaningful. All policy mustconsider the indirect and qualitative impact thatenhances the living standards of the nation, and not thepower sector alone.


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Thank You.

52425_mr._nishantha_nanayakkara

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