Sri Lanka Rapid Assessment and Gap Analysis · · 2017-12-22Sri Lanka is also a popular tourist attraction due to its landscape, ... Regulations introduced under the provisions

Sri Lanka Rapid Assessment and Gap Analysis

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Sri Lanka Office

September 2012


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ACKNOWLEDGEMENT

We wish to extend our profound gratitude to Dr Ananda Mallawatantri, Assistant Resident Representative of UNDP for the trust and confidence placed on M/s Gamini Senanayake Associates (Private) Limited by assigning this task. We express our sincere thanks to the members of the resource panel for their valuable contribution in generating ideas that could be used to formulate and develop projects, programmes and activities to achieve the goals of SE4ALL. We also express our sincere thanks to the staff members of Sri Lanka Sustainable Energy Authority and the United Nation Development Programme for readily providing us with all necessary information and for their unstinted support for the successful accomplishment of this task without which this would not have been a reality.


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List of Abbreviations AC - Air Conditioner ADB - Asian Development Bank ARECOP - Asian Region Cook stove Programme AU - Administrative Unit AWDR - Average Weighted Deposit Rate AWPLR - Average Weighted Prime Lending Rate BEASL - Bio Energy Association of Sri Lanka BOI - Board of Investment CBC - Commercial Bank of Ceylon CBO - Community Based Organization CBSL - Central Bank of Sri Lanka CDM - Clean Development Mechanism CEA - Central Environmental Authority CEB - Ceylon Electricity Board CFL - Compact Fluorescent Lamps CMA - Colombo Metropolitan Area CSR - Corporate Social Responsibility DFCC - Development Finance Corporation of Ceylon ECF - Energy Conservation Fund ECS - Electricity Consumer Society EE - Energy Efficiency EEI - Energy Efficiency Improvement E-FRIENDS - Environmentally Friendly Solutions Fund EM - Energy Management EnMAP - National Energy Management Plan ESCO - Energy Supply Company ESD - Energy Service Delivery Project FECS - Federation of Electrical Consumer Societies FMO - The Netherlands Development Finance Company GCMH - Grid-connected mini hydro GDP - Gross Domestic Production GEF - Global Environment Facility GOs - Government Organizations GOSL - Government of Sri Lanka GWh - Giga Watt Hours HH - Household HNB - Hatton National Bank IC - Internal Combustion ICS - Improved Cook Stoves IDA - International Development Association IDB - Industrial Development Board IDEA - Integrated Development Association IFC - International Financial Corporation JBIC - Japan Bank of International Cooperation JICA - Japan International Cooperation Agency kg - Kilo Gram kTOE - Kilo Ton of Oil Equivalent kWh - Kilo Watt Hours LECO - Lanka Electric Company

http://www.efsl.lk/fecs.aspx


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LKR - Sri Lanka Rupees LTGEP - Long Term Generation Expansion Plan LTNCREP - Long-term Non-conventional Renewable Energy Plan MBIs - Market Based Instruments MoF - Ministry of Finance MoPE - Ministry of Power & Energy MW - Mega Watt NCRE - Non-conventional Renewable Energy NDB - National Development Bank NERDC - National Engineering Research & Development Centre NGOs - Non-governmental organizations NREL - National Renewable Energy Laboratory OGVH - Off-grid electrification infrastructure through village hydro p.a. - Per annum PCIs - Participating Credit Institutions PEP - Promotion of Eco-efficient Productivity PFIs - Participating Financial Institutions PMU - Project Management Unit PUCSL - Public Utilities Commission Sri Lanka R&D - Research & Development RE - Renewable Energy RERBEG - Renewable Resource Based Electricity Generation RERED - Renewable Energy for Rural Economic Development RERED-AF - RERED Additional Finance REREDP - Renewable Energy for Rural Economic Development Project RET - Renewable Energy Technology SARI - South Asian Regional Initiative for Energy SEC - Specific Energy Consumption SEEDS - Sarvodaya Economic Enterprises Development Services SEF - Sustainable Energy Fund SGF - Sustainable Guarantee Facility SHS - Solar Home Systems SLBDC - Sri Lanka Business Development Centre SLEMA - Sri Lanka Energy Managers Association SLNEEA - Sri Lanka National Energy Efficiency Award SLSEA - Sri Lanka Sustainable Energy Authority SLSI - Sri Lanka Standard Institute SPP - Small Power Producers SPPAs - Small Power Purchase Agreements SRC - Short Rotation Coppice TBill - Treasury Bill TBond - Treasury Bond TERI - The Energy and Resources Institute TOE - Ton of Oil Equivalent TV - Television UAFF - Up-flow Anaerobic Floating Filter UDA - Urban Development Authority USAID - United State Assistance for International Development USD - United State Dollars WCO - Waste Cooking Oil Wp - Watt peak power

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Contents

LIST OF ABBREVIATIONS __________________________________________________________________ 2

CONTENTS ____________________________________________________________________________ 5

EXECUTIVE SUMMARY ___________________________________________________________________ 7

Section I: Introduction _________________________________________________________________ 21

Section 2: Current situation with regard to SE4ALL goals _______________________________________ 32

Section 3: Challenges and opportunities for achieving SE4ALL goals ______________________________ 70

Section 4: Ideas for the formulation of Projects, Programmes & Activities _________________________ 112

Reference ___________________________________________________________________________ 121

Bibliography _________________________________________________________________________ 123

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Resource Panel

Eng. Upali Darangama Ministry of Power & Energy (MoPE)

Dr Ananda Mallawatantri United National Developemnt Program (UNDP)

Dr Thilak Siyambalapitiya Resource Management Associates (RMA)

Dr Thusitha Sugathapala Sri Lanka Sustainable Energy Authority (SLSEA)

Eng. Harsha Wickramasinghe Sri Lanka Sustainable Energy Authority (SLSEA)

Eng. M.W.Leelaratne Ex-National Engineering Research & Development Centre (NERDC)

Eng. Sena Peiris National Cleaner Production Centre (NCPC)

Eng. Ananda Namal National Engineering Research & Development Centre (NERDC)

Eng. Anura Vidanagamage Industrial Solutions Lanka Limited (ISL)

Eng. Ronald Comester Ceylon Electricity Board (CEB)

Eng. Nimal Perera Sri Lanka Energy Managers Association (SLEMA)

Eng. Nameez Muzarfer Practical Action

Ms Kushani De Silva United National Developemnt Program (UNDP)

Compiled By

Eng. Gamini Senanayake, M/s Gamini Senanayake Associates Private Limited (GSA)

Eng. Ranjith Pathamasiri Sri Lanka Sustainable Energy Authority (SLSEA)

Eng. Wimal Nadeera Sri Lanka Sustainable Energy Authority (SLSEA)

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OBJECTIVE

The purpose of Rapid Assessment and Gap Analysis is to provide:

A quick brief look of the energy situation in the country (Section 1) within the context of its economic and social development and poverty eradication

A good review of where the country is in terms of the three SE4ALL goals (Section 2), and

A good estimate of the main challenges and opportunities vis-à-vis the three goals of SE4ALL where the major investments, policies and enabling environments will be required (Section 3)

A sound basis and background for an Action Plan that may follow as part of the SE4ALL activities in the country

Executive Summary

Country Overview

Vision - “Mahinda Chinthana Idiri Dekma” is the country’s vision for the future consists of fourteen key aspects that are strategically significant of which, 3 aspects explicitly dealt with “access” to and “green” energy.

Geography - Sri Lanka, an island in the Indian Ocean is located to the south of the Indian subcontinent. The total land area is 65,610 sq. km. A length of 445 km. and breadth of 225 km. encompasses tropical beaches, low land, mountains and vegetation. The average temperature of tropical low lands is 27°C and in the central hills average temperature drops down to 14°C. The annual average rainfall is around 2,000 mm and the number of rainy days per year is around 90.

Legislature - Sri Lanka is a free, independent and sovereign nation. Legislative power is exercised by a Parliament, elected by universal franchise on proportional representation basis. A President, who is also elected by the people, exercises executive power including defence. Sri Lanka enjoys a multi party system, and the people vote to elect a new government every six years.

Demography

Mid-year population (provisional) - 20,869,000 Average literacy rate - 91.9 % Labour force (Excluding Northern Province) - 8,236,000 Households with electricity - 91 % Per capita electricity consumption - 480.3 kWh.

Economy - Sri Lanka is a lower income economy in the South Asian region. The country's economy was socialist oriented in the past, but in the present scenario the country has stepped forward for private participation and competitive environment. Agriculture, industry and services have their respective importance in contributing to the GDP. Sri Lanka is also a popular tourist attraction due to its landscape, beaches and tropical forests. Key economic indicators are as follows;

GDP at current market prices (Rs. billion) - 6,543 (Around USD 59 Billion) Per capita GDP at market prices (US$) - 2,836


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Value of Oil Imports - US$ 4.63 Billions.

Poverty Rate - The proportion of people living below the poverty line sharply declined from 26.1 per cent in 1990/01 to 8.9 per cent in 2009/10 and on current trends, the national MDG target of halving poverty, 13.1 per cent is likely to be achieved much ahead of 2015.

Energy Situation

Composition of Primary Energy - Sri Lanka is a country of renewable energy having nearly 59% of primary energy derived from various sources of energy, mainly from biomass (47%) followed by hydro (12%). But the balance primary energy (41%) need is fulfilled by imported fossil fuel which makes the country very vulnerable to price fluctuations and escalations. Biomass, hydro power, wind power and solar power are the four indigenous sources with a high potential for productive use in Sri Lanka, whereas petroleum and coal can be considered the two main sources readily available in the international market for importation. Biomass is the main source of energy, satisfying heating energy requirements in the country, particularly in the domestic sector. While hydro power has already been extensively developed for electricity generation, studies have indicated that there is a large potential for wind power development in the country. Studies are presently underway to establish the availability of offshore petroleum resources within the territorial waters of Sri Lanka.

Secondary Energy Supply - The composition of secondary energy supply is as follows; biomass (57%), petroleum (34%) and electricity (9%). The share of commercial energy in secondary supply was 43%. Losses in conversion, transmission and distribution was high as 20%.

Electrical Energy Supply - The total amount of electricity generated during 2011 was 11,528 GWh out of which 50% was from oil burning and 9% from coal power plants while the balance 41% was almost entirely from hydro & wind power. The share of electricity generation from non-conventional sources remained very small.

Energy Usage - In 2010, transport sector accounted for 27% of the national energy demand, and the entire energy requirement of the transport sector was met through imported liquid petroleum. The industrial sector energy consumption share was 25% compared with the commercial and household sector share of 49%. Energy use in agriculture is insignificant.

Electrical Energy Usage - The composition of electrical energy usage is as follows; domestic (40%), industrial (34%), commercial (24%), religious and street lighting (1%) each.

Energy Demand and Growth - With the increasing demand for energy to provide for the country’s economic and social development, the total primary energy demand is expected to increase to about 15,000 kTOE by the year 2020 at an average annual growth rate of about 3%. Electricity and petroleum sub-sectors are likely to record higher annual growth rates of about 7-8%. Hydro electricity production and biomass-based energy supplies, which are the only large-scale indigenous primary energy resources available in Sri Lanka, are expected to increase only marginally in the near future.

Energy and Economic Development - Goals set for energy efficiency targets shows that the country is looking forward to decouple energy with economic development in the Sri Lankan context.

Energy (Petroleum) Imports - Sri Lanka's consumption of petroleum products has doubled in the three years since the end of island's 30-year ethnic war in 2009 as economic activity picked up requiring more energy to run the economy. The demand for petroleum products is going up despite higher prices.

http://www.economywatch.com/economic-statistics/Sri-Lanka/Value_Oil_Imports/


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Trends of Oil Imports & Value - In 2009, total oil imported in barrels per day (bbl/day) was around 84,730 bbl/day including both crude oil and oil products.

Household Energy Use - An analysis of expenditure on energy per household per month shows a countrywide average of Rs.1,279. Province-wise expenditure varies widely.

Energy Efficiency Strategy and Relevant - Under the strategy in implementing energy programmes in the country, four aspects are being focused, namely; regulatory interventions, energy efficiency services, knowledge management and financing assistance, and the methodologies have been thus prepared accordingly.

Regulatory Interventions - Regulations introduced under the provisions of Sri Lanka Sustainable Energy Authority Act are the driving force in implementing programmes to achieve the goals. Energy manager/Energy Auditor regulations have been introduced in order to establish the national capacity for implementing energy management programmes. A mandatory energy labelling programme has been introduced to ensure the use of energy efficient appliances by the consumers. Further activities such as making mandatory energy efficiency code for the design of energy efficient buildings are in the pipeline.

Provide Energy Efficiency Services - National level programmes in order to facilitate end use sectors to comply with the regulations are also being established. Facilities for consultancy and project implementation are created through registering consultants and energy services companies (ESCOs), and developing the capacities of such categories on long term basis. A sophisticated instrument bank is focally maintained at the Sustainable Energy Authority and the registered consultants and ESCOs can use the instruments in project implementation activities. Energy consumption analysis software for major sectors in the country have been prepared, and energy consumption baselines for the key sectors have been established. Sri Lanka national energy efficiency award has been introduced to give national recognition to the establishments excelling in energy management programmes.

Knowledge Management - Providing data and information and also updated knowledge on the subject are immensely important for the different end use sectors to implement energy programmes in their establishments. All the national data on energy supply and utilization, trends, technologies on alternative energy & energy efficiency, etc. are provided by the Sustainable Energy Authority as the focal entity. Awareness programmes, training workshops and sector-specific training programmes are conducted under this.

Financing Support - Financing is the key element for successful project implementation and some soft financing schemes were in operation some time back.

Current situation with regard to SE4ALL goals

Energy Access - The energy requirements of the country are met using electricity, petroleum oils, L.P. gas, coal and biomass. All the industrial and commercial sectors have access to electricity and without any limitation. So, those establishments have 100% access to electricity, which is a clean fuel and which can be used for energy requirements in any nature. They also have the opportunity of using petroleum oils for heating purposes and also in in-house power generation if they wish. Rural industries have the additional opportunity of using biomass in heating requirements. In the case of domestic sector, 91% of the population is fed by the national grid and 4% is fed by off-grid power plants, which are mainly based on renewable energy resources. The un-electrified rural communities have access to biomass and kerosene, which are the major sources of cooking and lighting respectively.


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Household Income & Expenditure on Energy - Mean household expenditure on Fuel & Lighting in 2009 was 6.4% of non food expenditure while it was 16.7% for transport & communication. These two figures very roughly give an indication of expenditure on energy though the latter also includes the cost of communication.

Access to Electricity - Level of electrification (coverage of the national grid) is 91%. There are issues related to the quality of supply (Interruptions, low and high voltage, etc.).

Affordability of Electricity - The affordability of electricity by households is based on a study carried out 2011. In the above mentioned study, affordability is defined in two ways. First, the ability to pay their current bill (and willingness to pay by non-electrified households). Whether they can pay their current bill without any difficulty. Under the second method affordability is defined in terms of basic need electricity. According to the above study, a little over 15 percent of responding households have reported that they cannot afford the electricity bill. Nearly 14 percent of respondents do not pay the bill regularly on monthly basis. According to the rule of thumb (10 percent or above on electricity) only the poorest group of households cannot afford electricity bill. Households with below Rs. 1,000 per capita income spend 15 percent of their average income on electricity. For them the electricity bill is nearly 25 percent of their expenditure on foods, three times the telephone bill and 2.3 times the expenditure on education.

Phasing out Kerosene Use for Lighting (Using LED-based Solar Lighting) - Presently, it is at a historical low, only 10% of the households are dependent on kerosene and of the majority belong to Samurdhi beneficiaries (Poorest of poor of the society). A project has been developed as a Government enabled, private sector program to commercially introduce advanced solar powered White LED lighting products to those segment of the population to power their basic lighting requirements and to eliminate the existing practice of using kerosene for lighting purposes by the Sri Lankan population forthwith.

Energy Efficiency vis-à-vis Goal of SE4ALL

Energy Sector & Energy Efficiency in Sri Lanka - Present maximum demand for electricity is around 2,000 MW and the total annual electricity generation is around 12,000 GWh. About 57% of the electricity generation is with thermal power plants running on diesel and other fossil fuel oils, about 17% with “Norochchole” coal power plant and the balance 26% with hydro power. As a consequence of the high share of oil based generation, the average electricity costs are higher when compared with other countries in the region. The daily load curve is highly skewed, with a high evening peak lasting for about three hours. This has been an additional burden to the utilities, whereas a flatter load curve would have made existing plants operate more evenly reducing the necessity to add new capacity to serve the high peak. Lighting, TV and other domestic appliances contribute to the peak period, and the efficiencies of the equipment used by customers are not at satisfactory levels.

International Assistance for Energy Efficiency Improvement - Sri Lanka has obtained assistance from international agencies (JICA, ADB, World Bank, USAID, etc.) in some of the earlier initiatives in energy efficiency improvement.

Progress to Date - A significant progress has been made through following programmes; Energy labelling, Building code, Energy Managers, Energy Auditors and Energy Consumption Reporting, EE Services through ESCOs, National Energy Efficiency Award and Sustainable Guarantee Facility (SGF)

National Energy Management Plan - EnMAP (2012 - 2016) - SLSEA very recently developped the National Energy Management Plan (EnMAP) for Sri Lanka covering a period of 5 years from 2012 to 2016. It


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shall serve as a guide for SLSEA to embark on an integrated and cohesive programme of work with a long term perspective to realize better energy efficiency in all energy consuming sectors of Sri Lanka. It will also provide vital information to all interested parties, stakeholders, partners, collaborators and the prospective donors on the direction of SLSEA in pursuing its mandate. Anticipated financial saving as a result of electrical energy saving in all sectors and fosil fuel saving in the industrial sector is estimated to be around LKR 13 billion in the first year and it will exceed LKR 34 billion at the fifth year. Financial benefit of implementing the EnMAP over a period of 5 years is estimated to be around LKR 135 billion for a cost of LKR 1.22 billion.

Energy Intensity of National Economy - Keeping the economic development goals of Sri Lanka in focus and anticipation of a strong growth in the industrial sector, retaining the present levels of energy intensity of economy will not be pursued. However, all possible measures to decouple the economic development from energy demand growth will be made, targeting an energy intensity of economy of 500 toe/XDR million by 2017. This will ensure a 20% saving of energy with respect to 2010 energy consumption.

Energy Saving Potential in Industrial & Commercial Sectors - It has been estimated that 19% reduction in petroleum usage and 7.5% increase in biomass consumption is possible.

Energy Usage and Saving Potential in Domestic Sector - Refrigerators are responsible for over 50% energy consumption.

CFL Penetration & its Effects on National Peak Demand - There is a significant potential for the reduction of national peak demand if all incandescent lamps are replaced by CFL. The equivalent nation peak demands saving is 235 MW.

Renewable Energy vis-à-vis Goal of SE4ALL

Renewable Energy - Due to the geo-climatic conditions, Sri Lanka is blessed with several forms of renewable energy resources. Some of them are widely used and developed to supply the energy requirements of the country. Others have the potential for development when the technologies become mature and economically feasible for use. The following are the main renewable resources available in Sri Lanka: Biomass, Hydro Power, Solar and Wind Biomass is the most common source of energy supply in the country with the majority usage coming from the domestic sector for cooking purposes despite the fact that they have access to grid electricity. Due to abundant availability, only a limited portion of the total biomass usage is channeled through a commodity market and hence the value of the energy sourced by biomass is not properly accounted for. Although there is a potential for biomass based electricity generation, developments are still at their initial stages. The first grid connected biomass based power plant (of l MW capacity) was commissioned in 2004 within the Small Power Purchase scheme of the CEB. In addition, a small scale (approximately 0.3MW) biomass based power plant is operational at a factory in Madampe, producing electricity for factory use, as a supplement to the grid supply. Another subsidiary of the same company is operating a co-generating plant using producer gas of coconut shell and generates 5 MW of power. Even though the majority of energy needs of the rural population are fulfilled by the use of firewood, there are possibilities of further increasing the use of biomass for energy purposes in the country, especially for electricity generation. Owing to the rapid growth of fuel wood cultivation, the concept of biomass based electricity generation holds much promise for Sri Lanka. The topography of the country provides an excellent opportunity to harness the energy stored in river


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water which flows from the central hills of the country to the ocean surrounding the island. Though the use of hydro resource for direct motive power was common in yesteryears, electricity production has become the sole use of hydro resource in recent times. Therefore, hydro contribution as an energy supply source is always through its secondary form which is electricity. Hydro power is a key energy source used for electricity generation in Sri Lanka. The better part of the major hydro potential has been already developed and they are delivering valuable low cost electricity to the country. Currently, hydro power stations are operated to supply both peaking and base electricity generation requirements. However, a few major sites are still classified as 'not economically feasible' for development. Apart from the grid connected hydro power stations, many small-scale hydro power applications are in operation serving off-grid loads. A substantial number of small scale hydro sites have been identified for future developments.

Today, the development of small hydropower alone has reached great heights in Sri Lanka, paving way for replication of the success in other parts of the world. The early development of the hydro industry created a significant opportunity for knowledgeable technocrats, local investors and financial institutes to forge an alliance to launch many more small hydro projects. The know-how was gainfully utilised by the non-governmental organisations operating at grass root levels also enabled many community owned micro hydro projects which were later identified as Village Hydro Schemes. By end 2010, there were more than 300 village hydro schemes in operation, benefiting approximately 7,000 rural families. The state owned electricity utility, the Ceylon Electricity Board (CEB) extended further cooperation by developing a robust technical and legal framework to connect non-despatchable embedded generators through a Grid Code and a Standardised Power Purchase Agreement (SPPA) based on avoided cost principles. The SPPA is also considered the key driver of the early success of the hydro power sector in Sri Lanka. It is applicable for power plants having capacities less than 10 MW based on renewable sources, waste or co-generation facilities. The SPPA which offered a tariff based on avoided cost principles saw a dramatic surge in the number of small hydro projects being developed, due to the steep rise in fossil fuel prices which entrained the avoided cost to a higher level, making many a small hydro project financially a very attractive investment. The resultant dynamism created an ever growing industry, teeming with project developers, service providers and consultants which would eventually grown into a formidable force, commanding a total capacity of 217 MW by end 2011. The country has developed a vast human resources base with the full set of skills required to develop small hydropower anywhere in the world. The country possesses its own high-quality hydro turbine manufacturing plant, with energy conversion efficiencies reaching the levels hitherto achieved only by world class European manufacturers. Turbines manufactured in Sri Lanka are not only used in local power plants, but also exported to other countries. Already there are initiatives to manufacture wind turbines as well, and wind blade manufacturing is already taking place at least in two enterprises. Solar energy is used mostly in non-commercial forms. Therefore, similar to biomass, the total usage of solar energy is not quantified properly. However, solar energy is the most extensively used form of energy in day to day life and its supply is unrestricted and persistent throughout the year in most parts of the country. The following are the most common uses of solar energy in Sri Lanka: drying, heating and electricity production. Though not measured and officially reported, substantial use of solar energy is observed in drying and water heating applications. The CEB pioneered the introduction of solar photovoltaic technology in Sri Lanka during the early 1980s and later solar photovoltaic applications saw a significant growth due the dedicated efforts of the private


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sector.

Renewable energy industry soon benefited from generous grants to construct two utility scale solar PV power plants in Hambantota in 2010. The projects were energised in 2011 and are yielding clean energy at an annual plant factor of 17%. The ongoing market upheavals in solar PV couples with a special tariff offered for exotic technologies have contributed to create a dynamic industry.

The usage of wind energy in Sri Lanka dates back to prehistoric times. Records have it, wind has been used in the 3rd century, supporting the then burgeoning steel smelting industry in the South-western slopes of the central hills of Sri Lanka. After this remarkable period, wind energy attracted the attention of Engineers who were responsible for water management in the dry zone of Sri Lanka. Supported by Danish expertise, many wind pumping stations were constructed in the flat terrain of the dry zone, along with the accumulation of a wealth of indigenous knowledge of the wind regime of Sri Lanka.

The perseverance of a handful of committed practitioners planted the first seeds of wind energy development in Sri Lanka through an ambitious programme of wind measurement in many locations of the country. Armed with these valuable long term wind data, CEB managed to convince a development partner to provide grant funds to construct the first wind energy plant in Hambantota in 1998. The success of this project lead CEB’s Alternative Energy Unit to initiate a modern wind resource assessment programme, yielding many years of quality wind data, required to launch commercial projects. The promising wind data attracted the attention of a development partner leading to the development of a wind Atlas for Sri Lanka in 2003. Introduction of the cost based tariff regime, availability of long term ground data, a sound financing programme and experience gained in project development managed to launch the first commercial wind project in 2009. This project was fast followed by several other projects, all of which are yielding 32% annual plant factor, the highest level recorded anywhere in Asia. The commendable accuracy of energy yield estimates provided the much needed comfort to the industry, leading to construction of many more wind power plants, resulting in a capacity addition of 30.15 MW in 2011. A further 89.15 MW of wind power plants are under construction and a 100 MW wind power plant is being mooted by the Government to reap the promising winds of the Mannar island located in the north western sector of Sri Lanka. In Sri Lanka, application of wind pumping is an interesting option for farmers in the dry zone who are practicing agriculture under lift irrigation, especially during the dry season. This is due to the existence of negative correlation between the rainfall and strength of wind. Wind pumping activities in Sri Lanka are of relatively recent origin. The first ever systematic studies on the subject commenced in 1978 with technical assistance from the Government of the Netherlands. A 3m-diameter, six-bladed wind pump was developed, which is now commercially produced in a small number and mostly used for irrigation purposes. Work on biogas in Sri Lanka dates back nearly two decades. Many governmental and non-governmental organizations have been active in this area at various periods of time. Many of these initiatives lacked sustainability as they were implemented in isolation. The Practical Action South Asia study “Integrating Energy and Environmental Mismanagement through Biogas – A Country Review” revealed many factors, which have directly or indirectly resulted in the failure of biogas technology. Although unconfirmed data suggests that there are nearly 5,000 biogas units constructed through out the country the above sample survey results indicate that the functioning rate is as low as 28.5%. The success rate, i.e. including plants which have been given up due to arrival of the grid supply, remains at 33%.

The NRE industry was dominated by small hydro sector, as it was the only technology which was viable under the prevalent avoided cost tariff regime. All other technologies were lagging behind with none of the proposed projects getting implemented. In order to encourage the development of other NRE technologies, the Government proposed a three tiered, technology specific, Cost-based Tariff for NRE developers,


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thereby eliminating the drawbacks of the previous tariff based on avoided cost. The new tariff is offered to 6 genres of technology, viz., biomass, hydro, wind, municipal waste, agro waste and waste heat recovery. The offering of a higher tariff for technologies other than hydro, opened opportunities for the expeditious development of other genres such as solar and wind. At present, measures are also taken to develop the first wind park in the Island of Mannar, which would enable a 100 MW increase in clean energy capacity of Sri Lanka. Several non-conventional primary sources have been used for electricity generation in Sri Lanka. Solar photovoltaic systems have been increasingly used from the early 1980s. Small isolated hydroelectric systems have been used in the tea processing industry for over 100 years. Small village-level hydroelectric systems are increasingly used in remote locations for household use. Installation of household solar photovoltaic systems and off-grid, community-based, hydro power systems continued to progress with the financial assistance of the World Bank funded “Renewable Energy for Rural Economic Development” (RERED) project. Given below is the electricity generation from non-conventional Sources.

In 2011, total non-conventional electricity generating capacity was 241 MW as against the conventional electricity generating capacity (CEB and non-CEB) of 2,900MW. Therefore, the contribution of non-conventional primary source is about 7.6% of the total installed capacity of 3,141 MW.

The National Energy Policy of Sri Lanka is focused on the promotion of renewable sources of energy as a means of addressing the supply inadequacies and sets out several initiatives and concessions to developers. The government has set itself a minimum target of 10% of national grid electricity to comprise of renewable energy sources by the year 2015.

However, the total renewable energy potential in Sri Lanka is found to be quite substantial, especially in Wind and Dendro.

It is hard to estimate the potential of off-grid Mini-hydro as well as on-grid Solar. As the on-grid Mini-hydro potential is expected to be fully harnessed by 2015, Sri Lanka has to rely on Dendro, Wind and Solar to increase its share of non-conventional renewable energy in the energy supply portfolio. Though there is a potential for Tidal and Wave energy, development of these sector will take a considerable period of time.

The total estimated small hydro potential at the 257 surveyed sites in 2002 was 97.4 MW, which was distributed among the three site categories as: 24.4 % in old estate sites, 21.2 % in new estate sites and the remaining 54.4 % in non-estate sites. A study carried out by DFCC Bank in 2007 under the RERED project, has estimated that mini-hydro capacity will be increased up to 300 MW by 2015. It has been noted that the consumption of fuel wood for generation of electricity using currently available technologies, and equipment, whilst meeting all environmental and other conditions is about 1.2 –1.5 kg/KWh (in 2005). Calculations on the national potential for Dendro power in Sri Lanka by BEASL have estimated this to be in excess of 4,000 MW annually generating over 24,000 GWh. This is nearly 4 times the total hydropower potential in this country. The conclusion may therefore be drawn that the Dendro potential in the country is adequate to meet our electrical energy demand for many decades. The most realistic assessment of the area of land available for commercial fire wood plantation would be 470,000 ha. This would be considered as the best starting point. Figures as high as 1.6 million have been quoted for under used scrub, however, the question of ownership and approval for change of use might not be automatically forthcoming. It would seem that a shortage of land for Short Rotation Coppice (SRC) would not be a serious constraint for Sri Lanka.


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In 2002, the area under tea plantation was 180,000 ha. This area includes marginal tea lands with lower stocking of productive bushes. Assuming 10% of the total tea area is marginal and not suitable for tea cultivation, such areas could be profitably used for raising fuel wood. About 50% of the marginal lands could be used for fuel wood for processing tea and the rest could be used for raising fuel wood for domestic use.

Electricity production using solid biomass fuels is still a developing industry. In the longer term, grid connected biomass generation (using the full range of possible technologies), may become competitive; the greatest potential is for small scale embedded generation using gasification, pyrolysis or high-speed steam engine-based plant. A study carried out by DFCC Bank in 2007 under the RERED project, has estimated that biomass power generation will be increased up to 90 MW by 2015.

Until the era ended in year 2000, scant information on wind resource prevented Sri Lanka from enjoying wind power. With the advent of new technology backed by foreign financial aid, Sri Lanka commenced wind energy studies followed by pilot scale wind power projects. There are several comprehensive studies done extensively on the wind resource of Sri Lanka. According to the “Wind Energy Resource Atlas of Sri Lanka and Maldives” compiled by the National Renewable Energy Laboratory (NREL) under USAID technical assistance in 2003, there is nearly 5,000 km2 of windy area with good to excellent wind resource potential in Sri Lanka out of which 4,100 km2 is in inland and 700 km2 is in the costal belt. Therefore, the land extent with wind energy potential is around 6% of the total land area (65,610 sq km2) of Sri Lanka. Based on a very conservative assumption of 5 MW per Km2, it could accommodate around 20,000 MW capacity wind power plants. The total potential is as high as 24,000 MW if windy lagoons are also considered. A study carried out by DFCC Bank in 2007 under the RERED project, has estimated that wind capacity will be increased up to 50 MW by 2015.

Already, SLSEA has issued Energy Permits to ten private developers for 90 MW in Kalpitiya & Puttalum area. And four private developers for another 40 MW were issued. Sri Lanka lies within the equatorial belt (between 6 and 10 degrees north of the Equator), a region where substantial solar energy resources exist throughout much of the year in adequate quantities for many applications, including solar water heating, solar electricity, and desalination. Many applications of solar energy are currently in use for meeting remote electrical loads throughout much of the non-electrified regions of Sri Lanka. The potential exists for significant expansion of the use of this renewable energy. According to the “Solar Resource Assessment for Sri Lanka & Maldives” compiled by the National Renewable Energy Laboratory (NREL) under USAID technical assistance in 2003, annual solar resource in Sri Lanka ranges from 4.5 to 6.0 kWh/m2/day.

A study carried out by DFCC Bank in 2007 under the RERED project [2], has estimated that solar power generation will be increased up to 11.2 MW by 2015.

In Sri Lanka, solar power has got a head start over others and is the fastest growing renewable resource, particularly because of its rural roots. The industry grew from nothing in 1996 to 15-odd companies that have helped install more than 100,000 units, mostly in homes of poor rice farmers. It is now growing at an average of 20,000.


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A study on the potential of biogas from biomass sources (Human waste, Municipal solid waste, Landfills, Livestock waste, Agricultural waste, plantation industries) in Sri Lanka carried out by Practical Action estimates a total power generation potential of 288 MW of which includes 86 MW from livestock waste. Solid waste is collected and disposed at a large number of unprotected sites. The problem is most acute in the Colombo Metropolitan Area (CMA) and in other major cities such as Dehiwala-Mt. Lavinia, Moratuwa, Kandy, Galle, etc. Even in remote areas, solid waste dumps have become a common sight. The Colombo municipal area produces about 700 metric tones daily and the figure for the whole metropolitan area is about 1,000 – 1,100 MT/day. The composition indicates that about 85% of the waste is organic and has moisture content of about 60-75%. This data has been largely determined for the waste arising in the Colombo area.

Production of liquid biofuels especially ethanol requires knowledge, experience, and a substantial amount of capital investment, Therefore, setting up of small scale ethanol production units (in Sri Lanka) is neither economically nor technically viable. Ethanol production in Sri Lanka is approximately 12 million litres per year and is produced using sugar cane molasses at 2 sugar factories. This ethanol is of potable grade and this amount is not even sufficient to meet demand for local ethanol. Therefore, another 5 million litres of potable ethanol are imported in addition to the commercial grade ethanol. However, small scale biodiesel production facilities can be installed even at village level and run by persons with some scientific background. Feedstock required for these units can also be obtained locally. Yet the cost of production may be high in these units due to the scale of operation and the inability to recover unused reactants and by-products. The first ever rural level, community based, small scale biodiesel production facility in Sri Lanka was set up by Practical Action with help from University of Ruhuna, Peradeniya, Moratuwa and NERDC. Biodiesel is also not yet produced on a commercial or pilot scale in Sri Lanka. As waves are primarily driven by the wind, areas near the Equator tend to have lower wave potential. The best wave climates, with annual average power levels between 20-70 kW/m of wave front or higher, are found in the temperate zones (30-60 degrees latitude) where strong storms occur. However, attractive wave climates are also found within ±30 degrees latitude where trade winds blow with the lower power levels being compensated by the smaller wave power variability. Annual average wave power is approximately 14 kW/m in the vicinity of Sri Lanka. It is reasonably close to estimate 15 kW/m as being suitable for generation at competitive prices.

The only alternate energy source for which a tariff system has been formulated by the Ministry of Power and Energy is wave energy. According to the government calculations, this is the cheapest form of alternative energy. With an absence of a major estuary and with a low tidal range (approx 0.7 m) there would be limited opportunity for a barrage-type tidal station in Sri Lanka. However, with estimated currents of 3 m/s in the Palk Strait there may be opportunities to develop a tidal stream.

SE4ALL Goals Goal 1 (Energy Access & Security) - In reaching this goal, both national energy security and energy security of the individual will be ensured by achieving the following: (I) All households to have access to basic energy needs by 2017. (II) Energy security of the nation ensured by 2017.


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GOAL 2 (ENERGY EFFICIENCY) - Keeping the economic development goals of Sri Lanka in focus and anticipation of a strong growth in the industrial sector, retaining the present levels of energy intensity of economy will not be pursued. However, all possible measures to decouple the economic development from energy demand growth will be made, targeting an energy intensity of economy of 500 toe/XDR million by 2017. This will ensure a 20% saving of energy with respect to 2010 energy consumption. The desired objectives are as follows; (I) A complete mechanism for delivery of energy efficiency services. (II) A comprehensive capacity development programme. (III) Energy conscious nation.

GOAL 3 (RENEWABLE ENERGY) - In order to reach this goal, the plan is to target 10% increase in the use of indigenous energy in the primary energy mix with respect to 2010 energy consumption. Following objectives were to be fulfilled to reach/contribute towards the goal; (I) Generation of electricity from NCRE to reach 10% by 2015. (II) Ten percent of industrial thermal energy to be switched to biomass. (III) Ten percent of transport energy from non-petroleum fuels. (IV) Increase of biomass as a clean cooking fuel by 10%.

Institutional and Policy Framework This section describes the institutional infrastructure available in the country for the promotion and utilizing of renewable energy and also the promotion of energy efficiency. The institutional arrangement in Sri Lanka in the sphere of renewable energy are as foolows. On one hand, these organizations can be broadly categorized as “State” and “Non-state” based on their legal status. On the other hand, these organizations can be further categorized as “Regulators” having project approving powers, “Facilitators” having facilitation and/or commercial interests and “Financiers” including credit Sri Lanka Sustainable Energy Authority (SLSEA) is positioned as the apex body with wider powers and has dual functions of both regulation and facilitation and hence is not listed under any type. All these organizations operate under a regulatory environment created by the Public Utilities Commission of Sri Lanka (PUCSL). The PUCSL promotes competition, efficiency, safety, and quality of service in public utilities, while protecting the interests of the consumers. PUCSL is also not listed under any type. This multiplicity of organizations on one hand could be viewed as a blessing for the promotion and utilization of renewable energy and on the other hand could be a hurdle especially at the time of project approvals due to bureaucratic hindrances. Therefore, a better coordination of stakeholder organizations, avoidance of duplicity and undue competition, etc. is the need of the hour and in this respect, SLSEA has an uphill task of playing the role of the apex body by making use of the wider powers it is bestowed with through the Act. It is estimated that more than 50 organizations with over 2,000 stakeholders are commercially involved in energy efficiency related matters and in the rapidly growing renewable energy industry, which includes grid-connected, off-grid community and household based renewable energy systems. The stakeholders include microfinance institutions, commercial and development banks, NGOs, project developers, consultants, and equipment suppliers. Development of renewable energy has received worldwide attention, mostly due to the bleak future of fossil fuel supply sector and emerging evidence of links between climate change and fossil fuel use. Like in many other developing countries, Sri Lankan case for renewable energy is more inclined to energy security and economic issues than environmental concerns. The principles on which renewable energy development is based on are four fold. They could be broadly identified as; (I) Government policy on accelerated renewable energy development (II) Creation of value from indigenous natural resources (III) Energy security concerns (IV) National economic development objectives.


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The funding landscape of Sri Lanka in renewable energy projects witnessed a dramatic change in 1997 with the successful negotiation of GOSL with the International Development Association – IDA (Concessionary credit arm of the World Bank) to secure a concessionary credit line (USD 19.7 m) supplemented with a grant component (USD 3.8 m) from Global Environmental Facility (GEF). The Energy Service Delivery (ESD) project was the result of this initiative which was operative from 1997 to 2002. Following the tremendous success of ESD, the Renewable Energy for Rural Economic Development (RERED) project was launched in 2003 by broad basing the development objectives with the enhanced credit line (USD 75 m) from the same funding source. A GEF grant of USD 8 m was made available for the RERED project. At the end of RERED project in 2007, and again due to its resounding success, an additional credit line amounting to USD 40 m was made available by the same funding organization for the extended phase of RERED project operative from 2008 to 2011. The remaining grant components of ESD and RERED are available for the extended RERED. A private sector oriented and independent administrative unit was established under the DFCC Bank to steer and administer the project (initially ESD and thereafter RERED) including the grant disbursement on behalf of GOSL. Six Participating Credit Institutions (PCIs) participated in ESD and the number increased to 11 in RERED. With the success of above projects and with the valuable experience gained, the Commercial Bank of Ceylon - CBC (one of the PCIs) has managed to tie up with International Financial Corporation - IFC (Private credit arm of World Bank) for 50% risk sharing of renewable projects undertaken by CBC. In addition to the above dedicated credit facilities, some renewable energy projects (biomass based power generation) have benefited from other credit lines such as Environmentally Friendly Solutions Fund (E-FRIENDS) though it is not meant for the promotion of renewable energy projects. The principal objective of this credit line made available by the Japan Bank of International Cooperation (JBIC) is to prevent industrial pollution in Sri Lanka. The National Development Bank (NDB) and the Participating Credit Institutions (PCI) provide long-term loans at low-interest to enable industries to reduce their pollution. Loans are either for investment in anti-pollution equipment and facilities or for technical environmental protection training costs. Both the ESD Project and the RERED Project were concerned with addressing the issue of providing long term financing support for renewable energy investments. Such measures have served the purpose excellently, with capacity installed often surpassing targets. However, given the magnitude of the task still ahead, the need to formulate a viable long term financing mechanism to augment electricity generation, transmission and distribution throughout the country, remains a critical need. The funding needs of the sector has been assessed given the estimate considered in the National Energy Policy and Strategies for Sri Lanka, that of 10% of electricity generation to comprise from renewable energy. While sources attributed to the Central Bank estimates that new power plants of 200 MW would be required annually to meet the growth in demand, it is anticipated that nearly 350 MW of the above requirement would comprise of new generating capacity to be installed through renewable resources by the year 2015. The additional funding requirement to facilitate the above increase in renewable energy capacity is estimated to be approximately US$ 242 million. The refinance component of 80% would amount to US$ 193 million. ADB is providing assistance to establish laboratory facilities for measuring of energy efficiency of appliances. This will help to implement energy labelling scheme. ADB is also providing assistance to carry out energy auditor training programme.

Plan is to extend the grid to reach 97% of total households and the balance 3% will be electrified through off grid systems such as SHS and micro hydro.


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“Grama Shakthi” program is being implemented to provide SHS for the balance 3% households (40,000 HHs) this year. Under this program Government is providing 1/3 of the total cost and 1/3 will provide by the Donor agencies as a grant. The balance 1/3 of the cost will be charged from the recipient. All forms of incentives (“Financial” and “Non-financial”) are available or had been available for the promotion and utilization of renewable energy options in Sri Lanka in varying degrees, at different times, in different regions for different target groups. In some cases, these incentives are available as a package while in some cases it is just one of them depending on the need. Some incentives have been introduced with a clear plan of phasing out with exit strategies. In the early days, many NGOs such as Practical Action (formerly ITDG) operating in this field offered grants for the developers as well as end users. Soft loans schemes such as ESD, RERED and even E-FRIEND, consisted of grant components. Some Provincials Councils such as “Uva” and “Sabaragamuwa” offered financial incentives to offset the upfront cost of low-income end users of Solar Home Systems and Village Hydro projects. Free services of State, NGO and even private sector are available mostly in the form of training and advisory services.

Private Investment & Enabling Business Environment It is estimated that more than 50 organizations with over 2,000 stakeholders are commercially involved in a rapidly growing renewable energy industry, which includes grid-connected, off-grid community and household based renewable energy systems. The stakeholders include microfinance institutions, commercial and development banks, NGOs, project developers, consultants, and equipment suppliers.

On the supply side, availability of the energy resource, manpower (know-how, skills, capabilities, etc.), money (financing, grants, incentives, etc.), machines (technology, machinery, equipment, etc.), and methods (policies, institutional arrangements, etc.) are considered. On the demand side, accessibility to the energy resource, end user needs, awareness, affordability (financing, grants, incentives, etc.), reliability of technology and equipment, and methods (policies, institutional arrangements, etc.) are considered. Of five main renewable resources, Solar could be treated as the most developed, next is Small Hydro Power (mini, micro and pico) and followed by Biogas. The Hydro market is found to be fully developed in terms of technology, equipment, construction, financing, maintenance & operation. Biogas has around 78% success rate especially when the Chinese continuous systems are adopted. The Wind market is being developed. The Biomass market for power generation and thermal applications of industry and commercial sectors is also not developed despite its high potential. Grid connected small hydropower capacity has grown from just 120 kW in 1996 to 100 MW in 2006. The development of the industry has been supported with appropriate policy changes, establishing of purchase agreements and pricing mechanisms. This, indeed, is an outstanding achievement and depicts the dynamism of the local entrepreneurship once the right institutional backing and investment climate are set in place for the new industry.

Despite its enormous potential, the biomass market for thermal applications of industrial and commercial sectors and also for electricity generation is not developed. The good sign is that many entrepreneurs have begun to sense prospects. A few emerging companies are actively involved in this sector by offering unique service packages.


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Gaps & Barriers

The major barriers in implementation of energy efficiency improvement projects have been; (I) Lack of financing (II) Lack of end user awareness and commitments (III) Lack of technical capacity among end users and (IV) The absence of a regulatory mechanism. The electricity tariff doesn’t reflect the true energy cost, especially in the domestic category. The tariffs are built, insulated from the ups and downs of the rising energy prices, therefore, it does not act as an incentive to encourage investments in energy efficiency activities. Energy efficiency is not yet a priority for many industries, since there are many other burning issues like material supply and labour related issues, which has a direct bearing on the viability of business. Sri Lankan ESCOs are not yet capable of handling the entire cycle of a given project, commencing from energy auditing to project implementation. In the area of funding, following barriers exist; (I) Lack of legal and financial infrastructure to support performance contracts between end-users and ESCOs, (II) Limited ability of local ESCOs to obtain bank financing or raise equity capital, particularly a problem for new, small ESCOs that are financially weak, (III) Lack collateral and credit history, (IV) Lack of experience among the banks, both with Energy Efficiency Improvement (EEI) projects, but also with the financial concept of performance contracts and lack of confidence on the part of banks that ESCO performance estimates will turn out to be accurate. Some barriers for the promotion of renewable energy and for the transferring of renewable energy technologies are generic and common to all renewable energy options while some are specific. Often the result of barriers is to put renewable energy at an economic, regulatory, or institutional disadvantage relative to other forms of energy supply. Many of these barriers could be considered “market distortions” that unfairly discriminate against renewable energy, while others have the effect of increasing the costs of renewable energy relative to the alternatives. All barriers could be broadly classified into 5 categories (Policy, Financial, Technical, Information and Institutional) and often they are not mutually exclusive. Technical Barriers - Resource Supply, Reliability, Technology Sophistication, R&D, Technical Deficiencies, Grid Constraints, Harmonics and Intermittent Sources

Financial Barriers – Financing, High Initial Cost, Interest Rates, Long Delays, Transaction Cost and Risk & Uncertainties Policy Barriers - Low Priority for RE in National Planning, Taxes & Duties, Regulations, Environmental Regulations, Monopoly of Electricity Distribution, Tariff, Fossil Fuel Subsidies, Restrictions on Locations and Construction and Land Issues

Information Barriers – Data, Training & Education, Awareness & Education and Consumer Perception

Institutional Barriers - Donor Driven Projects, Institutional Inefficiencies, Linkage Issues, Capacity and Competence Issues and Priority Issues.


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Ideas for the Formulation of Projects, Programmes & Activities

An exhaustive list of ideas have been generated through a focus group brainstorming exercise that can be used to formulate and develop projects, programme and activities for the achievements of SE4ALL goals. However, these ideas need to be further reviewed and prioritized using multiple criteria such as the Degree of impact, Economic and technical feasibility, innovativeness and practicability. These ideas have been arranged under three SE4ALL goals and also under following subheadings; Access to energy and security (Policy, Sources / Resources, Generation, Transmission and Distribution, Energy industry, Energy efficiency, Capacity building, Awareness & Promotion, R&D and Energy modesty. Energy efficiency (Policy, Standards & Regulations, Funding, Industry, Technology, Capacity building, Awareness & Promotion, Monitoring & Evaluation, R&D, Modesty and Rewards). Renewable energy (Policy, Standards & Regulations, Assessments, Planning, Monitoring & Evaluation, Harnessing RE, Biomass, Technology, Capacity building, Awareness & Promotion, R&D, Funding, Rewarding.

________


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Section I: Introduction

1.1 COUNTRY OVERVIEW [1, 2]

1. Basic socio-economic data: population, GDP/capita, key economic sectors, poverty rate (current and

trend)

1.1.1 Vision - Mahinda Chinthana Idiri Dekma “Mahinda Chinthana Idiri Dekma” is the country’s vision for the future.

The objective of our next massive leap forward is to transform Sri Lanka into a strategically important economic centre of the world.

my determination therefore, is to transform sri Lanka to be the Pearl of the Asian silk route once again, in modern terms. Using our strategic geographical location effectively, i will develop our motherland as a

naval, Aviation, Commercial, energy and Knowledge hub, serving as a key link between the east and the West.

The broad national objectives of the Mahinda Chinthana Idiri Dekma as given below encompass fourteen key aspects that are strategically significant.

1. A leap forward to become a centre of shipping, aviation, commerce, energy and knowledge and thus be the miracle of Asia.

2. To be a prosperous self sufficient country. 3. A country where everyone has a house, electricity, water and communication services. 4. A country with a developed road network and efficient transportation services. 5. A society that is disciplined, law abiding and that has good governance. 6. A hard won unitary nation that will not be divided again. 7. A sustainable peace that will be achieved through the consensus of all. 8. A green Lanka that will protect the flora and fauna of this country. 9. A country where the aspiration of the youth are recognized. 10. A teacher-student population that has conquered knowledge of the earth, sky and the cyber space. 11. A healthy population that equally benefits from both western and eastern medicine. 12. Local entrepreneurs who will utilize local resources and local knowledge and will be able to

compete internationally. 13. A period of renaissance in the Arts such as literature and drama. 14. A beautiful country where people will not leave but will arrive with happiness.

Of above fourteen aspects, 3 explicitly dealt with (1, 3 and 8 aspects) access to energy and green energy.

1.1.2 Geography Sri Lanka, an island in the Indian Ocean is located to the south of the Indian subcontinent, 880 km north of the equator. It lies between 5° 55' and 9° 55' north of the equator and between the eastern longitudes 79° 42' and 81° 52'. The total land area is 65,610 sq. km. including inland waters of 2,905 sq.km. A length of 445 km. and breadth of 225 km. encompasses tropical beaches, low land, mountains and vegetation. The island consists of a mountainous mass somewhat south of the centre, with a height exceeding 2,500 metres, surrounded by broad plains. The average temperature of tropical low lands is 27°C and in the central hills


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average temperature drops down to 14°C. The south-west monsoon brings rain to the western, southern and central regions from May to July, while the north-eastern monsoon occurs in the north and east in December and January. The annual average rainfall is around 2,000 mm and the number of rainy days per year is around 90.

1.1.3 Legislature Sri Lanka is a free, independent and sovereign nation. Legislative power is exercised by a Parliament, elected by universal franchise on proportional representation basis. A President, who is also elected by the people, exercises executive power including defence. Sri Lanka enjoys a multi party system, and the people vote to elect a new government every six years.

1.1.4 Demography

Mid-year population (provisional) - 20,869,000 Growth of population - 1.0% Population density - 333 persons per sq.km. Expectation of life at birth - 74.9 Average literacy rate - 91.9 %

- Male: 93.2 %,Female: 90.8 % Labour force (Excluding Northern Province) - 8,236,000 Unemployment rate (Excluding Northern Province) - 4.2% Poverty Head Count Index - 8.9 Households with electricity - 91 % Per capita electricity consumption - 480.3 kWh.

1.1.5 Economy Sri Lanka is a lower income economy in the South Asian region. The country's economy was socialist oriented in the past, but in the present scenario the country has stepped forward for private participation and competitive environment. Agriculture, industry and services have their respective importance in contributing to the GDP. Sri Lanka is also a popular tourist attraction due to its landscape, beaches and tropical forests. Key economic indicators are as follows;

GDP at current market prices (Rs. billion) - 6,543 (Around USD 59 Billion) GNP at current market prices (Rs. billion) - 6,471 Per capita GDP at market prices (Rs.) - 313,511 Per capita GNP at market prices (Rs.) - 310,059 Per capita GDP at market prices (US$) - 2,836 Per capita GNP at market prices (US$) - 2,804 Trade balance (US$ million) - -9,710 Investment (% of GDP) - 29.9%. Gross National Savings (% of GDP) - 22.1%.

Inflation (Annual average - Colombo Consumer Price Change %) - 6.7%

http://www.economywatch.com/economic-statistics/Sri-Lanka/Investment_Percentage_of_GDP/

http://www.economywatch.com/economic-statistics/Sri-Lanka/Gross_National_Savings_Percentage_of_GDP/

http://www.economywatch.com/economic-statistics/Sri-Lanka/Inflation_Average_Consumer_Price_Change_Percentage/


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Value of Oil Imports - US$ 4.63 Billions.

1.1.6 Poverty Rate [3] Sri Lanka has made significant progress in poverty reduction. The proportion of people living below the poverty line sharply declined from 26.1 per cent in 1990/01 to 8.9 per cent in 2009/10 and on current trends, the national MDG target of halving poverty, 13.1 per cent is likely to be achieved much ahead of 2015. However, in spite of this favorable progress at the national level, there are considerable regional disparities. The incidence of poverty has declined in all districts except in Nuwara Eliya and Moneragala where the poverty headcount index (HCI) is more than double the national average. Poverty in the estate sector has risen by more than 55 percentage points in 1990/91-2006/07, contrary to the general trend of steadily declining poverty. This varied pace of poverty reduction and disparities that exists, in Sri Lanka is likely to be linked to various physical and non-physical inequalities that prevail among different regions. Rising inequality is a cause for concern for Sri Lanka.

________

http://www.economywatch.com/economic-statistics/Sri-Lanka/Value_Oil_Imports/


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1.2 ENERGY SITUATION [4]

2. Energy supply (energy mix, export/import)

Primary energy sources

Power sector (installed capacity, annual generation, import/export) 3. Energy demand (overview of main consuming sectors, industry, residential, agriculture, transport) 4. Energy and economic development: share of energy sector in GDP; share and absolute amount of public spending on energy, including for energy subsidies; energy security (share of energy imports in balance of payment) 5. Energy strategy and relevant targets (access, capacity, generation, energy security)

1.2.1 Composition of Primary Energy Sri Lanka is a country blessed with year around sun, wind, rains and lush vegetation and surrounded by the Indian Ocean. All these natural resources bear testimony to the ample opportunities the country has to harness for energy needs.

47

41

12

0.05

Biomass (47%) 5,133 '000 toe

Petroleum (41%) 4,544 '000 toe

Hydro (12%) 1,352 '000 toe

Non-conventional (0.05%) 5 '000 toe

(Source: Sri Lanka Energy Balance 2010)

Figure 1.2.1 – Composition of Primary Energy

In deed, Sri Lanka is a country of renewable energy having nearly 59% of primary energy derived from various sources of energy, mainly from biomass (47%) followed by hydro (12%). But the balance primary energy (41%) need is fulfilled by imported fossil fuel which makes the country very vulnerable to price fluctuations and escalations. This has been a major drain of scarce foreign reserves. Table below provides the composition of primary energy and the trend for a period of 5 years from 2005;

Table 1.2.1 – Composition of Primary Energy Supply and the Trend

Primary Energy Supply (thousand toe) 2005 2006 2007 2008 2009 2010

Biomass 4,632 4,760 4,741 4,677 4,793 5,133

Petroleum 4,368 4,002 4,238 3,929 3,897 4,544

Hydro 840 1,112 947 991 931 1,352

Non Conventional 4 4 4 5 5 5

Total Primary Energy Supply 9,844 9,879 9,930 9,601 9,626 11,034

Share of Biomass in Primary Energy (%) 47 48 48 49 50 47

Share of Renewable Energy in Primary Energy (%) 56 59 57 59 60 59 (Source: Sri Lanka Energy Balance 2010)

Energy requirements in Sri Lanka are satisfied by both locally available sources and those sourced from


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global energy markets. Biomass, hydro power, wind power and solar power are the four indigenous sources with a high potential for productive use in Sri Lanka, whereas petroleum and coal can be considered the two main sources readily available in the international market for importation. Biomass is the main source of energy, satisfying heating energy requirements in the country, particularly in the domestic sector. While hydro power has already been extensively developed for electricity generation, studies have indicated that there is a large potential for wind power development in the country. Studies are presently underway to establish the availability of offshore petroleum resources within the territorial waters of Sri Lanka. Challenges faced by Sri Lanka’s Energy Sector are many. While ensuring a continuous supply of electricity and petroleum products, the growing economy has to manage a strategic balance between indigenous energy resources and imported fossil fuels. As per 2011 data, 9% of Sri Lanka’s population is yet to receive electricity supply for household needs. Commercial energy utilities are required to be further strengthened to improve their financial viability and service quality. The involvement of the country’s population in the investment, operation, regulation, and delivery of energy services needs to be increased.

1.2.2 Secondary Energy Supply The table below provides the composition of secondary energy supply; biomass (57%), petroleum (34%) and electricity (9%). The share of commercial energy in secondary supply was 43%. Losses in conversion, transmission and distribution was high as 20%.

Table 1.2.2 – Composition of Secondary Energy Supply and the Trend

2005 2006 2007 2008 2009 2010

Supply by Energy Source (thousand toe)

Biomass 4,584 4,713 4,689 4,653 4,771 5,054

Petroleum 2,743 2,705 2,802 2,449 2,425 2,947

Electricity 624 672 707 719 721 792

Total Secondary Energy Supply 7,951 8,090 8,198 7,821 7,918 8,793

Share of Commercial Energy in Secondary Supply (%) 42 42 43 41 40 43

Losses in Conversion, Transmission and Distribution (%) 19 18 17 19 18 20 (Source: Sri Lanka Energy Balance 2010)

1.2.3 Electrical Energy Supply

Table 1.2.3 – Composition of Electrical Energy Supply and the Trend

Generation Sri Lanka (GWh) 2005 2006 2007 2008 2009 2010 %

Hydro, CEB and SPP 3,450 4,634 3,947 4,129 3,881 5,634 53

Thermal, CEB, IPP and Hired 5,339 4,805 5,895 5,849 6,062 5,063 47

Non-Conventional, CEB 2 2 2 3 4 3 0

Self-Generation By Customers - - - - - - 0

Off-Grid, Conventional 78 78 78 - - - 0

Off-Grid, Non-Conventional 14 15 16 16 17 17 0

Gross Generation Sri Lanka 8,884 9,535 9,938 9,998 9,964 10,718 100 (Source: Sri Lanka Energy Balance 2010)

The total amount of electricity generated during 2011 was 11,528 GWh out of which 50% was from oil burning and 9% from coal power plants while the balance 41% was almost entirely from hydro & wind power. The share of electricity generation from non-conventional sources remained very small. The grapgh below depicts the electricity generation during the past 40 years and the dependency on fossil fuel.


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(Source: Sri Lanka Sustainable Energy Authority)

Figure 1.2.2 – Electricity Generation During the Past 40 Years

1.2.4 Energy Usage The table below provides the composition of energy usage in 2010. The transport sector accounted for 27% of the national energy demand, and the entire energy requirement of the transport sector was met through imported liquid petroleum. The industrial sector energy consumption share was 25% compared with the commercial and household sector share of 49%. Energy use in agriculture is insignificant. Primary energy intensity in the economy was 31 toe per million Rupees of GDP in 2010 and a declining trend can been seen. Commercial energy intensity in the economy was 11 toe per million Rupees of GDP in 2011 and as in the case of primary energy, a declining trend can be seen.

Table 1.2.4 – Composition of Energy Usage and the Trend

Energy Use (thousand toe, delivered to customers) 2005 2006 2007 2008 2009 2010

Industry 1,946 2,084 2,063 1,900 1,944 2,200

Transport 2,072 1,994 2,134 2,727 1,858 2,369

Household, commercial and others 3,918 4,001 3,990 4,122 4,173 4,313

Agricultural 14 12 11 9 8 10

Total Energy Use 7,951 8,090 8,198 8,758 7,983 8,892

Energy Intensity in the Economy

Primary Energy Intensity (toe per million Rupees of GDP1) 38 35 33 30 29 31

1 at 1982 factor cost prices

Commercial Energy Intensity (toe per million Rupees of GDP) 13 12 12 10 10 11

Energy use per person

Energy use (thousand toe/person) 404 407 410 434 389 430

Commercial Energy Use (thousand toe/person) 171 170 175 157 153 181

Electricity Sold (kWh/person) 368 393 411 414 409 445

Petroleum Sold (kg/person) 184 174 185 177 185 180 (Source: Sri Lanka Energy Balance 2010)

1.2.5 Electrical Energy Usage The table below provides the composition of electrical energy usage; domestic (40%), industrial (34%), commercial (24%), religious and street lighting (1%) each.

Table 1.2.5 – Composition of Electrical Energy Usage and the Trend


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Total Electricity Use (CEB+LECO+Self+Off-Grid)(GWh) 2005 2006 2007 2008 2009 2010 %

Domestic 2,866 3,063 3,217 3,239 3,373 3,651 40

Religious 49 51 50 49 51 55 1

Industrial 2,732 2,947 2,957 2,957 2,773 3,148 34

Commercial 1,465 1,633 1,864 1,986 2,059 2,224 24

Street Lighting 141 125 136 135 133 130 1

Total 7,253 7,819 8,223 8,366 8,389 9,208 100 (Source: Sri Lanka Energy Balance 2010)

The table below provides the installed capacity during a period of five years from 2005 and it was 3,088 MW in 2010. Sytem peak demand has shown an increasing trend and it has reached 1,955 MW in 2010.

1,600

1,650

1,700

1,750

1,800

1,850

1,900

1,950

2,000

2005 2006 2007 2008 2009 2010

Figure 1.2.3 – Peak Demand and the Trend

Table 1.2.6 – Installed Capacity, Peak Demand and the Trend

2005 2006 2007 2008 2009 2010

Total Installed Capacity in the Grid (MW) 2,411 2,434 2,441 2,811 2,868 3,088

System Peak Demand (MW) 1,748 1,893 1,842 1,922 1,868 1,955 (Source: Sri Lanka Energy Balance 2010)

1.2.6 Energy Demand and Growth With the increasing demand for energy to provide for the country’s economic and social development, the total primary energy demand is expected to increase to about 15,000 kTOE by the year 2020 at an average annual growth rate of about 3%. Electricity and petroleum sub-sectors are likely to record higher annual growth rates of about 7-8%. Hydro electricity production and biomass-based energy supplies, which are the only large-scale indigenous primary energy resources available in Sri Lanka, are expected to increase only marginally in the near future. This is mainly due to limitations in further hydropower development owing to lower economic viability of exploiting the remaining large hydropower sites and limited use of biomass with gradually increasing standard of living of the population. This means that the country’s incremental primary energy requirements need to be supplied mainly by imported fossil fuels in the medium term. In the longer term, possible development of indigenous petroleum resources and accelerated development of non-conventional renewable energy are likely to make a significant change in Sri Lanka’s mix of primary energy resources. A combination of factors has contributed to the emphasis in recent times for generating electricity through less conventional renewable sources. Electrification of rural areas, for instance poses many challenges, foremost amongst which are the high capital investment, operational costs and the difficulties associated with extending grid connected electricity lines to remote areas. In this context renewable sources of energy including solar power, small scale hydro power, wind power, biomass and Dendro power, have emerged as an economical and sustainable alternative source to promote medium term electricity generation to the rural populace, albeit in small measure.


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1.2.7 Energy and Economic Development 1.2.7.1 Energy & Economic Development Goals set (as stated below) for energy efficiency targets shows that the country is looking forward to decouple energy with economic development in the Sri Lankan context.

“Keeping the economic development goals of Sri Lanka in focus and anticipation of a strong growth in the industrial sector, retaining the present levels of energy intensity of economy will not be pursued. However, all possible measures to decouple the economic development from energy demand growth will be made, targeting an energy intensity of economy of 500 toe/XDR million by 2017. This will ensure a 20% saving of energy with respect to 2010 energy consumption. By development of systems, capacity and consciousness, the nation can be guided towards the goal of arresting energy intensity of economy”

1.2.7.2 Energy (Petroleum) Imports [5] Sri Lanka's consumption of petroleum products has doubled in the three years since the end of island's 30-year ethnic war in 2009 as economic activity picked up requiring more energy to run the economy. The demand for petroleum products is going up despite higher prices. Until 2000, the island's sole 50,000 barrels-a-day refinery operated by the state-run Ceylon Petroleum Corporation was able to meet about half of total requirements but now two-thirds of all products are imported except for kerosene. Therefore, the increased demand must be met by imports. If this trend continues at this pace, petroleum bill will likely to be doubled in every three years. Almost a quarter of the import bill is spent on petroleum alone which is a huge burden on country’s economy. The island's petroleum bill is equal to about 45 percent of total export proceeds. Economists say, heavy oil import bills has been a major contributory factor in Sri Lanka’s negative trade balance. Current petroleum imports bill is around USD 4.979 Billion. The bulk of Sri Lanka's petroleum consumption goes for transport and power generation, accounting for up to 90 percent of total petroleum consumption. Petrol and diesel consumption has been increasing at a very rapid rate, and also fuel oil used to generate electricity, because of rising power consumption and a growing fleet of vehicles. Demand for kerosene, used mainly for lighting, had fallen as grid electricity spread to cover over 90 percent of the people. Trends of Oil Imports & Value [6] In 2009, total oil imported in barrels per day (bbl/day) was around 84,730 bbl/day including both crude oil and oil products. The following table provides the value of oil imports from 1980 to 2010.

Table 1.2.7 – Value of Oil Imports

Year Value of oil imports

Billion USD Percent Change

1980 0.322

1981 0.373 15.84 %

1982 0.484 29.76 %


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1983 0.383 -20.87 %

1984 0.389 1.57 %

1985 0.386 -0.77 %

1986 0.137 -64.51 %

1987 0.229 67.15 %

1988 0.164 -28.38 %

1989 0.182 10.98 %

1990 0.311 70.88 %

1991 0.228 -26.69 %

1992 0.226 -0.88 %

1993 0.309 36.73 %

1994 0.296 -4.21 %

1995 0.387 30.74 %

1996 0.479 23.77 %

1997 0.539 12.53 %

1998 0.345 -35.99 %

1999 0.5 44.93 %

2000 0.901 80.20 %

2001 0.731 -18.87 %

2002 0.789 7.93 %

2003 0.838 6.21 %

2004 1.209 44.27 %

2005 1.655 36.89 %

2006 2.07 25.08 %

2007 2.498 20.68 %

2008 3.368 34.83 %

2009 2.167 -35.66 %

2010 3.019 39.32 %

(Source: http://www.indexmundi.com/sri_lanka/oil_imports.html)

1.2.7.3 Household Energy Use An analysis of expenditure on energy per household per month shows a countrywide average of Rs.1279. Province-wise expenditure varies widely. An analysis of expenditure on energy in relation to consumption of different types of fuel shows that the provinces with lesser usage of fuel wood tend to spend more on energy indicating that they use more expensive fuels like electricity, LPG & kerosene for domestic purposes. It is clearly evident that higher the income, more they spend on domestic energy. The average monthly expenditure on energy steadily increases as the income category increases. However it is interesting to see how preferences for energy type change/ behave with income category. Average electricity bill too progressively increases with increase in income. So does the LPG bill. But the pattern changes when it comes to kerosene and fuel wood. When household incomes increase, usage of kerosene and fuel wood

http://www.indexmundi.com/sri_lanka/oil_imports.html


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progressively decrease. These facts show that there is a preference for cleaner fuels by the community, but affordability is the major factor restraining their wider use.

1.2.8 Energy Efficiency Strategy and Relevant Targets (Access, Capacity, Generation and Energy Security)

Under the strategy in implementing energy programmes in the country, four aspects are being focused, namely; regulatory interventions, energy efficiency services, knowledge management and financing assistance, and the methodologies have been thus prepared accordingly. 1.2.8.1 Regulatory Interventions The Government of Sri Lanka clearly identifies the importance of ensuring energy security of the country through development of indigenous renewable energy sources and enhancing energy conservation. Regulations introduced under the provisions of Sri Lanka Sustainable Energy Authority Act are the driving force in implementing programmes to achieve the goals. Energy manager/Energy Auditor regulations have been introduced in order to establish the national capacity for implementing energy management programmes. A mandatory energy labelling programme has been introduced to ensure the use of energy efficient appliances by the consumers. Further activities such as making mandatory energy efficiency code for the design of energy efficient buildings are in the pipeline. 1.2.8.2 Provide Energy Efficiency Services National level programmes in order to facilitate end use sectors to comply with the regulations are also being established. Facilities for consultancy and project implementation are created through registering consultants and energy services companies (ESCOs), and developing the capacities of such categories on long term basis. A sophisticated instrument bank is focally maintained at the Sustainable Energy Authority and the registered consultants and ESCOs can use the instruments in project implementation activities. Energy consumption analysis software for major sectors in the country have been prepared, and energy consumption baselines for the key sectors have been established. So, end users can analyze their energy consumption data and get an understanding of the energy utilization in comparison to the peer establishments. Sri Lanka national energy efficiency award has been introduced to give national recognition to the establishments excelling in energy management programmes. 1.2.8.3 Knowledge Management Providing data and information and also updated knowledge on the subject are immensely important for the different end use sectors to implement energy programmes in their establishments. All the national data on energy supply and utilization, trends, technologies on alternative energy & energy efficiency, etc. are provided by the Sustainable Energy Authority as the focal entity. Awareness programmes, training workshops and sector-specific training programmes are conducted under this. The necessary material have been compiled and used in these programmes. 1.2.8.4 Financing Support Financing is the key element for successful project implementation and some soft financing schemes were in operation some time back. Those were Renewable Energy for Rural Economic Development (RERED), E-Friends, etc. and international donor agencies provided assistance for implementing those programmes. A facility called sustainable guarantee facility has been established and through that the necessary technical guarantee on project feasibility and also the guarantee on refinancing are provided in implementing energy efficiency improvement projects.

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Section 2: Current situation with regard to SE4ALL goals

2.1 ENERGY ACCESS vis-à-vis GOAL OF SE4ALL

6. Overview and assessment 7. Modern energy for thermal applications (cooking, heating)

Physical access: share of households without access to modern cooking/heating, industrial/agricultural use

Availability/quality of supply: status of domestic supply chain

Affordability: fuel prices, cost/affordability of efficient cooking stoves and fuel supplies (e.g. % of household monthly income)

Sustainability: share of sustainable biomass and other RES, % household with access to efficient stoves

8. Access to electricity:

Physical access: grid connection, urban/rural areas, target group: areas/category of population with minimum level of physical access [official statistics exist]

Availability and reliability of supply: frequency/duration of black-outs, load shedding (if officially practiced)

Affordability: tariffs, share of utility bills in household incomes, subsidies [data available for most countries via national household survey]

Sustainability: share of renewable energy sources (RES) in power mix [official statistics exist]

9. Modern energy for productive uses:

Energy needs and access: energy demand in productive sectors; share of enterprises, industrial/agricultural, with access to modern energy sources

Availability: quality of local supply chain and availability of required technologies for productive applications

Affordability and access to capital: fuel prices, cost/affordability of technological

10. Overview and assessment 2.1.1 Modern Energy for Thermal Applications (Cooking, Heating)

2.1.1.1 Energy Access The energy requirements of the country are met using electricity, petroleum oils, L.P. gas, coal and biomass. All the industrial and commercial sectors have access to electricity and without any limitation. So, those establishments have 100% access to electricity, which is a clean fuel and which can be used for energy requirements in any nature. They also have the opportunity of using petroleum oils for heating purposes and also in in-house power generation if they wish. Rural industries have the additional opportunity of using biomass in heating requirements. In the case of domestic sector, 91% of the population is fed by the national grid and 4% is fed by off-grid power plants, which are mainly based on renewable energy resources. The un-electrified rural communities have access to biomass and kerosene, which are the major sources of cooking and lighting respectively.


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It is clearly evident that higher the income, more they spend on domestic energy. The average monthly expenditure on energy steadily increases as the income category increases. However it is interesting to see how preferences for energy type change/ behave with income category. Average electricity bill too progressively increases with increase in income. So does the LPG bill. But the pattern changes when it comes to kerosene and fuel wood. When household incomes increase, usage of kerosene and fuel wood progressively decrease. These facts show that there is a preference for cleaner fuels by the community, but affordability is the major factor restraining their wider use.

Kerosene: Kerosene is used by 71.2% of households island-wide. A marginally higher proportion of rural households (73.8%) used kerosene compared to their estate counterparts (72.7%) and a significantly lower percentage of urban (55.8%) households.

LPG: Household saturation of liquified petroleum gas island-wide is 22.7%. LPG was a major source of energy used for cooking by urban households (45.1%) and 17.1% of rural households whereas in the estate sector (tea, rubber and coconut plantation) it was marginal at 1.4%.

Fuel wood: Fuel wood was the other major energy source used for cooking and water heating. National average household saturation is 90%. Usage by estate sector households is 98.7%, rural sector is 94.5%, and urban sector is 61%.

The first known major energy efficiency drive came into being with the introduction of an energy efficient cook stove in 1986. Involvement of a Government institution to promote fuel wood cook stove could be quite a coincidence, but the reasons for the affiliation could be absence of any other player with such deep penetration of the domestic energy user and also the interest of the state owned utility (Ceylon Electricity Board – CEB) to take out part of load from cooking applications. This extensive island wide programme, a part of the bigger National Fuel Conservation Programme targeted low and middle income groups for an improved cook stove which had one hearth providing heat to two mouths, named “Anagi”. Tests carried out on the stove and numerous field-cooking tests have revealed a near 50% fuel wood saving over the traditional stoves.


Figure 2.1.1 – “Anagi” Cook Stove

Although the results of the programme was not fully evaluated in a post programme monitoring effort, the emergence of the Anagi stove as the preferred stove speaks volumes of the success of the programme. It is estimated that 37.0% of households which use fuel wood for cooking now use the Anagi stove and a further 16.6% uses some kind of an efficient stove. Translated to fuel wood savings, this indicate a 38.3% saving of fuel wood used in Sri Lanka, accounting for all improved cook stoves in use. Given below are the details of stove penetration by provinces and by sector vice;


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Table 2.1.1 – “Anagi” Cook Stove Saturation in Provinces

Province Name Sector Saturation

of Stove %

Average of Tot No of

Stoves/house

3 Stone Stoves %

Partly Covered

Clay Stoves %

Fuel Efficient Stoves %

Other Stoves %

Central Urban 63.4 1.3 4.8 36.1 25.0 1.2 Rural 91.4 1.5 17.1 40.5 39.2 1.0 Estate 96.6 1.4 14.7 51.0 15.7 18.2

Central Average 90.5 1.5 15.6 42.6 32.6 5.1

Eastern Urban 61.7 1.4 51.5 10.3 4.0 0.0 Rural 91.7 1.4 75.0 16.6 10.6 0.0

Eastern Average 85.2 1.4 69.9 15.3 9.1 0.0

North Central Urban 94.5 2.0 70.3 24.2 0.0 0.0 Rural 100.0 1.9 77.0 24.4 2.6 0.0

North Central Average 99.8 1.9 76.8 24.3 2.5 0.0

North Western Urban 97.1 1.2 71.8 13.8 15.9 0.0 Rural 97.3 1.6 68.4 22.9 18.2 0.0

North Western Average 97.3 1.6 68.5 22.6 18.1 0.0

Sabaragamuwa Urban 97.6 1.7 17.1 90.1 9.8 0.0 Rural 98.8 1.8 24.8 64.5 22.7 0.0 Estate 100.0 1.7 28.2 67.6 12.1 0.0

Sabaragamuwa Average 98.9 1.8 24.8 65.7 21.3 0.0

Southern Urban 88.7 1.3 63.4 21.3 11.9 1.6 Rural 98.8 1.6 58.6 43.3 11.9 4.2 Estate 97.4 1.4 50.7 26.6 24.5 0.0

Southern Average 97.9 1.6 58.9 41.1 12.1 3.9

Uva Urban 100.0 1.9 55.6 11.1 33.3 22.2 Rural 98.6 1.7 50.4 49.7 5.8 0.0 Estate 96.8 1.2 87.0 3.2 12.5 0.0

Uva Average 98.4 1.6 56.0 41.2 7.9 0.9

Western Urban 52.1 1.5 30.0 22.5 2.7 0.6 Rural 87.1 1.6 38.3 41.2 21.0 1.3 Estate 100.0 1.5 83.4 35.1 0.6 0.0

Western Average 76.6 1.6 36.4 35.4 15.1 1.1

National 89.8 1.6 45.3 37.0 16.6 1.6 (Source: Sri Lanka Sustainable Energy Authority)


Figure 2.1.2 – “Anagi” Cook Stove Usage by Sectors

Monthly Fuel Wood Consumption by Sector & National

0

20

40

60

80

100

120

140

160

Urban Rural Estate National

Sector

Avera

ge F

uel

Wo

od

Co

nsu

mp

tio

n/

Mo

nth

(K

g.)


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The below table provides the biomass supply by source. Majority comes from home gardens (26%) followed by crop lands (19%).

Table 2.1.2 – Biomass Supply by Source

Source %

Natural Forest 7.0

Coconut Plantations 19.0

Forest Plantations 4.0

Processing Residues 3.0

Rubber Wood 7.0

Home Gardens 26.0

Crop Lands 19.0

Fuel wood Plantations 2.0

Others 13.0


The below table provides the yearly biomass saving potential in million tons.

Table 2.1.3 – Biomass Saving Potential (Million Tons/year)

Biomass Saving Potential (Million Tons/year)

Sector Type of Biomass

Fuel wood Agri-residues

Domestic cooking 2.24 0.41

Industrial boilers - 0.04

Furnaces 0.37 0.01

Total 2.61 0.46


2.1.1.2 Household Income & Expenditure on Energy The following table provides the household income of Sri Lanka in 2009 and expenditure on energy. Average exchange rate in 2009 was LKR 115 per USD.

Table 2.1.4 – Household Income & Expenditure on Energy

Mean Household

Income per month

Mean Household Expenditure per

month

Mean Household Expenditure on

Food & Drink per month

Mean Household Expenditure on Non-food per

month

Mean Household Expenditure on Fuel & Lighting

per month

Mean Household Expenditure on

Transport & Communication

per month

(A) (B) (C) (D) (E) (F)

LKR LKR As a % of (A)

LKR As a % of (B) Food Ratio

LKR As a % of (B)

LKR As a % of (D)

LKR As a % of (D)

National 35,495 32,446 91 12,918 39.8 19,529 61 1,250 6.4 3,260 16.7

Urban 46,191 44,845 97 15,427 34.4

Rural 34,329 30,845 90 12,523 40.6

Estate sector 25,649 25,662 100 12,702 49.5

Gini Co-efficient of Household Income & Expenditure

National 0.47 0.39

Urban 0.45 0.39

Rural 0.46 0.38

Estate sector 0.44 0.31

(Source: Household Income & Expenditure Survey 2009/2010 Preliminary Report,

Department of Senses & Statistics of Sri Lanka)


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Mean household expenditure on Fuel & Lighting in 2009 was 6.4% of non food expenditure while it was 16.7% for transport & communication. These two figures very roughly give an indication of expenditure on energy though the latter also includes the cost of communication.

2.1.1.3 Access to Electricity

Level of electrification (coverage of the national grid) is 91%.


Figure 2.1.3 – Status of Electrification

There are issues related to the quality of supply as described below:

Quality of Power A large number of power interruptions are recorded from some provinces of the country. The other areas of concern are low voltage and high voltage situations. Power Interruptions Average number of power interruptions is highest in the Central province with 7 interruptions per month. Uva records the next highest value 6, followed by 4 in Sabaragamuwa, 3 each in Eastern and Southern provinces, 2 each in North Central and North Western and 1 in the Western province. Accordingly the national average number of electricity breakdowns per month works out to 3. Since the duration of breakdowns has not been recorded, assessing the effect of these interruptions on the quality of supply and on the day to day life of the community becomes a problem. However these breakdowns need to be avoided by introducing suitable measures by the CEB. Sector-wise analysis shows that power interruptions per month are more in the estate sector (4), followed by rural (3).and urban (2) sector. Low Voltage The national average of incidences of low voltage is 3 per month. The highest numbers of incidences (9) are recorded from the Uva province. Next is Sabaragamuwa with 7. Central & Southern provinces have 3 incidences each, North Western and Eastern have 2 each and North Central and Western provinces follow with 1 incidence each. Most low voltage situations are brought about by connecting too many households to transformers, thus overloading them. Sector-wise analysis shows that low voltage situations are mostly prevalent in the rural sector (3). Estate (1) and urban (1) sectors too are affected to a lesser extent.


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High Voltage Incidences of high voltage are not common, however again Uva records the highest number of times per month – 4 incidences when they experienced high voltage. Sabaragamuwa records 3 incidences. All other provinces have not recorded any incidences of high voltage. Reasons for this situation have to be investigated and remedial measures implemented. Only the rural sector has reported high voltage problems at 1 per month.

2.1.1.4 Affordability of Electricity [8] This section describes the affordability of electricity by households based on a study carried out by the Department of Economics, Social Policy Analysis & Research Centre (SPARC), University of Colombo conducted for Public Utilities Commission of Sri Lanka (PUCSL) in April 2011. In the above mentioned study, affordability is defined in two ways. First, the ability to pay their current bill (and willingness to pay by non-electrified households). Whether they can pay their current bill without any difficulty. Under the second method affordability is defined in terms of basic need electricity.

Table 2.1.5: Affordability to Electricity

%

Overall Poorest Richest

Difficult to Pay the Electricity Bill 15.39 42.22 9.04

Do not Pay Electricity Bill Monthly 14.06 25.00 9.60

% of Monthly income on Electricity Bill 3.17 8.78 1.61

(Source: Study on Requirements of Prospective Electricity Consumers and Fuel (electricity) Poverty & Affordability

Conducted for Public Utilities Commission of Sri Lanka, April 2011)

Table above summarizes survey / study findings on affordability to electricity. Little over 15 percent of responding households have reported that they cannot afford the electricity bill. Nearly 14 percent of respondents do not pay the bill regularly on monthly basis. These two variables are closely correlated with income of the family. While 15 percent of respondents feel that they find it difficult to pay the electricity bill, the same percentage for poorest group in the sample is over 40. For 72 percent of respondents who do not pay the bill on monthly basis, main reason is economic difficulties. They delay payment of the bill because they cannot do it with all other commitments. The affordability is also measured in terms of percentage of income (expenditure) spends on electricity. If respondents’ spending on electricity exceeds certain percentage of their income, it is defined as unaffordability. For example, European Bank (2003) defines that the share of income goes into electricity exceeds 10 percent the consumer is identified as unaffordable household. This method has no any scientific validation except rule of thumb. Therefore, in this study, study team has compared the share of income goes into various other essentials with the share go for electricity bill. According to the rule of thumb (10 percent or above on electricity) only the poorest group of households cannot afford electricity bill. Households with below Rs. 1,000 per capita income spend 15 percent of their average income on electricity. For them the electricity bill is nearly 25 percent of their expenditure on foods, three times the telephone bill and 2.3 times the expenditure on education1.


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Table 2.1.6: Share of Income Spent on Major Consumables

Income Class Electricity Food Education Transport Telephone Recreation Water

less than Rs. 1,000 15.09 63.66 6.67 5.35 5.11 3.61 1.05

Rs. 1,001 to Rs. 2,000 4.16 74.86 9.66 4.33 3.70 1.90 1.38

Rs. 2,001 to Rs. 3,000 3.44 65.39 9.89 5.36 2.99 2.54 1.02

Rs. 3,001 to Ts. 4,000 2.99 59.08 7.66 5.04 2.99 2.41 0.69

Rs. 4,001 to Rs. 5,000 3.19 54.79 8.21 5.49 3.18 2.74 0.78

Rs. 5,001 to Rs. 6,000 3.93 47.53 6.17 5.03 3.75 2.39 0.61

Rs. 6,001 to Rs. 7,000 2.94 46.48 8.04 5.06 3.37 2.66 0.63

Rs. 7,001 to Rs. 8,000 3.69 48.50 6.43 4.81 3.01 2.17 0.73

Rs. 8,001 to Rs. 9,000 4.20 42.49 6.79 5.04 2.90 2.75 0.48

Rs. 9,001 to Rs. 10,000 3.18 42.62 7.10 4.18 2.90 2.53 0.54

Rs. 10,001 to Rs. 11,000 2.21 40.91 9.67 3.78 2.84 1.07 0.23

Rs. 11,001 to Rs. 12,000 3.43 33.56 6.11 3.90 3.03 2.92 0.36

Rs. 12,001 to Rs. 13,000 2.25 36.08 3.69 2.85 3.20 3.30 0.20

Over Rs. 13,000 2.30 28.61 5.87 3.71 2.82 2.96 0.42

Total 3.51 53.50 7.82 4.88 3.18 2.54 0.76

On average, a household in the sample spends 3.51 percent of household income on electricity. This is smaller than the percentage of income spent on foods, education and transport and closely comparable with the share on telephone. These percentages vary between different income classes. For example, poorest group spends on average 15.09 percent of their income on electricity. For them this is next only to the share of income goes to foods. Table 2.1.5 shows a very clear negative relationship between level of income and percentage of income spends on electricity. This is a clear evident that the poorest segments of the society cannot afford electricity bill. Table 2.1.6 shows that nearly one percent of respondents will have to spend over nine percent to buy basic need electricity. If the 10 percent threshold is considered, it can be concluded that basic need electricity is not affordable for 0.98 percent of the electricity consumers in the sample. In responding to questions on electricity affordability from non-electrified households nearly five percent of households have expressed that they might not be able to pay the electricity bill regularly and on average all non-electrified households are willing to pay Rs. 320 per month on electricity. Roughly they plan to consume 60 kWhs per month.

2.1.1.5 Phasing out Kerosene Use for Lighting (Using LED-based Solar Lighting)

Kerosene had been in use as a source of lighting from the beginning of the last century in Sri Lanka. However, wide scale use of kerosene for lighting resulted only in the 1940’s, due to the rapid expansion of the refinery capacity world over. Thereafter, throughout the decades from 1950 – 2000, the consumption decreased due to the expansion of the national grid to all corners of the country. Presently, it is at a historical low, only 10% of the households are dependent on kerosene and of the majority belong to “Samurdhi” beneficiaries (Poorest of poor of the society). Even with the target of reaching 100% of electrification by 2012, the Ceylon Electricity Board (CEB) estimates that about 40,000 households would still be deprived of the national grid, due to the sheer remoteness of such villages. There are an estimated 110,000 consumers who would rapidly served and


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would benefit from using LED-based solar lighting in the near term while awaiting a grid connection and others who may continue to require off-grid solutions. The latter include consumers who use kerosene lighting such as pavement hawkers and homes unfit for obtaining an electricity connection. The off-grid solutions include solar photovoltaic (PV) stand-alone system ranging in size from 10 Wp to 40 Wp, pico and micro hydro units providing electricity to individual households living close to suitable streams, village hydro mini-grids and solar/wind hybrids. These systems would provide high quality LED and CFL lighting to fulfil basic lighting needs or provide enhanced energy services that will including lighting as well as power for TV/radio and mobile phone charging. Therefore, a project has been developed as a Government enabled, private sector program to commercially introduce advanced solar powered White LED lighting products to those segment of the population to power their basic lighting requirements and to eliminate the existing practice of using kerosene for lighting purposes by the Sri Lankan population forthwith. Also the project envisages introduction of enhanced energy services to isolated rural communities through renewable energy options.

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2.2 ENERGY EFFICIENCY vis-à-vis GOAL OF SE4ALL

11. Overview and Assessment 12. Energy intensity of national economy: TPES/GDP$, current situation and trend, is there a decoupling between energy use and GDP, sectoral breakdown into:

Industrial energy use and potential for energy saving

Household energy use and potential for energy saving

2.2.1 Background Before the first ‘oil shock’ in 1973, energy efficiency initiatives were least heard around the world. People all over the world had ready and easy access to energy sources at relatively lower prices. Sri Lanka was no exception and the demand for energy was also not high. However, with the advent of open economic policies in 1977, demand for energy surged with the free inflow of vehicles and other electricity consuming domestic appliances. Gradual expansion of the national grid also contributed significantly to the rapidly growing energy demand. Second oil shock in 1979 further aggravated the situation. With the Sri Lankan Government realizing the need to intervene in energy conservation and management, among other initiates, a dedicated organization under the name “Energy Conservation Fund” (ECF) was established in 1983. ECF engaged in various energy conservation and management activities. However, with limited resources as well as statutory powers, delivery of ECF was severely constrained. Having identified its own constraints, it took initiatives to formulate a national energy policy for Sri Lanka and transforming itself into an empowered organization with wider powers for statutory interventions in energy conservation and management. Result was the birth of Sri Lanka Sustainable Energy Authority (SLSEA) in 2007 as the successor of ECF and much awaited formal document on energy policy - “National Energy Policy & Strategies of Sri Lanka” which came into effect in 2008.

2.2.2 Energy Sector & Energy Efficiency in Sri Lanka The main primary energy sources used in Sri Lanka are hydro resources, petroleum and biomass. Hydro resources are used for electricity generation for the national grid, fuel oil is used for transportation and power generation, and industrial requirements of thermal energy. Biomass is used for domestic cooking and industrial heating. Present maximum demand for electricity is around 2,000 MW and the total annual electricity generation is around 12,000 GWh. About 57% of the electricity generation is with thermal power plants running on diesel and other fossil fuel oils, about 17% with “Norochchole” coal power plant and the balance 26% with hydro power. (Source: Sri Lanka Sustainable Energy Authority) Figure 2.2.1 – Daily Load Profile of Electricity Demand

As a consequence of the high share of oil based generation, the average electricity costs are higher when compared with other countries in the region. The daily load curve is highly skewed, with a high evening peak lasting for about three hours. This has been an additional burden to the utilities, whereas a flatter load curve would have made existing plants operate more evenly reducing the necessity to add new capacity to serve the high peak. Lighting, TV and other domestic appliances contribute to the peak period, and the efficiencies of the equipment


41

used by customers are not at satisfactory levels. In this background, it is of paramount importance to devise effective modalities to ensure the optimum use of available resources, and to popularize better means of using energy efficient equipment and technologies.

2.2.3 International Assistance for Energy Efficiency Improvement Sri Lanka has obtained assistance from international agencies in some of the earlier initiatives in energy efficiency improvement. Such programmes are briefly described below; 2.2.3.1 Japan

Assistance was obtained from JICA for a 3-year project from 2008 to 2011 to establish a framework for energy efficiency improvement activities. Several initiatives and outcomes of the technical assistance work have enabled the proposed energy efficiency improvement fund

project to be effectively planned. JICA assistance was also available for energy efficiency initiatives in industry through the E-Friends II project. In the latter part of the E-Friends II project, which primarily financed environmental management projects in industry, concessionary loans were also provided for energy efficiency projects. Fuel switching projects, too, have been funded. 2.2.3.2 Asian Development Bank

University of Moratuwa conducts a Masters programme in Energy and assistance from ADB has been obtained in 1999 for initiating.

2.2.3.3 The World Bank Testing facilities were established in 2000 for lamp testing for the energy labelling programme, at the National Engineering Research & Development (NERD) Centre, under World Bank assistance.

2.2.3.4 US Agency for International Development

In obtaining finances from commercial banks for energy efficiency improvement projects, end users faced the difficulty for want of collateral, and SLSEA addressed that by establishing the Sustainable Guarantee Facility (SGF). Development of SGF was

assisted by the USAID under the SARI/Energy programme. Furthermore, identifying the need for greater technical focus on energy efficiency improvement in lighting, SLSEA established Regional Centre for Energy Efficient Lighting in 2009, with the assistance of USAID.

2.2.4 Progress to Date 2.2.4.1 Energy Labelling Through the provisions of the SLSEA Act, the mandatory energy labelling programme is being implemented step by step, with the objective of covering all commonly used appliances by year 2016. Energy labelling for compact fluorescent lamps (CFLs) has already been introduced with a gazette notification issued in 2009 making the energy label for CFLs mandatory. Formulation of energy labelling programmes for ceiling fans, linear fluorescent lamps (LFL) and ballasts are at final stages and it is planned to announce mandatory energy labels for those products by mid-2012. The next step would be to introduce similar legislation for refrigerators and air conditioners.


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2.2.4.2 Building Code Incorporating energy efficiency by way of retrofits to existing buildings causes many a practical limitations, and therefore, incorporation of energy efficiency in design stage of buildings has been determined to be the most appropriate course of action. Therefore, Code of Practice on Energy Efficient Buildings (Building Code) was compiled by SLSEA to ensure energy efficiency features are included in the design and construction of large-scale buildings. Compliance with building code is expected to be announced as a mandatory requirement by the Urban Development Authority, by mid-2012. 2.2.4.3 Energy Managers, Energy Auditors and Energy Consumption Reporting Energy Consumption Benchmarks were developed in accordance with Clause 36 of the SLSEA Act. A web-based mandatory monitoring system has been established to monitor the energy consumption levels of industries in comparison with the benchmarks as per Clause 37 of the SLSEA Act. This mandatory monitoring system is implemented through Energy Managers. The appointment of accredited energy managers to plan and implement energy management work, and to report energy efficiency, would shortly be made mandatory. 2.2.4.4 EE Services through ESCOs SLSEA is facilitating the formulation and implementation of projects by Energy Service Companies (ESCOs) by providing support through capacity building and providing instruments. Capacity building includes technology dissemination, skill development in use of instruments, report writing, etc. Fuel switching from liquid fuel to biomass, building management systems for increasing efficiency, introduction of efficient lighting systems and introduction of efficient motors are the major energy conservation measures implemented by ESCOs. 2.2.4.5 National Energy Efficiency Award SLSEA has already prepared Sri Lanka National Energy Efficiency Award scheme targeting both public sector and private sector covering major production and services sectors in the country, namely manufacturing, hotels, commercial buildings, state sector office buildings and the healthcare sector. It was introduced in 2010. 2.2.4.6 Sustainable Guarantee Facility (SGF) A guarantee scheme is available for energy efficiency improvement projects carried out through ESCOs. SLSEA is validating projects through technical and financial guarantees for projects, facilitating the industrial and commercial sector end users to obtain soft loans for energy efficiency improvement projects. Loan disbursements are made by the financial institutions participating in the scheme.

2.2.5 National Energy Management Plan - EnMAP (2012 - 2016) SLSEA very recently developped the National Energy Management Plan (EnMAP) for Sri Lanka covering a period of 5 years from 2012 to 2016. It shall serve as a guide for SLSEA to embark on an integrated and cohesive programme of work with a long term perspective to realize better energy efficiency in all energy consuming sectors of Sri Lanka. It will also provide vital information to all interested parties, stakeholders, partners, collaborators and the prospective donors on the direction of SLSEA in pursuing its mandate. 2.2.5.1 Main and Sub-activities The EnMAP consists of 10 main activities as follows;


43

1. Conducting awareness & training programmes and promoting services 2. Secure funds 3. Establishment of Energy Management Cells 4. Providing Advisory & Counselling services 5. Promoting ISO 50001 6. Introducing Standards & Regulations 7. Carrying out Research & Development 8. Establishment of Pilot Projects (For future replication) 9. Introducing Market Based Instruments (MBIs) 10. Rewarding of achievements

2.2.6 Cost and the Benefit of Implementing the EnMAP 2.2.6.1 Cost Estimated cost in Sri Lanka Rupees to implement the activities of EnMAP and expected source of funding are given in the below table. Some projects need to be implemented with SLSEA funds received from consolidated fund and from Energy Fund. Some projects need donor assistance and CSR (Corporate Social Responsibility) funds. Some projects could be fully self funded while some needs sponsorship from private entities.

Table 2.2.1 – Cost of Implementing EnMAP)

Annual Budget in million LKR Funding Sources

Mai

n A

ctiv

itie

s

Ye

ar 1

Ye

ar 2

Ye

ar 3

Ye

ar 4

Ye

ar 5

Tota

l

Self

Fu

nd

ed

Co

nso

lidat

ed

Fu

nd

Do

no

r Fu

nd

s

CSR

Fu

nd

s

Ener

gy F

un

d

Spo

nso

rsh

ips

1 Awareness, training & promotion 65.9 65.9 65.9 65.9 65.9 329.5 106 85.5 48 10 30 50

2 Funding 2.4 52.4 42.4 42.4 42.4 182 0 2 170 10 0 0

3 EM cell 7 5 5 4 4 25 0 25 0 0 0 0

4 Advisory & counseling 19.3 15.3 17.3 20.3 16.3 88.5 7 31.5 42 0 8 0

5 ISO 50001 1.8 1.6 1.6 1.6 1.6 8.2 6 2.2 0 0 0 0

6 Standards & regulations 22.8 42.8 42.8 3.8 3.8 116 0 96 20 0 0 0

7 R&D 30 30 30 30 30 150 25 50 75 0 0 0

8 Pilot projects (For future replication) 141 16 16 16 16 205 125 55 20 0 5 0

9 Market Based Instruments (MBIs) 0.4 0.4 0.4 0.4 0.4 2 0 2 0 0 0 0

10 Rewarding of achievements 23.1 23.1 23.1 23.1 23.1 115.5 5 45.5 0 0 5 60

Total 314 253 245 208 204 1,222 274 395 375 20 48 110 (Source: Sri Lanka Sustainable Energy Authority)

Estimated budgetary requirement for 5 years is around LKR 1.2 billion and average annual requirement is around LKR 250 million. LKR 395 million is expected from the consolidated fund, LKR 375 million from donor funds, LKR 48 million from Energy Fund and LKR 20 from CSR funds. Self funding is expected in the range of LKR 274 million and around LKR 110 is expected from sponsorships. 2.2.6.2 Benefit Benefit of implementing the EnMAP will be realized from saving of electricity as well as fossil fuel. Savings from Electricity


44

Anticipated electrical savings in GWh from all sectors are given in the table below.

Table 2.2.2 – Benefit of Implementing EnMAP)

Annual Electrical Energy Saving GWh

Mai

n A

ctiv

itie

s

Ye

ar 1

Ye

ar 2

Ye

ar 3

Ye

ar 4

Ye

ar 5

Tota

l

1 Awareness, training & promotion 114.4 187.8 272 367 315.2 1,256

2 Funding 84.4 148.8 228 322 287.2 1,070

3 EM cell 77.8 138.3 211.25 298.6 277.25 1,003

4 Advisory & counseling

5 ISO 50001

6 Standards & regulations 49.496 91.87 145.235 210.9338 194.1313 692

7 R&D 8.944529 13.41679 8.944529 4.472264 0 36

8 Pilot projects (For future replication)

9 Market Based Instruments (MBIs) 165.7704 248.6556 331.5408 414.426 396.426 1,557

10 Rewarding of achievements 10.8 21.6 36 54 50.4 173

Total 512 850 1,233 1,671 1,521 5,787 (Source: Sri Lanka Sustainable Energy Authority)

Anticipated electrical energy saving is estimated to be around 500 GWh in the first year (equivalent to about 5% of the national energy consumption) and it will reach 1,500 GWh at the fifth year. Coresponding monetory values in million LKR based on present average cost of electricity of LKR 21 per kWh are given in the table below.

Table 2.2.3 – Anticipated Electrical Energy Saving by Implementing EnMAP)

Annual Electrical Energy Saving LKR million

Mai

n A

ctiv

itie

s

Ye

ar 1

Ye

ar 2

Ye

ar 3

Ye

ar 4

Ye

ar 5

Tota

l

1 Awareness, training & promotion 2,402 3,944 5,712 7,707 6,619 26,384

2 Funding 1,772 3,125 4,788 6,762 6,031 22,478

3 EM cell 1,634 2,904 4,436 6,271 5,822 21,067

4 Advisory & counseling

5 ISO 50001

6 Standards & regulations 1,039 1,929 3,050 4,430 4,077 14,525

7 R&D 188 282 188 94 - 751

8 Pilot projects (For future replication)

9 Market Based Instruments (MBIs) 3,481 5,222 6,962 8,703 8,325 32,693

10 Rewarding of achievements 227 454 756 1,134 1,058 3,629

Total 10,744 17,859 25,892 35,100 31,933 121,528 (Source: Sri Lanka Sustainable Energy Authority)

Anticipated financial saving as a result of electrical energy saving is estimated to be around LKR 10 billion in the first year and it will reach nearly LKR 32 billion at the fifth year.


45

Savings from Fossil Fuel

Table 2.2.4 – Anticipated Fossil Fuel Saving by Implementing EnMAP)

Sector Million Litres Percentage

Transport 2,063 56

Power Generation 1,070 29

Industry 216 6

Domestic 331 9

Commercial 35 1

Total 3,715 100 (Source: Sri Lanka Sustainable Energy Authority)

The above table presents the fossil fuel consumption of various sectors in 2010 in million litres. Industrial sector consumes around 200 million litres which is around 6% of the total consumption. Transport sector is the biggest consumer and is high as ten times of the industrial sector consumption.


Figure 2.2.2 – Sectoral Consumption of Petroleum)

However, as EnMAP does not cover the energy efficiency and saving possibilities in the transport sector, for the estimate of benefits, only the industrial sector is considered. Assuming a conservative figure of 15% saving, EnMAP would derive a financial saving of around LKR 2.7 billion per year at the current furnace oil price of LKR 90 per litre. Total Savings Anticipated financial saving as a result of electrical energy saving in all sectors and fosil fuel saving in the industrial sector is estimated to be around LKR 13 billion in the first year and it will exceed LKR 34 billion at the fifth year. Cost vs Benefit Financial benefit of implementing the EnMAP over a period of 5 years is estimated to be around LKR 135 billion for a cost of LKR 1.22 billion.

2.2.7 Energy Intensity of National Economy Keeping the economic development goals of Sri Lanka in focus and anticipation of a strong growth in the industrial sector, retaining the present levels of energy intensity of economy will not be pursued. However, all possible measures to decouple the economic development from energy demand growth will be made, targeting an energy intensity of economy of 500 toe/XDR million by 2017. This will ensure a 20% saving of energy with respect to 2010 energy consumption.


46

2.2.8 Energy Saving Potential in Industrial & Commercial Sectors

Table 2.2.5 – Energy Saving Potential in Industrial & Commercial Sectors)

Present Consumption - TOE Saving Potential - TOE Percentage savings

Electrical energy 271 54 20

Thermal energy 1,863 465 25 (Source: Sri Lanka Sustainable Energy Authority)

Some technologies that can be adopted to enhance the energy utilization efficiency;

Co generation in selected industries (eg. tea, rubber, tyre, hotels, etc.)

Waste heat recovery – Mainly in thermal power plants

Thermal storage – Ice making during off peak hours and use in peak hours

Use of variable speed drives in electrical motors

Efficient lighting systems like T5 and LEDs

Implement Energy labelling scheme (Especially for magnetic ballasts and ceiling fans)

Table below presents the industrial energy consumption;

Table 2.2.6 – Composition of Industrial Energy Consumption)

2005 2006 2007 2008 2009 2010

Biomass (Thousand TOE) 1416.28 1519.48 1506.08 1358.44 1393.49 1619.39

Petroleum (Thousand TOE) 295.04 310.75 303.00 270.35 246.66 243.74

Electricity (Thousand TOE) 234.93 253.42 254.27 254.30 238.44 270.73

Total 1946.25 2083.65 2063.35 1883.08 1878.59 2133.87


Table below presents the petroleum consumption by different sectors;


Figure 2.2.3 – Sectoral Petroleum Consumption)

It has been estimated that 19% reduction in petroleum usage and 7.5% increase in biomass consumption is possible. Below tables provide the annual energy saving potential based on energy audits carried out along with estimated savings from different energy efficient technologies;


47

Table 2.2.7 – Energy Saving Potential Based on Energy Audits)

Description

Annual Saving Potential

Electricity Fuel Oil (Million litres)

Investment (LKR million) MWh MVA

Public sector institutions (26) 9288 20 Nil * 165

Private sector establishments (110) 9585 28 1.5 227

*These institutions are office establishments, and no direct fuel oil use.


Table 2.2.8 – Saving Potentials for Some Technology Options)

Technological option Annual Saving Potential (GWh)

Variable speed drives Efficient industrial fans (Tea sector only) Efficient ceiling fans Efficient motors Efficient chillers & AC systems Efficient lighting systems Efficient pumps Building management systems Compact fluorescent lamps Efficient refrigerators Improving housekeeping in Industrial and Commercial sectors (Implementation of ISO 50001)

26.9 9.5 155 8.7

171.2 20.4 18.9 8.6 300 54

250


The table and the figure below present the industrial sector wise electricity consumption;

Table 2.2.9 – Industrial Sector vice Electricity Consumption


48

Industry Category % CEB LECO Total

Garment industry 14.49 38,240,527 2,047,544 40,288,071

Other,mainly commercial buildings 7.91 20,894,858 1,104,534 21,999,392

Food industry (including farms and restaurants) 7.48 19,991,171 816,233 20,807,404

Rubber and leather including rubber estates 6.39 16,512,284 1,247,282 17,759,566

Water pumping 5.84 15,656,484 593,195 16,249,679

Metal industry (iron,aluminium etc) 5.75 15,995,822 15,995,822

Cement,roofing material and porcelain 5.54 15,121,652 279,056 15,400,708

Tea industry 5.23 14,552,568 14,552,568

Hotel industry 4.72 10,059,455 3,057,006 13,116,461

Chemical and mining industries 3.85 10,077,400 629,180 10,706,580

Property development and large scale buliding management 3.76 10,324,331 131,882 10,456,213

Non classified industries 3.36 8,549,364 792,155 9,341,519

Airport and sea ports 3.30 9,098,654 79,946 9,178,600

Hospitals 3.16 8,566,332 220,292 8,786,624

Telecommunication 2.33 6,152,674 334,060 6,486,734

Banks and other similar fianncial organizations 2.25 6,249,414 6,249,414

Plastics,polythene,pvc etc 2.10 4,228,802 1,615,519 5,844,321

Nonclassified government organization 1.99 5,524,165 5,524,165

Defence 1.98 5,397,092 101,859 5,498,951

Mass media 1.95 5,411,928 5,411,928

Packaging industry 1.82 3,985,146 1,081,618 5,066,764

Wood products 0.99 2,753,680 2,753,680

Education 0.82 2,198,787 82,062 2,280,849

Supermarket chains (cargills and keels) 0.71 1,909,796 75,921 1,985,717

Electricity generation and distribution 0.67 1,855,242 1,855,242

Rice milling 0.57 1,588,062 1,588,062

Recreation and sports 0.29 793,427 793,427

Dessicated cocunut industry 0.27 760,631 760,631

Inland transport (CTB,CGR etc) 0.23 566,766 75,076 641,842

Coconut estates and fiber products 0.15 403,279 403,279

Metal crushing 0.09 253,848 253,848

Total 100.00 263,673,641 14,364,420 278,038,061 (Source: Sri Lanka Sustainable Energy Authority)

14%

8%

7%

6%

6%

6%6%

5%

5%

4%

4%

3%

3%

3%

2%

2%

2%2%

2%2%

2%1%1%1%1%1%0%0%0%0%0%

Garment industry

Other,mainly commercial buildings

Food industry (including farms and restaurants)

Rubber and leather including rubber estates

Water pumping

Metal industry (iron,aluminium etc)

Cement,roofing material and porcelain

Tea industry

Hotel industry

Chemical and mining industries

Property development and large scale buliding managementNon classified industries

Airport and sea ports

Hospitals

Telecommunication

Banks and other similar fianncial organizations

Plastics,polythene,pvc etc

Nonclassified government organization

Defence

Mass media


Figure 2.2.3 – Industrial Sector vice Electricity Consumption


49

2.2.9 Energy Usage and Saving Potential in Domestic Sector Table below presents the consumption of energy by the domestic sector;

Table 2.2.10 – Energy Consumption of the Domestic Sector

2005 2006 2007 2008 2009 2010

Biomass (Thousand TOE) 3167.84 3193.09 3182.94 3294.72 3377.65 3435.01

Petroleum (Thousand TOE) 361.55 389.00 354.45 318.84 312.83 356.72

Electricity (Thousand TOE) 388.83 419.05 452.91 465.15 482.99 521.19

Total 3918.22 4001.14 3990.30 4078.72 4173.48 4312.93


Figure below presents the energy balance of a typical household;


Figure 2.2.4 – Energy Balance of a typical Household

Refrigerators are responsible for over 50% energy consumption. Figure below presents the Daily Load Pattern of a Sample of Households;


Figure 2.2.5 – Daily Load Pattern of a Sample of Households (2911HH)


50

Lighting load is responsible for over 50% energy consumption.

2.2.10 CFL Penetration & its Effects on National Peak Demand Table below presents the usage of different types of Lamps and their contribution to the total lighting Load;

Table 2.2.11 – Usage of Different Types of Lamps and their Contribution to the Total Lighting Load

Lamp Type % of Lamps from

Total Lamp Population

(%) from Morning

Lighting load

(%) from Evening Lighting

Load

(%) from Total Average Lighting

load

CFL 47 30 31 27

Incandescent 49 66 64 68

LFL 3.3 3 4 4

Other 0.7 1 0.3 1


Figure below presents the import of CFL and incandescent lamps since 2001.

0

5000

10000

15000

20000

25000

30000

35000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Lam

p Im

po

rts

(Th

ou

san

ds)

Year

CFL Imports

Series1 Series2 (Source: Sri Lanka Sustainable Energy Authority)

Figure 2.2.6 – CFL Imports

The below figure present the potential for national peak demand if all incandescent lamps are replaced by CFL. The equivalent nation peak demands saving is 235 MW.


Figure 2.2.7 – Reduction of Lighting Load by Replacement of Incandescent Lamps with CFLs

If all incandescent lamps replaced with CFLs

Existing situation


51

2.3 RENEWABLE ENERGY vis-à-vis GOAL OF SE4ALL

13. Overview and Assessment 14. On-grid and off-grid renewable energy 15. Use of renewable energy sources (RES) for thermal applications (cooking/heating) 16. Use of RES for productive activities

17. Consolidated Summary: problem statements with regard to energy access, energy efficiency and renewable energy

2.3.1 Renewable Energy Resources [4]

Due to the geo-climatic conditions, Sri Lanka is blessed with several forms of renewable energy resources. Some of them are widely used and developed to supply the energy requirements of the country. Others have the potential for development when the technologies become mature and economically feasible for use. The following are the main renewable resources available in Sri Lanka: Biomass, Hydro Power, Solar and Wind. 2.3.1.1 Biomass Biomass is the most common source of energy supply in the country with the majority usage coming from the domestic sector for cooking purposes despite the fact that they have access to grid electricity. Due to abundant availability, only a limited portion of the total biomass usage is channelled through a commodity market and hence the value of the energy sourced by biomass is not properly accounted for [4]. Biomass comes in different forms. The following are the most common forms of biomass available in Sri Lanka: Fuel Wood, Municipal Waste, Industrial Waste and Agricultural Waste. Home gardens and forests supply the major portion of the biomass requirement of the country. A very small amount of biomass is converted to charcoal and electricity. Biomass is mostly used 'as-it-is'. Although there is a potential for biomass based electricity generation, developments are still at their initial stages. The first grid connected biomass based power plant (of l MW capacity) was commissioned in Walapone in October 2004 within the Small Power Purchase scheme of the CEB. In addition, a small scale (approximately 0.3MW) biomass based power plant is operational at the Factory of Haycarb Ltd. in Madampe, producing electricity for factory use, as a supplement to the grid supply [4]. Another subsidiary of Haycarb Ltd (Recogen) is operating a co-generating plant using producer gas of coconut shell and generates 5 MW of power. Another 0.5 MW power plant is now in operation at Thirappane using producer gas generated by Gliricidia. Even though the majority of energy needs of the rural population are fulfilled by the use of firewood, there are possibilities of further increasing the use of biomass for energy purposes in the country, especially for electricity generation. Owing to the rapid growth of fuel wood cultivation, the concept of biomass based electricity generation (commonly referred to as Dendro Power) holds much promise for Sri Lanka [4]. The biomass distribution network is quite simple, and in most cases, non-existent. The majority use of biomass is at the domestic level, where the source and the point of use happen to be within the same home garden. Even in industrial usage, the distribution is a one-to-one arrangement, which links the source to the user through a direct biomass transport. The biomass sector operates with very little interaction with


52

the governing structure of the energy sector [4].

2.3.1.2 Hydro

Figure 2.3.1 – Village Hydro (Source: Energy Forum)

The topography of the country provides an excellent opportunity to harness the energy stored in river water which flows from the central hills of the country to the ocean surrounding the island. Though the use of hydro resource for direct motive power was common in yesteryears, electricity production has become the sole use of hydro resource in recent times. Therefore, hydro contribution as an energy supply source is always through its

secondary form which is electricity [4]. The small power producers (SPP) who operate small scale hydro power plants (mini hydro plants) contribute to the primary energy supply through hydro power. In contrast to SPP hydro power plants, which are of 'run-of river' type, Ceylon Electricity Board (CEB) owned large hydro power plants posses storage capacities in the form of reservoirs, enabling these large power plants to be dispatched as and when they are mostly needed in the system [4]. Hydro power is a key energy source used for electricity generation in Sri Lanka. The better part of the major hydro potential has been already developed and they are delivering valuable low cost electricity to the country. Currently, hydro power stations are operated to supply both peaking and base electricity generation requirements. However, a few major sites are still classified as 'not economically feasible' for development. Apart from the grid connected hydro power stations, many small-scale hydro power applications are in operation serving off-grid loads. A substantial number of small scale hydro sites have been identified for future developments [4].

Today, the development of small hydropower alone has reached great heights in Sri Lanka, paving way for replication of the success in other parts of the world. The early development of the hydro industry created a significant opportunity for knowledgeable technocrats, local investors and financial institutes to forge an alliance to launch many more small hydro projects. The know-how was gainfully utilised by the non-governmental organisations operating at grass root levels also enabled many community owned micro hydro projects which were later identified as Village Hydro Schemes. By end 2010, there were more than 300 village hydro schemes in operation, benefiting approximately 7,000 rural families. The state owned electricity utility, the Ceylon Electricity Board (CEB) extended further cooperation by developing a robust technical and legal framework to connect non-despatchable embedded generators through a Grid Code and a Standardised Power Purchase Agreement (SPPA) based on avoided cost principles. The SPPA is also considered the key driver of the early success of the hydro power sector in Sri Lanka. It is applicable for power plants having capacities less than 10 MW based on renewable sources, waste or co-generation facilities. The salient features of the SPPA include:

(i) A complete avoidance of market risk: the Ceylon Electricity Board assures the purchase of all what

is produced by an SHP project.

(ii) A floor price of 90% of the tariff: ensuring a steady and predictable cash-flow.

(iii) A long term commitment: the SPPA which was for a period of 15 years is now offered for 20 years

and is based on sound legal provisions in resource allocation assured through an Energy Permit.


53


Figure 2.3.2 – Small Hydro Sector

The SPPA which offered a tariff based on avoided cost principles saw a dramatic surge in the number of small hydro projects being developed, due to the steep rise in fossil fuel prices which entrained the avoided cost to a higher level, making many a small hydro project financially a very attractive investment. The resultant dynamism created an ever growing industry, teeming with project developers, service providers and consultants which would eventually grown into a formidable force, commanding a total capacity of 217 MW by end 2011. The country has developed a vast human resources base with the full set of skills required to develop small hydropower anywhere in the world. The country possesses its own high-quality hydro turbine manufacturing plant, with energy conversion efficiencies reaching the levels hitherto achieved only by world class European manufacturers. Turbines manufactured in Sri Lanka are not only used in local power plants, but also exported to other countries. Already there are initiatives to manufacture wind turbines as well, and wind blade manufacturing is already taking place at least in two enterprises.


Figure 2.3.3 – Locally Manufactured Hydro Turbine

2.3.1.3 Solar

Figure 2.3.4 – Solar PV (Source: Energy Forum)

Solar energy is used mostly in non-commercial forms. Therefore, similar to biomass, the total usage of solar energy is not quantified properly. However, solar energy is the most extensively used form of energy in day to day life and its supply is unrestricted and persistent throughout the year in most parts of the country. The following are the most common uses of solar energy in Sri Lanka: drying, heating and electricity production. Though not measured and officially

reported, substantial use of solar energy is observed in drying and water heating applications [4]. The CEB pioneered the introduction of solar photovoltaic technology in Sri Lanka during the early 1980s and later solar photovoltaic applications saw a significant growth due the dedicated efforts of the private sector.


Figure 2.3.5 – Sri Lanka’s First Ever Solar Park with an Installed Capacity of 1.237 MW at Hambantota


54

Renewable energy industry soon benefited from generous grants to construct two utility scale solar PV power plants in Hambantota in 2010. The projects were energised in 2011 and are yielding clean energy at an annual plant factor of 17%. The ongoing market upheavals in solar PV couples with a special tariff offered for exotic technologies have contributed to create a dynamic industry.

2.3.1.4 Wind The usage of wind energy in Sri Lanka dates back to prehistoric times. Records have it, wind has been used in the 3rd century, supporting the then burgeoning steel smelting industry in the South-western slopes of the central hills of Sri Lanka. After this remarkable period, wind energy attracted the attention of Engineers who were responsible for water management in the dry zone of Sri Lanka. Supported by Danish expertise, many wind pumping stations were constructed in the flat terrain of the dry zone, along with the accumulation of a wealth of indigenous knowledge of the wind regime of Sri Lanka.


Figure 2.3.6 – Wind Energy Plants in the North Western Province of Sri Lanka

The perseverance of a handful of committed practitioners planted the first seeds of wind energy development in Sri Lanka through an ambitious programme of wind measurement in many locations of the country. Armed with these valuable long term wind data, CEB managed to convince a development partner to provide grant funds to construct the first wind energy plant in Hambantota in 1998. The success of this project lead CEB’s Alternative Energy Unit to initiate a modern wind resource assessment programme, yielding many years of quality wind data, required to launch commercial projects. The promising wind data attracted the attention of a development partner leading to the development of a wind Atlas for Sri Lanka in 2003. Introduction of the cost based tariff regime, availability of long term ground data, a sound financing programme and experience gained in project development managed to launch the first commercial wind project in 2009. This project was fast followed by several other projects, all of which are yielding 32% annual plant factor, the highest level recorded anywhere in Asia. The commendable accuracy of energy yield estimates provided the much needed comfort to the industry, leading to construction of many more wind power plants, resulting in a capacity addition of 30.15 MW in 2011. A further 89.15 MW of wind power plants are under construction and a 100 MW wind power plant is being mooted by the Government to reap the promising winds of the Mannar island located in the north western sector of Sri Lanka. In Sri Lanka, application of wind pumping is an interesting option for farmers in the dry zone who are practicing agriculture under lift irrigation, especially during the dry season. This is due to the existence of negative correlation between the rainfall and strength of wind. Wind pumping activities in Sri Lanka are of relatively recent origin. The first ever systematic studies on the subject commenced in 1978 with technical assistance from the Government of the Netherlands. A 3m-diameter, six-bladed wind pump was developed, which is now commercially produced in a small number and mostly used for irrigation purposes [16].


55

2.3.1.5 Bio Gas Figure 2.3.7 - Biogas (Source: Energy Forum)

Work on biogas in Sri Lanka dates back nearly two decades. Many governmental and non-governmental organizations have been active in this area at various periods of time. Many of these initiatives lacked sustainability as they were implemented in isolation [10].

The Practical Action South Asia study “Integrating Energy and Environmental Mismanagement through Biogas – A Country Review” revealed many factors, which have directly or indirectly resulted in the failure of biogas technology. Although unconfirmed data suggests that there are nearly 5,000 biogas units constructed through out the country the above sample survey results indicate that the functioning rate is as low as 28.5%. The success rate, i.e. including plants which have been given up due to arrival of the grid supply, remains at 33% [10].

2.3.2 Contribution by Non-Conventional Electricity (NRE) Generation

(Source: Sri Lanka Energy Balance 2010 & CEB Generation Data)

Figure 2.3.8 – Non-conventional Electricity Generation

The NRE industry was dominated by small hydro sector, as it was the only technology which was viable under the previously adopted avoided cost tariff regime. All other technologies were lagging behind with none of the proposed projects getting implemented. In order to encourage the development of other NRE technologies, the Government proposed a three tiered, technology specific, Cost-based Tariff for NRE developers, thereby eliminating the drawbacks of the previous tariff based on avoided cost. The new tariff is offered to 6 genres of technology, viz., biomass, hydro, wind, municipal waste, agro waste and waste heat recovery. The offering of a higher tariff for technologies other than hydro, opened opportunities for the expeditious development of other genres such as solar and wind. The first solar energy park was commissioned in 2011, with an installed capacity of 1.2 MW. At present, measures are also taken to develop the first wind park in the Island of Mannar, which would enable a 100 MW increase in clean energy capacity of Sri Lanka. Several non-conventional primary sources have been used for electricity generation in Sri Lanka. Solar photovoltaic systems have been increasingly used from the early 1980s. Small isolated hydroelectric systems have been used in the tea processing industry for over 100 years. Small village-level hydroelectric systems are increasingly used in remote locations for household use. Installation of household solar photovoltaic systems and off-grid, community-based, hydro power systems continued to progress with the financial assistance of the World Bank funded “Renewable Energy for Rural Economic Development” (RERED) project. Given below is the electricity generation from non-conventional Sources [4]. .


56

Table 2.3.1 – Non-conventional Electricity Generation

Non-Conventional

Primary Source

Gird-Connected (2011)

Number of Installations

Average Peak Capacity (kW)

Energy (GWh)

Wind Electricity 5 33,800 88.95

Small Hydro Electricity 92 194,000 601.64

Solar PV 4 1,235 0.87

Biomass 3 12,000 30.57

Total 104 234,235 722.03

Non-Conventional

Primary Source

Off-Grid (2010)

Number of Installations

Average Peak Capacity (kW)

Estimated Useful Energy (GWh)

Off-grid Hydroelectric Estate 32 3,226.2 7,065,472

Off-grid Hydroelectric Village 239 1,928.0 3,208,880

Off-grid Solar PV Home Systems 157,342 6,659.7 7,192,461

Wind Battery Charging Systems 25 8.2 5,747

Total 157,638 11822.1 17,472,560

(Source: Sri Lanka Energy Balance 2010 & CEB Generation Data)

The above table shows that in 2011, total non-conventional electricity generating capacity was 241 MW as against the conventional electricity generating capacity (CEB and non-CEB) of 2,900MW. Therefore, the contribution of non-conventional primary source is about 7.6% of the total installed capacity of 3,141 MW.

2.3.4 Scope for Utilizing Renewable Energy

This section describes the scope for the utilizing of renewable energy in Sri Lanka.

In order to improve the quality of life among the lesser-privileged segments of people who have no access to electricity to meet their energy requirements, it has become necessary to explore sustainable energy alternatives. Based on Sri Lanka’s geographical positioning in terms of its tropical climate and natural terrain, Sri Lanka has a very high potential to draw on forms of renewable energy sources to meet this need. Endowed with a tropical climate, the potential for solar energy is very high. The terrain is highly conducive to tap hydropower, which has accounted for around 54 percent (in 2007) of total installed capacity of state utility. The opportunities for producing localized hydropower through micro (village) and mini hydropower technologies are also considerably high. In addition, the long coastal lines surrounding the island of Sri Lanka with several windy locations also provide tremendous scope for tapping wind power. In this context, the applications of Renewable Energy Technologies (RETs) have a distinct advantage of being able to be used in localized settings and provide effective delivery without a centralized supply mechanism [11].

The National Energy Policy of Sri Lanka is focused on the promotion of renewable sources of energy as a means of addressing the supply inadequacies and sets out several initiatives and concessions to developers as explained. The government has set itself a minimum target of 10% of national grid electricity to comprise of renewable energy sources by the year 2015 [12].

A study carried out by DFCC Bank in 2007 under the RERED project, has estimated the potential from renewable energy technologies in Sri Lanka by the year 2015 as follows [12];


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Table 2.3.2 – Estimated Renewable Energy Potential

Energy Source Estimated Potential

by year 2015 Estimated Potential

by year 2020

Solar Energy 11 MW 160 MW

Wind Energy 50 MW 400 MW

Mini Hydro Energy 300 MW 400 MW

Biomass Energy 90 MW 134 MW

Total 451 MW 1,094 MW

(Source: DFCC Bank, Sustainable Energy Authority – Renewable Energy Road Map)

However, the total renewable energy potential in Sri Lanka is found to be quite substantial, especially in Wind and Dendro as shown in the below table [13].

Table 2.3.3 – Estimated Renewable Energy Potential

2006

(MW) Potential

(MW)

Mini-hydro (on-grid) 106 300

Mini-hydro (off-grid) 1.4 -

Dendro (on-grid) 2 4,000

Wind (on-grid) 3 24,000

Solar (on-grid) 0.035 -

(Source: Proceeding of the Conference, Achieving Sustainability and Equity in Energy: Policy Choices for the Future,

Sri Lanka Sustainable Energy Authority and Practical Action, 2008)

It is hard to estimate the potential of off-grid Mini-hydro as well as on-grid Solar. As the on-grid Mini-hydro potential is expected to be fully harnessed by 2015, Sri Lanka has to rely on Dendro, Wind and Solar to increase its share of non-conventional renewable energy in the energy supply portfolio. Though there is a potential for Tidal and Wave energy, development of these sector will take a considerable period of time.

2.3.4.1 Hydro Power

Small streams in the upper catchments as well as major rivers of Sri Lanka offer considerable potential to generate hydroelectric power. The potential for large scale hydro plants have already been harnessed by CEB.

A study to assess the small hydro potential in Sri Lanka (focusing largely on the plantation sector) was concluded in 2002 by Sunith Fernando for Intermediate Technology Development Group – ITDG (now Practical Action) with the funding of The Royal Norwegian Embassy in Sri Lanka, the results of which are presented below.

The total estimated small hydro potential at the 257 surveyed sites in 2002 was 97.4 MW (see Table below), which was distributed among the three site categories as: 24.4 % in old estate sites, 21.2 % in new estate sites and the remaining 54.4 % in non-estate sites. The highest potential encountered in the study was 5,192 kW on “Kuru Ganga” while the lowest capacity of 5 kW was found in one of the old estate sites, Maria division of “Waltrim Estate”. Capacity utilized in old estate sites was estimated as 6.1 MW. Distribution of all sites by the estimated exploitable small hydro potential is as follows; in 81 % (209 sites) of the surveyed sites, the potential lies in the range 0-500 kW. Within this range, 22 % of sites have a capacity of less than 50 kW and 25 % lie between 50 kW and 100 kW. In the range of 500 kW to 4000 kW (48 sites) nearly 70 % of sites have capacities between 500 kW and 1500 kW [21].


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Table 2.3.4 – Estimated Exploitable Small Hydro Potential

Site

Classification

Number of

Sites

Utilized Potential

(MW)

Exploitable Potential Highest Site

Capacity (kW)

Lowest Site

Capacity (kW)

MW

% of Total

Old estate sites 137 6.1 23.668 24.4 1,665 5

New estate sites 71 - 20.723 21.2 1,127 8

Non-estate sites 49 - 53.016 54.4 5,192 44

Total 257 6.1 97.407 100 - -

(Source: An Assessment of the Small Hydro Potential in Sri Lanka – Practical Action)

Site classification is as follows;

Old estate sites - These are sites where there are or had been hydro plants in the past. New estate sites - A new location found within the boundaries of the particular tea estate. Non-estate sites - A site located outside an estate, mostly on state land.

According to the distribution of non-estate sites by district, the highest potential of 26,800 kW was found in Ratnapura district, followed by Kegalle district with 9,972 kW. Almost all non-estate sites were found on state land, often interspersed with village settlements, some bordering forest reserves. Therefore,

development of these sites is likely to face social and environmental issues to some extent [14]. A study carried out by DFCC Bank in 2007 under the RERED project, has estimated that mini-hydro capacity will be increased up to 300 MW by 2015 [12].

Figure 2.3.9 – Estimated Growth in Mini-Hydro Electricity Generating Capacity (Source: DFCC Bank)

2.3.4.2 Biomass Energy [13]

Given below is the biomass availability in MT per year estimated by Bio Energy Association of Sri Lanka (BEASL) in 2005:

Table 2.3.5– Estimated Availability of Biomass

Type MT / Year %

Rice Husk available from commercial mills 179,149 6.2

Biomass from Coconut Plantations available for industrial use 1,062,385 37

Sugar bagasse 283,604 8.3

Bio degradable garbage 786,840 27.4

Saw dust 52,298 1.8

Off cuts from timber mills 47,938 1.7

Biomass from home gardens Such as Gliricidia 505,880 17.6

Total 2,873,880 100

(Source: Proceeding of the Conference, Achieving Sustainability and Equity in Energy: Policy Choices for the Future,

Sri Lanka Sustainable Energy Authority and Practical Action, 2008)

Power generating potential - It has been noted that the consumption of fuel wood for generation of electricity using currently available technologies, and equipment, whilst meeting all environmental and

Growth in Mini-Hydro Capacity

0

50

100

150

200

250

300

350

2006 2008 2010 2012 2014

MW


59

other conditions is about 1.2 –1.5 kg/KWh (in 2005). Calculations on the national potential for Dendro power in Sri Lanka by BEASL have estimated this to be in excess of 4,000 MW annually generating over 24,000 GWh. This is nearly 4 times the total hydropower potential in this country. The conclusion may therefore be drawn that the Dendro potential in the country is adequate to meet our electrical energy demand for many decades [13 – pp22]. Land availability - The most realistic assessment of the area of land available for commercial fire wood plantation would be 470,000 ha. This would be considered as the best starting point. Figures as high as 1.6 million have been quoted for under used scrub, however, the question of ownership and approval for change of use might not be automatically forthcoming. It would seem that a shortage of land for Short Rotation Coppice (SRC) would not be a serious constraint for Sri Lanka [13 - pp33]. Tea plantation - In 2002, the area under tea plantation was 180,000 ha. This area includes marginal tea lands with lower stocking of productive bushes. Assuming 10% of the total tea area is marginal and not suitable for tea cultivation, such areas could be profitably used for raising fuel wood. About 50% of the marginal lands could be used for fuel wood for processing tea and the rest could be used for raising fuel wood for domestic use [13 -pp39].

Electricity production using solid biomass fuels is still a developing industry. In the longer term, grid connected biomass generation (using the full range of possible technologies), may become competitive; the greatest potential is for small scale embedded generation using gasification, pyrolysis or high-speed steam engine-based plant [15].

Figure 2.3.10 – Estimated Growth in Biomass Electricity Generating Capacity

(Source: DFCC Bank)

A study carried out by DFCC Bank in 2007 under the RERED project, has estimated that biomass power generation will be increased up to 90 MW by 2015 [12].

2.3.4.3 Wind Power [15, 16, 17]

Figure 2.3.11 – Wind Resource Map of Sri Lanka

(Source: Wind Energy Resource Atlas of Sri Lanka and the Maldives, National Renewable Energy Laboratory)

Until the era ended in year 2000, scant information on wind resource prevented Sri Lanka from enjoying wind power. With the advent of new technology backed by foreign financial aid, Sri Lanka commenced wind energy studies followed by pilot scale wind power projects. There are several comprehensive studies done extensively on the wind resource of Sri Lanka. The first one to emerge was the “Wind Energy Resource Assessment in Puttalam and Central Regions of Sri Lanka” as a result of a collaborative attempt of the Ministry of Power and Energy Sri Lanka, CEB, and UNDP/GEF Renewable Energy Project. The report elaborates the availability of wind resource, wind energy potential, and the reliability in terms of wind speed and consistency, etc. The study identified potential wind sites in the country along with the financial and economic viability of establishing wind driven power generation plants.

According to the “Wind Energy Resource Atlas of Sri Lanka and Maldives” compiled by the National Renewable Energy Laboratory (NREL) under USAID technical assistance in 2003, there is nearly 5,000 km2 of

Growth in Biomass Capacity

0

20

40

60

80

100

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

MW


60

windy area with good to excellent wind resource potential in Sri Lanka out of which 4,100 km2 is in inland and 700 km2 is in the costal belt. Therefore, the land extent with wind energy potential is around 6% of the total land area (65,610 sq km2) of Sri Lanka. Based on a very conservative assumption of 5 MW per Km2, it could accommodate around 20,000 MW capacity wind power plants. The total potential is as high as 24,000 MW if windy lagoons are also considered [17]. The above values may be further enhanced with the future advancement in wind technology as it would be possible to utilize wind resource which is now at a moderate level. It would be equivalent to 16.7 % of the total area of the country (11,000 Km2 out of 65,610 Km2) having wind power generating potential. According to these approximations, Sri Lanka has an overall wind potential of more than 55,000 MW [17]. The above wind potentials are calculated based on the available land area in the country excluding the national parks and reserves, bird sanctuaries, archaeological or cultural sites and cities or capitals which are the pre excluded areas for such a project. However, NREL stressed that additional studies were needed to accurately assess the practical resource by accounting for the transmission grid and accessibility. As a result of those studies, wind maps graphically depicting the wind resource distribution in the country and the estimated wind energy prospects in such areas are now available in the public domain. The above wind resource map of Sri Lanka shows the wind resource values with provincial boundaries. It clearly shows that the wind power availability in the good and excellent range is extended from the Northern tip of the Kalpitya Peninsula (in the North West) to the Karativu islands near Portugal Bay through Mannar and Delft Islands (in the North) and in the central highlands (Indicated in blue – excellent and purple - good). The central highland regions include the extreme Northern part of the Central Province, the Southern part of the North Central Province, and the Northern parts of Uva and Sabaragamuwa provinces. Finally, coastal areas in the South-Eastern part of the Southern Province and the Southern tip at Dondra are estimated to have moderate resources. Another prominent coastal region with good resource is the strip from Hambanthota to near the Eastern border of the Southern Province. According to the wind measurements by the CEB, good wind potentials exist in Southeast and Northwest of Sri Lanka. Hambantota and Kalpitiya areas have been identified as suitable places for a grid connected Wind Parks. A conservative estimate, excluding the wildlife reserves and agricultural lands, leads to an estimated wind potential of at least 200 MW in the southern coastal areas. However, the cost of electricity generated by wind is still not competitive with renewable sources such as mini-hydro [16]. A study carried out by DFCC Bank in 2007 under the RERED project, has estimated that wind capacity will be increased up to 50 MW by 2015 [12].

Figure 2.3.1 2– Estimated Growth in Wind Electricity Generating Capacity (Source: DFCC Bank)

According to the current development in this field and the possibility of harnessing the wind potential in the North with the civil war coming to an end, DFCC estimates would be easily surpassed. Already, SLSEA has issued Energy Permits to ten private developers for 90 MW in Kalpitiya & Puttalum area. And four private developers for another 40 MW were issued. The inconsistencies of estimates of different parties shows that,

Growth in Wind Capacity

0

10

20

30

40

50

60

2006 2008 2010 2012 2014

MW


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further studies are needed, especially wind data measurements in various locations to accurately assess the practically realizable potential by taking various constraints and restrictions such as accessibility of sites, grid availability, etc. in to consideration. SLSEA has already commenced the collection of wind data in 4 locations out of the 10 locations planned [18].

2.3.4.4 Solar Power Sri Lanka lies within the equatorial belt (between 6 and 10 degrees north of the Equator), a region where substantial solar energy resources exist throughout much of the year in adequate quantities for many applications, including solar water heating, solar electricity, and desalination. Many applications of solar energy are currently in use for meeting remote electrical loads throughout much of the non-electrified regions of Sri Lanka. The potential exists for significant expansion of the use of this renewable energy. According to the “Solar Resource Assessment for Sri Lanka & Maldives” compiled by the National Renewable Energy Laboratory (NREL) under USAID technical assistance in 2003, annual solar resource in Sri Lanka ranges from 4.5 to 6.0 kWh/m2/day [19]. Figure 2.3.1 3– Solar Resource Map of Sri Lanka (Source: Solar Resource Assessment of Sri Lanka and the Maldives, National Renewable Energy Laboratory)

The above study shows that ample resources exist throughout the year for virtually all locations in Sri Lanka for PV applications, such as solar home systems and remote power applications.

The variability in global horizontal solar resources is relatively small across most of the country, despite the impact of terrain characteristics on cloud formation. The resource generally varies spatially at most 20% to 30% during any given season. The highest resources are in the northern and southern regions, and the lowest resources are in the interior hill country [19].

The seasonal variations in solar resources in Sri Lanka can be somewhat greater at specific locations, for example ranging from 4.5 to 6.5 kWh/m2/day in the hill country and the effects of the changing directions in wind flow and storm patterns between the southwest and the northeast monsoons are quite sharp. During the southwest monsoon, with airflow generally from the southwest to the

northeast, the lee side of the mountains (the northeast portion of the country) shows quite high solar resources. During the northeast monsoon, the southern and western portions of the country show higher resources. However, the highest resources occur during the hot dry period from March and April when the transition between the northeast and the southwest monsoon occurs [19].

A study carried out by DFCC Bank in 2007 under the RERED project, has estimated that solar power generation will be increased up to 11.2 MW by 2015 [12].

Figure 2.3.1 4– Estimated Growth in Solar Electricity Generating Capacity (Source: DFCC Bank)

In Sri Lanka, solar power has got a head start over others and is the fastest growing renewable resource, particularly because of its rural roots. The industry grew from nothing in 1996 to 15-odd companies that have helped install more than 100,000 units, mostly in homes of poor rice farmers. It is now growing at an average of 20,000 units a year [20].

Growth in Solar Capacity

0

2

4

6

8

10

12

2006 2008 2010 2012 2014

MW


62

Pradip Jayewardene, a founder member of the Solar Industries Association and a pioneer in the private-led solar industry in Sri Lanka, said "Because the industry is growing and demand is outstripping supply globally, the technology is getting costly. We have sun all year on but the panels and other equipment to tap this source are getting more expensive, because the demand is 75 times the supply. The huge demand for suppliers of equipment is driving up costs." [20]

2.3.4.5 Bio Gas Energy A study on the potential of biogas from biomass sources (Human waste, Municipal solid waste, Landfills, Livestock waste, Agricultural waste, plantation industries) in Sri Lanka carried out by Practical Action estimates a total power generation potential of 288 MW of which includes 86 MW from livestock waste [22]. Many biogas (anaerobic digestion) technologies are commercially available and have been demonstrated for use with agricultural wastes and for treating municipal and industrial wastewater. Where unprocessed wastes cause odor and water pollution such as large dairies, anaerobic digestion reduces the odor and liquid waste disposal problems and produces a biogas fuel that can be used for process heating and/or electricity generation.

Solid waste is collected and disposed at a large number of unprotected sites. The problem is most acute in the Colombo Metropolitan Area (CMA) and in other major cities such as Dehiwala-Mt. Lavinia, Moratuwa, Kandy, Galle, etc. Even in remote areas, solid waste dumps have become a common sight. The Colombo municipal area produces about 700 metric tones daily and the figure for the whole metropolitan area is about 1,000 – 1,100 MT/day. The composition indicates that about 85% of the waste is organic and has moisture content of about 60-75%. This data has been largely determined for the waste arising in the Colombo area [2].

2.3.4.6 Bio-diesel Production of liquid bio-fuels especially ethanol requires knowledge, experience, and a substantial amount of capital investment, Therefore, setting up of small scale ethanol production units (in Sri Lanka) is neither economically nor technically viable. Ethanol production in Sri Lanka is approximately 12 million litres per year and is produced using sugar cane molasses at 2 sugar factories. This ethanol is of potable grade and this amount is not even sufficient to meet demand for local ethanol. Therefore, another 5 million litres of potable ethanol are imported in addition to the commercial grade ethanol [23]. However, small scale bio-diesel production facilities can be installed even at village level and run by persons with some scientific background. Feedstock required for these units can also be obtained locally. Yet the cost of production may be high in these units due to the scale of operation and the inability to recover unused reactants and by-products. The first ever rural level, community based, small scale biodiesel production facility in Sri Lanka was set up by Practical Action with help from University of Ruhuna, Peradeniya, Moratuwa and NERDC. There are plans to run a tractor and a generator using the biodiesel produced by this unit for community based activities without any charge. This facility could also be used to educate, encourage and motivate people towards the use of biofuels and help in breaking the myth and various concerns regarding the use of biodiesel [23]. Biodiesel is also not yet produced on a commercial or pilot scale in Sri Lanka [23].


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2.3.4.7 Wave Energy As waves are primarily driven by the wind, areas near the Equator tend to have lower wave potential. The best wave climates, with annual average power levels between 20-70 kW/m of wave front or higher, are found in the temperate zones (30-60 degrees latitude) where strong storms occur. However, attractive wave climates are also found within ±30 degrees latitude where trade winds blow with the lower power levels being compensated by the smaller wave power variability. Annual average wave power is approximately 14 kW/m in the vicinity of Sri Lanka. It is reasonably close to estimate 15 kW/m as being suitable for generation at competitive prices [6]. Figure 2.3.1 5– Wave Energy Map of Sri Lanka (Source: Reference 50 – Energy Forum)

The only alternate energy source for which a tariff system has been formulated by the Ministry of Power and Energy is wave energy. According to the government calculations, this is the cheapest form of alternative energy. Waves are stable in the South of Sri Lanka since there is no land mass all the way to Antarctica. Strong storms are rare. The wave energy potential of 1 meter off the southern coast of Sri Lanka is about 13 KW in January. It rises to 100 KW by May. The Ministry of Power and Energy estimates that stable electricity can be obtained at a plant factor of 67% [24].

2.3.4.8 Tidal Power [25] With an absence of a major estuary and with a low tidal range (approx 0.7 m) there would be limited opportunity for a barrage-type tidal station in Sri Lanka. However, with estimated currents of 3 m/s in the Palk Strait there may be opportunities to develop a tidal stream.

2.3.4 Summary of Renewable Energy Resources Available

Given below is the summary of renewable resources available in Sri Lanka. The estimated potential was drawn from various sources and the estimated exploitable potential by 2015 is from a study carried out by the Development Finance Corporation of Ceylon (DFCC Bank) in 2007 under the RERED project.

Table 2.3.6 – Availability of Renewable Energy Resources

Renewable Energy Source Estimated Potential Estimated Exploitable Potential by 2015 - MW

Small Hydro 600 MW 300

Solar (PV) 4.5 to 6.0 kWh/m2/day 11

Wind (on-grid) – Inland only 24,000 MW 50

Biomass (Dendro on-grid) 4,000 MW 90

Biogas 288 MW -

Wave Energy 13 to 100 kW/m -

________


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2.4 SE4All Goals

18. Goals

Energy access

Energy efficiency

Renewable energy

Goals would ideally be formulate and if so, should be based on problem statement and can relate to improved physical access, as well as its reliability, affordability and sustainability for the whole country and/or targeted consumers’ groups, i.e. households or productive users. It would be good to use quantitative indicators/targets when formulating national goals to enable their aggregation at the global level (i.e. XXX mln people with approved access to electricity and YYY mln people with access to modern energy for cooking, etc). Milestones to 2015, 2020 and 2030 would be ideal.

2.4.1 Ensuring Energy Access & Security

In reaching this goal, both national energy security and energy security of the individual will be ensured by achieving the following: Objectives:

(i) All households to have access to basic energy needs by 2017.

(ii) Energy security of the nation ensured by 2017.

2.4.2 ENERGY EFFICIENCY

Energy management activities are carried out with a national focus and with a target of achieving an energy consumption reduction of 8.7% by 2020 and 13.5% by 2030. Following graph depicts the projected electricity savings at different milestones.

(Source: Sustainable Energy Authority)

Figure 2.4.1 – Projected Electricity Saving

Table 2.4.1 – Target Savings from Generation


65

Year Net Generation

GWh/year

Maximum Demand

MW

Yearly Savings as a % of Net Generation

2012 11,895 2,425 4.3%

2016 16,232 3,162 6.4%

2020 21,794 4,061 8.7%

2025 28,569 5,569 11.6%

2030 39,449 7,617 13.5%


The overall electricity savings as a result of the activities carried out by SLSEA in year 2011 are given below;

448.3 GWh savings due to implementation of energy efficiency activities in domestic, industrial and commercial sectors. This is equivalent to 4.1% of the total consumption in 2011.

300 MW peak demand reduction

715 million litres of fuel oil mainly due to fuel switching initiatives

328,700 kg of LPG

476,300 kg of firewood The above is only from the sectors with reported data and hence the actual savings is higher.

2.4.3 INCREASING INDIGENOUS ENERGY

The previously compiled renewable energy portfolio (Table 1.1) of the SEA aimed at achieving 10% electrical energy from NCRE plants by 2015 and maintaining a share of 10% from NCRE plants till 2020. However, this target has been now revised in the Mahinda Chinthana: Vision for the Future as requiring Sri Lanka to meet 20% of electricity generation coming from NCRE sources by 2020. Following objectives were to be fulfilled to reach/contribute towards this goal.

(i) Generation of electricity from NCRE to reach 10% by 2015, 20% by 2020 and beyond.

(ii) Ten (10%) percent of industrial thermal energy to be switched over to biomass.

(iii) Ten (10%) percent of transport energy from non-petroleum fuels.

(iv) Increase of biomass as a clean cooking fuel by 10%.

Renewable Energy Mix The Table below shows the planned renewable energy mix to achieve the target of 20% from NCRE resources by 2020. The short term targets (1-3 year period) envisioned for each renewable energy resource is based on the assessment made on number of permits issued and details of projects which are at different stages of project approval process.


66

Table 2.4.2 – Capacity Mix of NCRE Resources

YEA

R PROPOSED CAPACITY ADDITIONS (MW)

HYDRO WIND SOLAR BIOMASS TOTAL

2012 40 50 10 10 110

2013 60 50 30 10 150

2014 60 20 30 20 130

2015 60 100 10 20 190

2016 50 10 10 25 95

2017 40 10 10 25 85

2018 10 10 10 30 60

2019 10 10 10 30 60

2020 10 10 10 30 60

TOTAL 340 270 130 200 940


The Figure below demonstrates the timing of proposed capacity additions. The noticeable feature is the continuous reduction of capacity additions from hydro resource. This is largely due to the exploitation of full economic potential of the hydro resource. The contribution from wind resource has been restricted due to the widely known grid stability issues. However with the ever increasing national demand for electricity and advent of new technology, it is very likely that the present restrictions on grid absorption of wind power would be reviewed.


Figure 2.4.2 – Capacity Addition from NCRE Resources

Expected Electricity Generation from NCRE Technologies The primary target of the above renewable energy mix is to realize a 20% electrical energy demand from NCRE resources. The industry standard capacity factors have been assumed for assessing the energy yield form each renewable energy technology. The table below shows the set capacity factors for each technology.


67

Table 2.4.3 – Capacity Factors for NCRE Technologies

RENEWABLE ENERGY

RESOURCE CAPACITY FACTOR

(%)

SOLAR 17%

WIND 32%

HYDRO 42%

BIOMASS 80%


The Table below shows the expected energy generation from each renewable energy technology and their temporal variations. It also exhibits the variation of combined capacity factor of all NCRE technologies. It is possible to realize a combined capacity factor of, approximately, 40% NCRE based power generation if the proposed NCRE portfolio is implemented. Perhaps this is an ambitious target, given the type of technologies in the NCRE mix and maturity of certain technologies. It should be noted that the contribution from biomass recourse based power plants would be very vital in achieving the desired target.

Table 2.4.4 – Details of Energy from NCRE Technologies & Capacity Factors

YEA

R INSTALLED CAPACITY (MW) GENERATION (GWH) NCRE

CAPACITY

FACTOR HYDRO WIND SOLAR BIOMASS TOTAL HYDRO WIND SOLAR BIOMASS TOTAL NCRE

2012 229 81 11 23 344 843 227 17 158 1244 41%

2013 274 131 41 33 479 1008 367 62 228 1664 40%

2014 309 151 71 43 574 1137 423 106 298 1964 39%

2015 329 251 86 68 734 1210 703 129 473 2515 39%

2016 349 281 101 93 824 1284 787 151 648 2871 40%

2017 369 311 116 118 914 1358 871 173 823 3226 40%

2018 379 341 131 143 994 1394 955 196 999 3544 41%

2019 389 371 146 148 1054 1431 1040 218 1034 3722 40%

2020 400 401 161 153 1114 1468 1124 240 1069 3901 40%



Figure 2.4.3 – Variation of Combined Capacity Factors


68


Figure 2.4.3 – Expected Energy Generation from NCRE Sources

The figure below shows the expected achievement (% contribution) from NCRE technologies towards reaching the 20% NCRE contribution to national electrical energy demand.


Figure 2.4.4 – NCRE Contribution to National Electricity Demand

Impediment Towards Achieving NCRE Targets The renewable energy capacity additions are well within the available potential of NCRE resources. However, given the industry outlook, this seems to be an ambitious target. There are many technical and non technical factors which may impede the progress of realizing NCRE target. The commonly foreseen issues are;

a. Grid connections issues b. Project approval issues c. Social and non technical issues


69

In order to achieve the set NCRE targets, interventionist type approach is desired. Since each of the NCRE based power generation schemes are at different stages of its project cycle (industry maturity), the interventions need to be carefully formulated and resource specific. The hydro sector may need interventions in the form of accelerating project approval process and clearing grid connection issues at regional grid substations whereas biomass sector may need few pilot projects to motivate and set the industry in motion. The Table below highlights the commonly cited issues when integrating large amount of renewable energy resources. The important indexes to be reviewed are the penetrations of NCRE technologies at different time of the daily demand curve. The contribution from NCRE technologies to off-peak demand, if the proposed NCRE portfolio is implemented, would be very significant. However fleets of power plants which are based on NCRE resource need to be connected to the power system at all time in order to achieve the desired contribution from NCRE technologies.

Table 2.4.5 – NCRE Penetration - Peak and Off-peak Demand

YEAR FORECAST PEAK

DEMAND

GRID(MW)

OFF PEAK DEMAND (MW)

(ASSUMING 0.45 OF PEAK

DEMAND)

TOTAL NCRE

INSTALLED

CAPACITY % OF

PEAK DEMAND

TOTAL NCRE

INSTALLED CAPACITY

% OF OFF-PEAK

DEMAND

TOTAL NCRE

INSTALLED CAPACITY

LESS BIOMASS % OF

OFF-PEAK DEMAND

2012 2503 1126 14% 30% 28%

2013 2688 1210 18% 36% 33%

2014 2853 1284 20% 39% 36%

2015 3035 1366 24% 47% 42%

2016 3211 1445 26% 50% 44%

2017 3397 1529 27% 52% 44%

2018 3604 1622 28% 53% 44%

2019 3820 1719 28% 53% 44%

2020 4051 1823 27% 52% 44%


2.4.4 ARRESTING GROWTH OF ENERGY INTENSITY OF ECONOMY

Keeping the economic development goals of Sri Lanka in focus and anticipation of a strong growth in the industrial sector, retaining the present levels of energy intensity of economy will not be pursued. However, all possible measures to decouple the economic development from energy demand growth will be made, targeting an energy intensity of economy of 500 toe/XDR million by 2017. This will ensure a 20% saving of energy with respect to 2010 energy consumption. By development of systems, capacity and consciousness, the nation can be guided towards the goal of arresting energy intensity of economy. The desired objectives are as follows. Objectives:

(i) A complete mechanism for delivery of energy efficiency services.

(ii) A comprehensive capacity development programme.

(iii) Energy conscious nation.

________


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Section 3: Challenges and Opportunities for Achieving SE4ALL Goals

3.1 Institutional and policy framework This section should focus only on those institutional and policy frameworks which have direct relevance to identified goals and the degree to which there is, or not, coordination among the various relevant ministries and/or whether there is an institution which coordinates the energy sector activities within the context of economic and social development in the country.

19. Energy and development:

Energy in national development and poverty reduction strategies and plans

Energy governance: institution(s) in charge of energy sector within the context of economic and social development in the country

20. Thermal energy for households:

Relevant targets, policies, strategies, plans

National institutions/capacities (mandate/capacities of relevant governmental institutions and market regulators, fuel tariffs, specifically for households)

21. Power sector:


National Institutions/capacities (Ministry of Energy/Power, existence/capacity/mandate of market regulator for power sector, market structure in power sector, power tariffs)

22. Modern energy for productive sectors:


Institutions/capacities

23. National monitoring framework for SE4ALL:

Proposed indicators to measure and monitor achievement of national SE4ALL goals

Data requirements, gaps and associated capacity development needs

3.1.1 Institutional and Policy Framework This section describes the institutional infrastructure available in the country for the promotion and utilizing of renewable energy and also the promotion of energy efficiency.

PUCSL

SLSEA

Non-state

Sector

State Sector

Appro

vin

g

Auth

orities

Facili

tato

rs

A B

CD

Fin

ancie

rs

F

E


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Figure 3.1.1 – Institutional Arrangement

The above is an attempt to portray the institutional arrangements in Sri Lanka in the sphere of renewable energy. On one hand, these organizations can be broadly categorized as “State” and “Non-state” based on their legal status. On the other hand, these organizations can be further categorized as “Regulators” having project approving powers, “Facilitators” having facilitation and/or commercial interests and “Financiers” including credit providers and donors. Under this dual categorization, six types of organizations could be identified as follows:

1. Type A – State Sector Organizations (with regulatory and project approving powers) 2. Type B – State Sector Organizations (with facilitation role) 3. Type C– Non State Sector Organizations, NGOs (with facilitation role) 4. Type D – Non State Sector Organizations, Private (with commercial interests as well with

facilitation role) 5. Type E – Non State Sector Organizations, Private Banks (with commercial interests) as credit

providers and the Donor Community (with no commercial interests) 6. Type F – State Sector Organizations, State Banks (with commercial interests) as credit providers

Sri Lanka Sustainable Energy Authority (SLSEA) is positioned as the apex body with wider powers and has dual functions of both regulation and facilitation and hence is not listed under any type. All these organizations operate under a regulatory environment created by the Public Utilities Commission of Sri Lanka (PUCSL). The PUCSL promotes competition, efficiency, safety, and quality of service in public utilities, while protecting the interests of the consumers. PUCSL is also not listed under any type. This multiplicity of organizations on one hand could be viewed as a blessing for the promotion and utilization of renewable energy and on the other hand could be a hurdle especially at the time of project approvals due to bureaucratic hindrances. Therefore, a better coordination of stakeholder organizations, avoidance of duplicity and undue competition, etc. is the need of the hour and in this respect, SLSEA has an uphill task of playing the role of the apex body by making use of the wider powers it is bestowed with through the Act. Some key players known to the writers at the time of compiling this report are listed below under each category. It is estimated that more than 50 organizations with over 2,000 stakeholders are commercially involved in energy efficiency related matters and in the rapidly growing renewable energy industry, which includes grid-connected, off-grid community and household based renewable energy systems. The stakeholders include microfinance institutions, commercial and development banks, NGOs, project developers, consultants, and equipment suppliers. Type A – State Sector (Regulatory)

Table 3.1.1 – Classification of Organizations Involved in Renewable Energy

Organization Role

1 Central Environmental Authority (CEA)- www.cea.lk

Environmental clearance

2 Public Utilities Commission (PUC) - www.pucsl.gov.lk

Regulation

3 Board of Investment (BOI) - Project approvals

http://www.cea.lk/

http://www.pucsl.gov.lk/


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www.investsrilanka.com

4 Mahaweli Authority - www.mahaweli.gov.lk Clearance for Hydro projects

5 Airport & Aviation - www.airport.lk Clearance for Wind towers

6 Coastal Conservation Department - www.coastal.gov.lk

Clearance for Hydro projects

7 National Water Supply & Drainage Board – www.waterboard.lk

Clearance for Hydro projects

8 Irrigation Department - www.irrigation.gov.lk Clearance for Hydro projects

9 Forest Department - www.forestdept.gov.lk Clearance for Hydro projects

10 Divisional Secretaries & Pradesiya Sabhas General clearance

11 Ceylon Electricity Board (CEB) - www.ceb.lk For grid availability and capacity

Type B – State Sector (Facilitation)

Organization Role

1 National Engineering Research & Development Centre (NERDC) - www.nerdc.lk

R & D (Biomass, Biogas, Wind, Solar, Hydro, Biodiesel)

2 Sri Lanka Standard Institute (SLSI) - www.slsi.lk

Standards & Code of Practices

2 University of Moratuwa - www.mrt.ac.lk R & D (Biodiesel), Biogas

3 University of Peradeniya - www.pdn.ac.lk R & D (Biodiesel)

4 University of Ruhuna - www.ruh.ac.lk R & D (Biodiesel)

5 Industrial Development Board - www.idb.gov.lk

Development (Biogas, Biomass)

Type C– Non State Sector, NGOs (Facilitation)

Organization Role

1 Practical Action – www.practicalaction.org/sri-lanka

Policy advocacy & technology transfer

2 Sri Lanka Energy Managers Association (SLEMA) - www.slema.org.lk

Capacity building (Training, Workshops, Seminars)

3 Energy Forum - www.efsl.lk

Policy advocacy & technology transfer

4 Integrated Development Association (IDEA) - www.ideasrilanka.org

Promotion of RE, especially cook stoves

5 Lanka Biogas Association - www.lankabiogas.org

Biogas

6 Federation of Electricity Consumer Societies - www.efsl.lk/fecs.aspx

Village hydro

7 Village Hydro Energy Suppliers & Manufacturers Association

Village hydro

8 Village Hydro Developers Association Village hydro

9 Micro-hydro Association Micro hydro

10 Bio Energy Association of Sri Lanka (BEASL) - www.bioenergysrilanka.org

Biomass

11 National Energy NGO Network Promotion of Renewable Energy

12 National Network on Gender & Energy (NANEGE), University of Peradeniya - www.energia-asia.org/.../sri-lanka

Biomass

13 Department of Animal Production & Health - Biogas

http://www.investsrilanka.com/

http://www.mahaweli.gov.lk/

http://www.airport.lk/

http://www.coastal.gov.lk/

http://www.waterboard.lk/

http://www.irrigation.gov.lk/

http://www.forestdept.gov.lk/

http://www.ceb.lk/

http://www.nerdc.lk/

http://www.slsi.lk/

http://www.mrt.ac.lk/

http://www.pdn.ac.lk/

http://www.ruh.ac.lk/

http://www.idb.gov.lk/

http://www.practicalaction.org/sri-lanka

http://www.slema.org.lk/

http://www.efsl.lk/

http://www.ideasrilanka.org/

http://www.lankabiogas.org/


http://www.bioenergysrilanka.org/

http://www.energia-asia.org/.../sri-lanka


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www.daph.gov.lk

Type D – Non State Sector, Private (Commercial & Facilitation) Equipment suppliers & private developers

Organization Role

1 EnerFab (Mr Indika Gallage) - www.enerfabsrilanka.com

Dendro equipment supplier

2 Spectra Industries - www.spectra.lk Cook Stoves & Dendro equipment supplier

3 Cimplus Lanka (Pvt) Ltd (Mr G.K.Upawansa) Biogas

4 Eco Engineers (Mr Athula Jayamanne) - www.athulajayamanne.com

Biogas

5 Industrial Services Bureau (Mr Neelakanth Wanninayake) – www.isb.lk

Supplying of small scale wind turbines

6 Industrial Services Lanka Limited (Mr Anura Vidanagamage) – www.isl.lk

Supplying of small scale wind turbines

7 Access Solar - www.accesssolar.lk Supplying of Solar PV

9 Alpha Solar - www.solartherm.lk Supplying of Solar PV

10 EB Creasy – www.listofcompanies.co.in/e-b-creasy-company-plc

Supplying of Solar PV

11 Selco Solar Supplying of Solar PV

12 Shell Solar - www.solar-facts-and-advice.com/shell-solar.html

Supplying of Solar PV

13 Softlogic - www.softlogic.lk Supplying of Solar PV

14 Solar Dynamics Supplying of Solar PV

15 Suriyavahini Supplying of Solar PV

Type E – Non State Sector, Private Banks (with commercial interests) & Donor Community (without commercial interests)

Organization Role

1 DFCC Bank - www.dfcc.lk Credit

2 National Development Bank (NDB) - www.ndbbank.com

Credit

3 Samptah Bank - www.sampath.lk Credit

4 Hatton National Bank (HNB) - www.hnb.net Credit

5 Seylan Bank - www.eseylan.com Credit

6 SEEDs - www.seeds.lk Credit

7 Commercial Bank of Ceylon - www.combank.net

Credit

8 Ceylinco Leasing Corporation Credit

9 Lanka Orix Leasing Company - www.lankaorix.com

Credit

10 Alliance Finance Company - www.alliancefinance.lk

Credit

11 Sanasa Development Bank - www.sdb.lk Credit

1 GEF - www.thegef.org/gef/CM-SriLanka Grants

2 UNDP - www.undp.lk Grants

http://www.daph.gov.lk/

http://www.spectra.lk/

http://www.athulajayamanne.com/

http://www.isb.lk/

http://www.isl.lk/

http://www.accesssolar.lk/

http://www.solartherm.lk/

http://www.listofcompanies.co.in/e-b-creasy-company-plc

http://www.listofcompanies.co.in/e-b-creasy-company-plc

http://www.solar-facts-and-advice.com/shell-solar.html

http://www.solar-facts-and-advice.com/shell-solar.html

http://www.softlogic.lk/

http://www.dfcc.lk/

http://www.ndbbank.com/

http://www.sampath.lk/

http://www.hnb.net/

http://www.eseylan.com/

http://www.seeds.lk/

http://www.combank.net/

http://www.lankaorix.com/

http://www.alliancefinance.lk/

http://www.sdb.lk/

http://www.thegef.org/gef/CM-SriLanka

http://www.undp.lk/


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3 ESCAP - www.unescap.org/huset/lgstudy/country/srilanka

Grants

4 Government of Netherlands Grants

5 Government of Norway Grants

6 Government of Japan (JICA & JBIC) Grants

7 Government of Ireland Grants

8 USAID – www.usaid.gov Grants

Type F –State Sector, State Banks (with commercial interests)

Organization Role

1 Regional Development Banks Credit

Note: Apart from what is listed above, there could be many organizations and individuals active in this discipline not known to the writers especially from the NGO and private sector and hence the above should not be treated as comprehensive. The roles of some key organizations are described below;

3.1.2 State Sector The Basic Structure of the Energy Sector Institutional Framework is given below;


Figure 3.1.2 – Basic Structure of the Energy Sector Institutional Framework

Development of renewable energy has received worldwide attention, mostly due to the bleak future of fossil fuel supply sector and emerging evidence of links between climate change and fossil fuel use. Like in many other developing countries, Sri Lankan case for renewable energy is more inclined to energy security and economic issues than environmental concerns. The principles on which renewable energy development is based on are four fold. They could be broadly identified as;

(i) Government policy on accelerated renewable energy development

http://www.unescap.org/huset/lgstudy/country/srilanka

http://www.usaid.gov/


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(ii) Creation of value from indigenous natural resources

(iii) Energy security concerns

(iv) National economic development objectives

Guiding principles in renewable energy development are given in the following table Guiding Principles In Renewable Energy Development


Figure 3.1.3 – Guiding Principles In Renewable Energy Development

3.1.2.1 Public Utilities Commission [26] The Public Utilities Commission Act (PUC Act 2002), which was enacted in December 2002, established the multi-sector regulatory body, the PUC. The PUC functions as a regulatory umbrella for the public utilities industries. It will initially regulate the electricity sector, with plans to add water and petroleum industries. The powers and functions regulating each sector within the PUC will be provided in industry-specific legislation. The PUC promotes competition, efficiency, safety, and quality of service in public utilities, while protecting the interests of the consumers. The PUC has been vested with the powers of advising the government on all matters such as licensing, regulation, and inspection functions, as well as tariffs and other charges. It also investigates anti-competitive practices and abuses of a dominant position and oversees the activities of monopolies. Initial funding to establish the PUC has been provided by the Government, but the PUC will generate its own funds over time from licensing fees and other charges on the industry operators. The Electricity Reform Act, which was also enacted in December 2002, provides for the regulation of companies generating, transmitting, and distributing electricity in Sri Lanka. The administration of the Electricity Reform Act will be vested in the PUC, and the PUC will serve as the economic, technical, and safety regulator for the electricity industry. 3.1.2.2 Sri Lanka Sustainable Energy Authority [27] SLSEA established under the Act No.35 of 2007 of Democratic Socialist Republic of Sri Lanka functions under the purview of the Ministry of Power & Energy (MoPE). SLSEA has the Vision to make an energy secure Sri Lanka and functions with the Mission to guide the nation in all its efforts to develop indigenous energy resources and conserve energy resources through exploration, facilitation, research & development and knowledge management in the journey of national development by protecting natural, human and economic wealth by embracing best sustainability practices. In the journey towards an energy secure Sri Lanka, SLSEA has set three primary goals, viz;


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1. All citizens to have access to modern energy services by 2017 2. Ten percent (10%) of all energy forms generated from non-conventional renewable energy

resources by 2017 across all areas including electricity (The industry if continuously facilitated through education, capacity building and relationship building exercises which target the state agencies responsible for granting planning approvals. The resource allocation process is fully web enabled in 2009 and project facilitation and monitoring is expected to be migrated to a web based scheme in 2012), transport and domestic sectors, and

3. To manage the energy intensity of economy at 500toe/XDRM even in 2017 while keeping the economic development of Sri Lanka in focus in anticipation of a strong industrial growth.

Act provides wider powers to SLSEA with special emphasis on energy efficiency and conservation programmes. SLSEA has an important and uphill task of playing the role of the apex body in energy conservation & management and by promoting renewable energy use by making use of wider powers it is bestowed with through the Act. 3.1.2.3 Ceylon Electricity Board (CEB) [28] The mandate of the Ceylon Electricity Board (CEB) is to generate, transmit and supply electricity. CEB also constructs, maintains and operates the necessary works for the generation of electricity by all means and for the inter-connection of Generating Stations. It also distributes and sells electricity in bulk or otherwise. CEB is a corporate body establish in terms of Parliament No.17 of 1969 as the Successor to the Department of Government Electrical Undertakings. It is a national institution charged with the responsibility of generating, transmitting and distributing electrical energy to reach all categories of consumers nationwide. As a national body serving a very vital function, revenue is collected according to a government approved tariff structure. To carry out its role, the CEB has acquired a large base of physical assets, including generating stations, substation complexes, transmission lines and distribution networks located in all parts of the country. It also has a significant human resource base to operate, maintain and plan the system. It is the duty of the CEB to provide reliable electricity to the entire nation at internationally competitive prices effectively and efficiently through a meaningful partnership with skilled and motivated employees using appropriate state of the art technology for the socioeconomic development of the country in an economically sustainable manner while meeting acceptable environmental standards and a satisfactory rate of return on investments. The availability, reliability and quality dimensions highlight the degree to which the CEB should orient its functions to the satisfaction of the customer and to serve the Nation. These are also the major concerns of the commercial and industrial sectors which have to be internationally competitive in order to provide employment opportunities and contribute to the economic and social development. The affordability criteria highlight two aspects, firstly that the supply of electrical energy should be within the reach of the people at an affordable price irrespective of where they live, so that the people could make use of it to facilitate socio economic development. Secondly, planning process, implementation strategies, distribution methodologies and revenue collection activities should be geared to provide electricity at an affordable price to the customer while ensuring that all these processes guarantee the availability, reliability and quality of the product while adhering to acceptable environmental norms.


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3.1.2.4 Road Map to Achieve Energy Security [28] A Cabinet Sub Committee coordinated by Minister of Petroleum Industries has been appointed in June 2012 to examine and assess the counbtry’s energy supply situation and develop a clear “Road Map” in achieving immediate, medium and long term energy security in terms of relaibility, adequacy and affordability of energy supply. This “Road Map to Achieve Energy Security” is also expected to suggest possible incentives for promoting alternative and renewable sources for ensuring energy security in the country. The Road Map is to be submitted to Cabinet of Ministers within 4 months.

3.1.3 NGO Sector There are many non-governmental organizations (NGOs) active in the energy sector in the country. They have implemented many rural energy programmes and also played a key role in awareness raising and capacity building of the rural community. Further, the NGO sector in the country collaborates efficiently with private sector activities and is also instrumental in establishing many community organizations. Some of the key NGOs related to the energy sector are described below [24]. In the absence of any government authority to look after the energy requirements for the off-grid population in Sri Lanka, the civil society organizations have become the backbone of the off-grid energy sector. The NGOs and CBOs, during the last 22 years, have contributed to the off-grid energy sector by mobilizing the community and organizing the end users, by conducting research and development, providing micro-financing and by monitoring the after sale services. As a result the off-grid energy technologies have now provided energy services to over 100,000 off-grid households in Sri Lanka. These energy technologies include Solar PV systems, village hydro systems, bio-gas units, small wind generators and village dendro-power systems [29]. 3.1.3.1 Practical Action Practical Action (Former ITDG) is an international development agency that promotes appropriate technology options around the world and its Head Office is based in the United Kingdom. Practical Action has been in operation in Sri Lanka since 1989.. Currently it has around 8060 employees. Practical Action has been engaged in the areas of renewable energy (improved cook stoves, wind, micro-hydro, biomass, biogas, biodiesel, solar, etc.), rural transport, agro-processing, manufacturing, building materials, disaster mitigation, research and policy, and communications. Presently, their main involvements include policy advocacy, standards setting, capacity building, and information dissemination through publications, research, technology development, and technology transfer. Practical Action plays a crucial role in formulation of new policies and reviewing of existing policies by acting as a convener of stakeholder groups and also by preparation of various publications. It has carried out an Energy Poverty Indiex, particularly considering the primary energy needs of people. It also is engaged in the policy advocacy in the same area. The working model of Practical Action is depicted below. Figure 3.1.4 – Working Model of Practical Action (Source: Practical Action)

The working process of Practical Action commences with the technology testing to assess the suitability to local conditions. Technology could be either an existing one or entirely a new one. Thereafter, a pilot programme is implemented followed by a capacity building programme for all stakeholders to promote the technology. With the success of pilot and capacity building programmes, scaling up of the equipment, Technology Testing

Pilot Programme

Capacity Building

Scaling-up

Exit

Working Model of Practical Action


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appliances, etc. to the real life conditions is carried out and the same could be considered as the commercialization stage. When the market is developed to a self-sustaining level, a pre-determined exist strategy is executed. The first step of the process – technical testing is usually funded by the parent organization and external financial assistance is sought for pilot programmes. Financial assistance in the form of subsidies is available at the time of commercialization of technologies. The host is expected to contribute maximum of 30% either in cash or in kind. Hydro - One of the main energy programmes initiated by Practical Action was small-hydro development in the country. Practical Action invested heavily to revive the small hydro power technology that once flourished in the estate sector but went into disuse with the expansion of the national grid system and initiated a number of interventions during the last two decades to accelerate the development of this sector, which includes: (i) Technical Assistance for rehabilitation of abandoned plants, (ii) Development of local engineering capabilities in design, operation and maintenance of small hydro plants, (iii) Operation & maintenance training for operators and mechanics, (iv) Technical assistances for manufacture of Pelton turbines, Electronic Load Controllers and Induction Generator Controllers, and (v) Demonstration and promotion of decentralized, community managed micro-hydro schemes. This was one of the most successful renewable energy programmes in the country and Practical Action won “Energy Globe 2001 International Award” for its contribution for the development of villagehydro. Practical Action also undertook pioneering work in adapting the small hydro power technology for rural electricity supply which is now being used on a commercial scale in the country. This work was begun 28 years ago. Having realized the long-term potential for small hydropower development, Practical Action invested substantial time and money in capacity building to enable local technical personnel to lead the small hydropower industry in Sri Lanka. These training programmes targeted a range of technical personnel – from maintenance technicians in estates to engineers in the government organizations and private companies. Many persons benefited from Practical Action's training programmes and some of them are now holding senior positions in hydropower companies, banks, consulting companies, equipment manufacturing companies and universities. Grid connected small hydropower capacity has grown from 120 kW in 1996 to 100 MW in 2006. Practical Action is now actively engaged in Pico-hydro development. Wind - Another successful rural energy programme initiated by Practical Action was the wind energy project, which is the development of a small wind turbine for battery charging applications in the rural sector. This was, titled "Small Wind Energy System for Battery Charging". The main objective of the project was to develop a small wind machine that could cater to the electrical energy needs of the rural people, who do not have access to the national grid. The expected outcome of the project was the development of a reliable and cost effective wind energy system with dissemination of the know-how of its manufacture among the interested local manufacturers. The first phase of the project was started in June 1998 and completed in 2001. During the first three years, three demonstration units (of capacity 200 W, rotor diameter 2m and tower height 11 m) were designed, fabricated and field tested. The design is now in the commercial market, and Practical Action is in the process of improving the design further. Further, in December 2003, Practical Action conducted an extensive design course on small wind turbine for engineers [26]. Over 40 units of small wind turbines with the capacity ranging from 150 to 250 W have been promoted to date. As the solar PV market is fairly well developed in Sri Lanka, Practical Action does not involve in direct Solar PV promotion but in hybrids. all other renewable energy options. However, Solar Wind Hybrid is promoted as the need arises. So far 12 hybrid units have been promoted (300 W solar PV with 40 W wind turbines). Under Solar Thermal Systems, solar dryers for food and fish processing are being promoted. Under Bio-fuel, there is a pilot project in Nikeweratiya to promote bio-diesel using oil bearing seeds such as Castor, Neem, Jathropa, etc. As a principle, Practical Action does not promote any Ethanol as bio-diesel to


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avoid any conflicts with food production. This project is an integrated approach where Plantation, Oil expelling, Diesel processing Application of bio-diesel (for water pumping, hand tractors, electricity generation on a 90:10 basis),, etc) are being tried out with the collaboration of many partners such as NERD Centre, Universities of Moratuwa, Peradeniya and Ruhuna, and the private sector. In addition to the bio-fuel, other renewable energy technologies such as wind, biogas and solar heating (for dehydration of agro produce) are also used in the integrated demonstration project. Biogas - Practical Action started a project on developing and popularizing biogas technology in 1996 by carrying out a sample survey to find out the status of biogas technology in Sri Lanka and to learn lessons from the past experiences. This phase was followed by a series of new activities aimed at widespread popularization of the technology [2]. Out of the estimated 5,000 domestic type biogas units of in Sri Lanka, Practical Action was responsible for the promotion of around 1,000 units all over the country adopting three main technologies; Chinese continuous type, Sri Lankan dry batch type (NERD system) and Indian Plug Flow Type. The Chinese system is found to be the most effective. Few other new technologies are also being tested currently. At the national level in Sri Lanka, biogas technology has a number of benefits such as:

Waste getting cleared (the environmental management tool)

Useful fuel gas being generated (the energy generation tool)

Production of the digestate as a by-product, which is considered to be an excellent soil conditioner (the fertilizer option)

At a commercial scale, two private sector companies; Ambewela Milk Processing Factory and Maxis Poultry are in the process of setting up biogas units with German technology to treat their solid and liquid waste. Biogas compression is not yet used in Sri Lanka and the University of Moratuwa is engaged in some trails under their research activities. Practical Action was instrumental in establishing the Lanka Biogas Association (www.lankabiogas.org) in 2008 of which current president is Prof Ajith De Alwis with a membership of around 100. The Launch of the Lanka Biogas Association has officially herald a new era of development and promotion of biogas in Sri Lanka, as a technology that offers triple benefits: as an effective system in which to manage bio-degradable waste, to produce clean energy and to provide valued inputs to organic agriculture. This is considered as a landmark event in the Renewable Energy Sector of Sri Lanka. Biogas technology can play a vital role in solving some of the major problems faced by the Sri Lankan societies of the present and future. Biogas utilization should happen in a more systematic way, as it is fast becoming one of multiple end-uses in Sri Lanka [2]. Most of the technologies promoted by the Practical Action are for rural applications. However, its attempt to popularize bicycles (Human Powered Machine) is mostly for urban applications. Associations - Practical Action was instrumental in establishing / strengthening many organizations and associations for the promotion of renewable energy; Energy Forum (www.efsl.lk ), Lanka Biogas Association (www.lankabiogas.org), Village Hydro Energy Suppliers & Manufacturers Association, Federation of Electricity Consumers Society (www.efsl.lk/fecs.aspx ), Village Hydro Developers Association, Integrated Development Association (IDEA), and South Asia Electronic Forum on Energy (www.sa-energy.net) . For example, Energy Forum was commenced as a Project and later transformed into an independent entity to mainly deal with policy advocacies while Practical Action retaining the focus on technology transfers. Similarly, IDEA was commenced as a Project to promote Cook Stoves.


http://www.efsl.lk/



http://www.sa-energy.net/


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Resource Assessment - In 2001, Practical Action carried out an assessment of Micro-hydro (by Mr Sumith Fernando) in 10 districts of Sri Lanka identifying over 1,000 sites and also the potential for biogas (by Prof Ajith De Alwis). Publications - There are many publications to the credit of Practical Action (Research papers, Books, Electronic News letters – South Asia Energy Magazine ‘e net’Videos – on Wind, Micro & Pico Hydro, etc.) in all three languages (English, Sinhala & Tamil). Practical Action took the lead in the preparation of; National Standards on Domestic Biogas Systems (SLS 1292 : 2006), Operations and Maintenance Manual on Community Based Micro Hydro Village Electrification Schemes, Biogas Design & Construction, Maintenance of Domestic Biogas Systems and Biofuels. Practical Action also led the first day cover design and release of the postage stamp on the UN theme for the year 2012 ’Sustainable Energy for All’ and establishment of the demonstration pico hydro power plant at Doluwa Bus Stand. South-South Technology Transfer - Practical Action has created a good platform for South-South technology transfer. Micro-hydro technology of Sri Lanka was promoted in India with special emphasis on social organization and technical aspects while the Bio-fuel technology is transferred from India.

3.1.3.2 Energy Forum The Energy Forum was established in 1991 with the participation of renewable and decentralized energy technology NGOs, private-sector firms, government agencies, and prominent energy community members in Sri Lanka to address their common issues. The Energy Forum which was originally a project of ITDG (now Practical Action) became a non profit organization in 1999. The Energy Forum is working to promote renewable and distributed energy options to alleviate poverty, to address energy capacity deficiencies, and to protect the environment. As a network of individuals and organizations from government institutions, Provincial Councils, the private sector, NGOs, utilities, universities and research institutions, the Energy Forum serves as a network hub for non-partisan energy information and research. The Energy Forum specializes in grassroots community awareness-raising and has created close working partnerships with community leaders, business leaders, provincial councils and individual officials, policy makers, journalists, school children and teachers and other NGOs and community-based organizations. Energy Forum acts as a partner for local and global renewable energy initiatives and promotion of fair and sustainable energy policy. Particularly, in the year 2001 a survey on off-grid biomass based electricity generation potential was conducted by Energy Forum under funding by the World Bank. The survey identifies that almost all the dry-zone off-grid villages in Sri Lanka have enough sparsely used croplands that can be effectively used to establish energy plantations for supplying fuelwood to generate electricity for the consumption of off-grid households [26]. The great success of Energy Forum has been its bottom-up focus. Starting from the grassroots, the Energy Forum convinced local Community Based Organizations of their role in addressing the energy needs of the communities they serve. One of the key achievements of the Energy Forum has been the establishment of the Federation of Electrical Consumer Societies (FECS) to give end users and consumers a voice in the decision-making process regarding off-grid energy. The FECS now has around 150 ECS members, representing over 6000 off-grid powered households.




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3.1.3.3 The Federation of Electricity Consumer Societies This is a community organization that functions through the joint action of Electricity Consumer Societies attached to isolated rural hydro electricity plants distributed throughout Sri Lanka. The FECS has an active membership of 104 Electricity Consumer Societies and its Executive Committee consists of 12 members representing 6 districts in Sabaragamuwa, Southern and Uva Provinces, 4 Provincial Energy Officials and 2 National level experts. 10,250 families currently obtain electricity from these plants, covering a total population of around 51,000. FECS receives considerable backstopping support from the Energy Forum. 3.1.3.4 Integrated Development Association (IDEA) IDEA is the major organization, which co-coordinated, monitored and responded to the needs of the stove development community which comprises of several government and non government organizations operating at provincial, district and community levels. CEB stove programme set up the Integrated Development Association (IDEA) to continue stove dissemination efforts with the guidance of a few development experts. Practical Action, which assisted CEB in the stove dissemination effort, recognized IDEA as the Partner Organization. Figure 3.1.5 – “Anagi” Cook Stove

Practical Action provided technical inputs and secured funding for IDEA to continue with dissemination of stoves in rural areas thus filling the vacuum created by the withdrawal of CEB. IDEA being a NGO with a future vision was able to shell the rigidity enforced by the CEB thinking which enable to accommodate a wide spectrum of

development issues, which could not be addressed within the CEB objectives. Creation of IDEA was an important initiative for sustainability of stove activities in Sri Lanka since the main objective was to implement and support projects related to stove. Therefore, IDEA had the freedom, mandate and commitment to focus on stoves only without diluting their efforts on other projects. At present there is no significant foreign funding for stove activities except the support provided by Asian Regional Cookstove Programme (ARECOP) for networking activities for which IDEA act as the focal point. A network of district level NGOs has been formed with the support and guidance of ARECOP [26]. IDEA serves as the national focal point of the ARECOP and a member of the INFORSE. Its activities include networking and capacity building of NGOs in the promotion of wood stoves and kitchen improvement, including the Anagi Stove, promotion of improved combustion systems in brick kilns and bakeries and promoting large wood stoves for income generating activities, off grid micro hydro village electrification, capacity building of NGOs and CBOs in proposal writing and sustainable development activities and advocacy to promote rural energy planning and policy concepts [22]. 3.1.3.5 Bio-Energy Association of Sri Lanka (BEASL) Figure 3.1.6 – Gliricedia

All the interested parties in biomass energy have got-together to form Bio-Energy Association of Sri-Lanka (BEASL) with the mission of “to be the leading voice in the country for the bio energy industry”. The main objectives of BEASL are to build support for the industry throughout the country’s legislature, administration and funding agencies, through tax incentives, increased biomass research and regulations and other policy initiatives. BEASL also interacts directly with the general public, farmer organizations and other relevant institutions to ensure that bio-energy provides a sustainable


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development means to alleviate poverty. In order to offer well considered opinions and advice for the formulation of necessary policies and plans BEASL has been incorporated as an association under the Companies Act. Pioneering members of BEASL have long strived to promote the use of indigenous resources for power generation and thus reduce the increasing dependence on imported fossil fuels for both generation of electricity and thermal energy requirements. In the backdrop of poser shortages in the past years and the looming threat of further shortages and the escalation of costs of energy, the value of Biomass energy is at last being realized and has received the attention of the government authorities due to the effort of organizations like BEASL. BEASL was instrumental in convincing GOSL to declare Gliricedia as the 4th commercial crop in Sri Lanka and to have a reasonably attractive tariff for grid-connected biomass electricity generation.

3.1.3.6 Human and Environment Links Progressive Organization (HELP-O) [30] HELP-O is a NGO based in Galle specializing in producing biogas using domestic waste with the support of UNDP. With the experience gained over the years, HELP-O has ventured into the setting up of biogass plants in many governemnt hospitals. HELP-O commenced its operation in 1992 and is focusing on the low-income community for the development and balancing of human and environmental progress.


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3.2 Programs and Financing

This section should provide an overview of on-going/planned programs, further details such as project titles, financing and partners should be provided in Annex 1(see matrix below). 24. Thermal energy: programs and financing to improve access, efficiency and use of RES for cooking and other household needs

Supply: programs and investment to develop domestic manufacturing capacities, including access to capital and know-how for supply chain stakeholders

Demand: financial support schemes to improve affordability of modern energy for end-users, as well as build their knowledge and capacity

Sustainability: programs aimed at improving environmental sustainability of energy supply for cooking, such as forest plantation and sustainable charcoal production

25. Power sector: programs and financing to improve access, efficiency and use of RES for power supply

Physical access (electrification)

Availability (new capacity)

Reliability (grid maintenance/upgrade)

Sustainability (investment in renewable energy, on-grid and off grid, and energy efficiency) 26. Modern energy for productive use: programs and financing to improve access, efficiency and use of renewable resources in productive sectors

Supply: programs and investment to develop domestic manufacturing capacities, including access to capital and know-how for productive applications

Demand: financial support schemes to improve affordability of modern energy technologies for industrial and agricultural enterprises, as well as build their knowledge and capacity

Sustainability: programs aimed at improving environmental sustainability of energy supply, such as demand-side energy efficiency and use of renewable energy

3.2.1 Financial Institutions Supporting Renewable Energy Projects & their Current Status

This section provides information on financial institutions supporting renewable energy projects along with the present status of projects funded. Depicted below is an overview of dedicated funding mechanisms in the past and in the present.

Figure 3.2.1 – Dedicated Funding for Renewable Energy

ProjectPeriod Funding Admin Focus PCIs

1997 - 2002 ESD

Credit - WB / IDA

USD 19.7 m

Grant – GEF

USD 3.8 m

DFCC

Administrative

Unit6

70% Mini Hydro

28% Solar

2003 - 2007 RERED

Credit - WB / IDA

USD 75 m

Grant – GEF

USD 8 m

DFCC

Administrative

Unit11

67% Mini Hydro

32% Solar

2008 - 2011 RERED-AF

Credit - WB / IDA

USD 40 m

Grant – GEFBalance from

ESD & RERED

DFCC

Administrative

Unit11 ?

2009 - ?Commercial

Bank

Credit – WB/IFC

USD 15 m

Grant – GEF,

Ireland & Japan

Commercial

Bank ?

Upgrading

Renewable

Energy Projects

?


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The funding landscape of Sri Lanka in renewable energy projects witnessed a dramatic change in 1997 with the successful negotiation of GOSL with the International Development Association – IDA (Concessionary credit arm of the World Bank) to secure a concessionary credit line (USD 19.7 m) supplemented with a grant component (USD 3.8 m) from Global Environmental Facility (GEF). The Energy Service Delivery (ESD) project was the result of this initiative which was operative from 1997 to 2002. Following the tremendous success of ESD, the Renewable Energy for Rural Economic Development (RERED) project was launched in 2003 by broad basing the development objectives with the enhanced credit line (USD 75 m) from the same funding source. A GEF grant of USD 8 m was made available for the RERED project. At the end of RERED project in 2007, and again due to its resounding success, an additional credit line amounting to USD 40 m was made available by the same funding organization for the extended phase of RERED project operative from 2008 to 2011. The remaining grant components of ESD and RERED are available for the extended RERED. A private sector oriented and independent administrative unit was established under the DFCC Bank to steer and administer the project (initially ESD and thereafter RERED) including the grant disbursement on behalf of GOSL. Six Participating Credit Institutions (PCIs) participated in ESD and the number increased to 11 in RERED. With the success of above projects and with the valuable experience gained, the Commercial Bank of Ceylon - CBC (one of the PCIs) has managed to tie up with International Financial Corporation - IFC (Private credit arm of World Bank) for 50% risk sharing of renewable projects undertaken by CBC. In addition to the above dedicated credit facilities, some renewable energy projects (biomass based power generation) have benefited from other credit lines such as Environmentally Friendly Solutions Fund (E-FRIENDS) though it is not meant for the promotion of renewable energy projects. The principal objective of this credit line made available by the Japan Bank of International Cooperation (JBIC) is to prevent industrial pollution in Sri Lanka. The National Development Bank (NDB) and the Participating Credit Institutions (PCI) provide long-term loans at low-interest to enable industries to reduce their pollution. Loans are either for investment in anti-pollution equipment and facilities or for technical environmental protection training costs. Further details of the projects mentioned above are explained in following sections. 3.2.1.1 Energy Service Delivery Project – ESD [31, 12] The ESD Project was implemented during 1997 – 2002 by the GOSL, with World Bank and GEF assistance. The ESD Project comprised three components – a credit programme, a pilot grid-connected wind farm of 3 MW and a capacity building component for the Ceylon Electricity Board (CEB). The Administrative Unit (AU) set up within DFCC Bank was the executing agency for the ESD Credit Programme component and the CEB was the executing agency for the other two components. 3.2.1.2 ESD Project Credit Programme The ESD Project Credit Programme provided the basis for a market-based approach to the introduction of renewable energy development in Sri Lanka. It was designed to promote private sector and community based initiatives for the provision of electricity services through grid-connected mini hydro projects, off-grid village hydro schemes and solar photovoltaic electrification of rural homes. The ESD Credit Programme resulted in a dramatic increase in the development of grid-connected and off-grid renewable energy projects, prepared and implemented by the private sector and village communities. At completion, the ESD Project Credit Programme had met or exceeded all targets:


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31 MW of mini hydro capacity installed through 15 projects against a target of 21 MW

20,953 solar home systems (SHS) installed, with a total capacity of 985 kW, against a revised target of 15,000

350 kW of capacity through 35 village hydro schemes serving 1,732 beneficiary households against a target of 250 kW through 20 schemes.

0

10

20

30

40

MW

Target Installed

capacity

Mini hydro capacity

0

100

200

300

400

kw

Target Installed

Capacity

Village hydro schemes

(Source: Energy Sector Unit – World Bank)

Figure 3.2.2 – ESD Project Targets & Achievements

The ESD Credit Programme was assisted by a US$19.7m line of credit from IDA of the World Bank and a US$3.8m grant from GEF. Loans for individual investments or subprojects were disbursed through participating credit institutions, namely DFCC Bank, National Development Bank (NDB), Hatton National Bank (HNB), Sampath Bank, Commercial Bank and Sarvodaya Economic Enterprises Development Services (SEEDS). The Credit Programme provided medium to long-term funding to private investors, non-governmental organizations (NGOs) and co-operatives for:

0

5,000

10,000

15,000

20,000

25,000

No

Target Installed

Nos

Solar home systems


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Off-grid electrification infrastructure through village hydro (OGVH) schemes and solar home systems (SHS)

Grid-connected mini hydro (GCMH) projects and

Other renewable energy investments. Off-Grid Projects, following an initial period of market development, entered a phase of rapid and sustained growth during the final two years. The follow-on Renewable Energy for Rural Economic Development (RERED) Project builds on the success of the ESD Project. 3.2.1.3 Pilot Wind Farm

In 1999, a pilot wind farm supplying an annual rated capacity of 4.5 Gwh commissioned in a 17 ha land closer to Hambantota town in the South under the ESD project, was successfully linked to the national grid. The wind farm comprises of five 600 kW turbines (total of 3 MW). The CEB continues to monitor and record operational data from the wind farm and learn from the experience in integrating such projects with the national grid. In 2006, the wind farm generated 2.31 Gwh [32].

(Source: Sunday Observer) Figure 3.2.3 – Wind Farm

3.2.1.4 Renewable Energy for Rural Economic Development - RERED [12] Following the success of the ESD project, the RERED Project was launched in 2002 to provide electricity access to rural households and small and medium enterprises through the deployment of off-grid renewable energy technologies as well as to promote private sector power generation from renewable energy sources. The specific objectives of the RERED project include expanding commercial use of energy generated from renewable sources and fostering rural economic development and thereby improve quality of rural life by providing access to electricity. The credit support made available under both projects played a pivotal role in nurturing the sector. Following the successful implementation of ESD project, several other financial institutions, including commercial banks, leasing companies and micro finance institutions displayed a keen interest in participating in the implementation of the follow-on RERED project. In addition to the 06 PCIs involved in the successful ESD project, 05 new PCIs were selected under the RERED project, namely Seylan Bank, Ceylinco Leasing Corporation, Lanka Orix Leasing Company, Alliance Finance Co and Sanasa Development Bank. A total of USD 83 m was committed to Sri Lanka under the RERED project. The two renewable energy development projects have enabled the electrification of almost 130,000 rural households as at 31st March 2009 [18]. The project initiatives have furthermore provided a firm foundation for entrepreneur and technical capabilities as well as financing capabilities. 3.2.1.5 RERED Additional Financing [12, 31] With the full commitment of RERED Project credit line, the need to seek additional sources of long term funds to foster the continued growth of the renewable energy sector was identified. GOSL, with a view to addressing the issue, requested the World Bank for supplementary financing for the RERED Project through IDA credit.


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With the signing of the RERED Additional Financing agreement between the GOSL and the World Bank, the RERED project, which was implemented over the period 2002-2007, was extended until 2011. IDA provided an additional USD 40 m line of credit for RERED Additional Financing. 3.2.1.6 Projects Implemented under ESD and RERED [31] Given below are the Off-Grid Village Electrification Schemes implemented and Solar Home Systems installed under ESD, RERED and RERED-AF from 1998 to 2008.

Off-Grid Village Electrification Schemes Completed under ESD (1997-2002),

RERED (2003-2007) & RERED Additional Financing (2008-2011) Projects

ESD Project RERED RERED AF

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Cumulative Capacity kW

0

22

75

128

350

661

810

1,011

1.171

1,432

1,577

Cumulative Number of Households

0

140

365

573

1,732

2,548

3,817

4,587

5,129

5,869

6,425

(Source: http://www.energyservices.lk/statistics/esd_rered.htm)

Figure 3.2.4 – Performance of ESD & RERED – Off-grid Village Hydro

http://www.energyservices.lk/statistics/esd_rered.htm


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Solar Home Systems Installed under ESD (1997-2002),

RERED (2003-2007) & RERED Additional Financing (2008-2011) Projects

ESD Project RERED RERED AF

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Cumulative Capacity kW

1.6

25.6

108.6

615.8

984.6

1867.9

2904.2

3909.9

4624.2

5170.2

5548.6

Cumulative Number of Systems Installed

50

683

2574

13316

20953

39530

62834

83773

101551

115195

124800

(Source: http://www.energyservices.lk/statistics/esd_rered.htm)

Figure 3.2.5 – Performance of ESD & RERED – Solar Home Systems

3.2.1.7 Project Performance in Facilitating Finance [12] Achievement of project disbursement targets - The long term financing arrangements extended under both ESD and RERED credit programs, have been identified as a key attribute that enabled PCIs to meet project funding targets. The credit facility provided the end user access to liquidity for both capital investment and working capital on affordable terms. While some project developers required long term financing to meet high infrastructure costs coupled with relatively long term cash flow generation, other developers, such as solar system developers needed access to affordable finance. Some developers sought readily accessible working capital. The financing structure of the two projects successfully addressed the

http://www.energyservices.lk/statistics/esd_rered.htm


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needs of the various end users. The availability of long term financing to PCIs was a pre-requisite to match the long pay back periods, in particular of village and mini hydro projects. Payback period and financing costs - The ESD and RERED credit programs had been structured to effectively support the sector in terms of pay back as well as the rate of interest. Loans to sub borrowers incorporated maturity periods up to 10 years, while the rate of interest under RERED was pegged to the least volatile and least costly benchmark in the country, the Average Weighted Deposit Rate (AWDR). PCIs that receive refinance at AWDR extended sub loans at variable margins over AWDR, re-priced semi annually. The terms associated with grid connected mini hydro projects were typically AWDR plus 4% to 5% for maturities of 6 to 8 years, while the terms for off-grid projects were AWDR plus 4% to 6% for similar maturities. Solar home systems were however typically linked to AWDR plus a minimum margin of 10% for maturities of 2 to 4 years, primarily due to high administrative costs involved. The long term nature of the repayment program together with the reasonable interest rate structure, matched the long term requirements of mini hydro developers. Recoveries - The suitability of the above financing schemes is reflected in the satisfactory collection ratios reported by PCIs that have been in excess of 95%. It is, however, pertinent to note that some PCIs that extended sub loans for solar projects up to 5 year tenures had experienced difficulties in recoveries in the latter years. The delays in collection were attributed to additional maintenance expenses incurred by the end user, such as replacement of batteries used in solar home systems. Some PCIs thereafter disbursed sub loans to end users for periods of 3 to 4 years. This strategy had reportedly resulted in a marked improvement in their collection ratios. 3.2.1.8 Viewpoints of PCIs [12] M.Boyagoda - Consultant commissioned by the Ministry of Finance, Government of Sri Lanka under the RERED Project to Evaluate the Capital Market Constraints to Financing Renewable Power Projects in Sri Lanka, conducted interviews with selected PCIs and other stakeholders in order to make an objective assessment of their commitment to promote renewable energy projects as well as to ascertain specific concerns in funding the sector. The following salient observations reflect the broad consensus among the stakeholders. 1. Project lending under both ESD and RERED schemes to promote rural electrification had been mostly committed for mini hydro projects. Two PCIs had, however, focused on financing solar home systems. 70% of disbursements under the ESD project were for mini hydro projects, followed by solar projects that received 28% of the funds. Meanwhile 67% of the RERED credit line had been deployed to fund mini hydro projects and 32% for solar projects. 2. Most PCIs had engaged in a syndication process to synergize technical skills and minimize risk exposure. Technical expertise was available inhouse with some PCIs, while some others obtained outside assistance. 3. The average loan tenor ranged from 6 to 8 years, besides a grace period of 1 to 2 years. The rate of interest on an average amounted to AWPLR + 5% for mini hydro projects, while solar projects received lending at a flat rate ranging from 10% p.a. to 12% p.a. 4. One PCI reported exposure to this sector of 5% of their total asset book while some PCIs are considering the imposition of a sector exposure limit. 5. The lack of power generation at optimal capacity was a concern reported by PCIs. Power generated reflected only 35% to 40% of expected capacity, the reasons for which are presently being investigated.


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6. Since most of the optimum sites for mini-hydro projects are already in use, the cost of developing less favourable sites could be considerably higher resulting in the escalation of project cost estimates. 7. A time lag of 2 to 3 years is reported in the legal process relating to the acquisition of land, while project cost estimates could escalate in the interim. 9. Lack of proper planning on the part of the CEB in supplying electricity access to under privileged areas. The possibility of connection to the national grid has at times prompted borrowers to defer solar system implementation plans. This is primarily due to end user preference to obtain grid connectivity rather than a solar powered energy option. 10. Recovery issues were experienced in some instances. One PCI that focused on solar home systems had disbursed almost 60% of that portfolio to the North and East provinces. Some PCIs had incurred losses associated with the tsunami. While the overall recovery rate is very satisfactory, approximately 95%, such incidences have prompted PCIs to consider requesting equity contributions up to 40% for future lending. 11. Financing of renewable power projects would be costlier, due to depreciation of the rupee on the one hand and increasing cost of raw material such as solar cells, in the international market, on the other hand. 12. A lack of enthusiasm was witnessed in assisting wind power projects which remain in an experimental stage, as well as biomass projects due to possible constraints in raw material supply. 13. While PCIs remain committed to promoting the sector, doubts were expressed in deploying their own financial resources to fund renewable power projects, in the absence of RERED type assistance due to the inherent high asset liability mismatches that could be compounded by engaging in long term fixed rate lending. Given PCIs cost profiles any lending out of own resources would be pegged to the AWPLR plus a probable margin of 5%. This would expose the producer to a severe interest rate risk. 3.2.1.9 E-FRIENDS Loan Scheme [33] Environmentally Friendly Solutions Fund (E-FRIENDS) is a concessionary loan scheme implemented by National Development Bank (NDB) with JICA supports through a Japanese ODA loan. E-FRIENDS provides loans to private companies via Participating Credit Institutions, in order to support private companies' medium and long-term investment in environment improvement activities including the introduction of anti-pollution technologies. E-FRIENDS also financed the expenses for consulting services and training, which is required by private companies to obtain technological and environmental support to implement environmental improvement activities. So far, E-FRIENDS has provided some seven billion rupees (LKR) for approximately 800 projects. The financing framework is shown in the below diagram [47].

(Source: http://www.jica.go.jp/english/news/press/2009/090420.html)

Figure 3.2.6 – Financing Framework of E-FRINDS Loan Scheme

http://www.jica.go.jp/english/news/press/2009/090420.html


91

Renewable energy projects are also benefited by this loan scheme as they are qualified under environmentally friendly projects. Principal Terms & Conditions for Sub-Loans under the Credit Component [34]

Loan Amount: Up to 100% of the project cost subject to a maximum of LKR 20 million (USD 174,000).

Equipment that has both pollution control function and results in a substantial increase in profitability will be eligible for loan amount covering 70% of the cost.

Repayment Period: Maximum 10 years

Grace Period: Maximum 2 years

Security: Normally a mortgage on the project assets

Interest Rate: 6.5 % E-Friends Interest Free Loan under the Technical Assistance Component [34]

The interest free technical assistance loan is available to cover the consultancy costs directly related to the project, which is to be implemented under the E-Friends scheme.

Interest Free Loan Amount: Up to 75% of the cost subject to a maximum LKR 750,000 (USD 6,520).

Repayment Period: Maximum 5 years

Grace Period: Maximum 12 months

Security: Normally mortgage on project assets Participating Credit Institutions (PCIs): National Development Bank, DFCC Bank, Hatton National Bank, Commercial Bank of Ceylon, Sampath Bank, Seylan Bank, and branches of these banks. 3.2.1.10 CBC – IFC Project [35, 36] The International Finance Corporation (IFC) and Commercial Bank of Ceylon (CBC) signed an agreement in June 2009 to upgrade renewable energy projects in Sri Lanka. According to the agreement IFC will share 50 percent of the risks of the renewable energy projects undertaken by the CBC. The project follows a unique “distributed generation” approach, with smaller scale production of electricity at or near energy demand improving reliability of supply and lowering pollution by using renewable sources. The project is expected to produce economic benefits for local project developers including small and medium enterprises. IFC will share its financing, project structuring capability and benchmark data for renewable energy technologies with Sri Lanka. IFC will also help enhance the bank’s ability to appraise projects using these technologies. An advisory component funded by the Government of Ireland and Japan and Global Environment Facility will help the CBC to build the capacity and skills needed to implement the program. Most of the prime hydro power potentials in the country have already been exploited. The remaining are sub-prime projects where the risk is high. Other renewable energy options that CBC has focused are wind and bio-mass, which are both risky ventures. Climate changes and other technical factors that would obstruct the power generation can thwart revenue flows of these projects and so the bank will have to face credit risk. Under the agreement the IFC shares 50 per cent of such risks. 3.2.1.11 The Netherlands Development Finance Company [37] The Netherlands Development Finance Company (FMO) is the international development bank of the Netherlands. FMO invests risk capital in companies and financial institutions in developing countries.


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FMO has been invited to arrange up to USD 55 m debt for South Asia Energy Management Systems Inc. (SAEMS) for a portfolio of 12 small hydro power projects (SHP) in Sri Lanka and Uganda with a combined capacity of 58MW. SAEMS was established in February 2006, to undertake the development, construction, acquisition, ownership and long term operation of hydro-electric and other renewable energy projects and cellulosic ethanol biofuels production facilities world-wide. The portfolio consists of eleven projects in Sri Lanka and one in Uganda. Five SHPs were acquired by SAEMS and are operational (18.5MW), four SHPs are under construction (29.3MW) and three are under development (10.2MW). The total investment amounts to USD 83.5 m, of which FMO itself will invest USD 31 m, USD 20 m by means of a senior loan and USD11 m by means of a mezzanine loan. 3.2.1.12 Future Funding Needs [12] Both the ESD Project and the RERED Project were concerned with addressing the issue of providing long term financing support for renewable energy investments. Such measures have served the purpose excellently, with capacity installed often surpassing targets. However, given the magnitude of the task still ahead, the need to formulate a viable long term financing mechanism to augment electricity generation, transmission and distribution throughout the country, remains a critical need. The funding needs of the sector has been assessed given the estimate considered in the National Energy Policy and Strategies for Sri Lanka, that of 10% of electricity generation to comprise from renewable energy. While sources attributed to the Central Bank estimates that new power plants of 200 MW would be required annually to meet the growth in demand, it is anticipated that nearly 350 MW of the above requirement would comprise of new generating capacity to be installed through renewable resources by the year 2015. The additional funding requirement to facilitate the above increase in renewable energy capacity is estimated to be approximately US$ 242 million. The refinance component of 80% would amount to US$ 193 million. 3.2.1.14 Administrative Unit [38] RERED’s Project Management Unit was converted to a body responsible for developing renewable energy strategies and addressing implementation issues. This unit is currently the focal agency for the structuring of a proposed renewable energy bond. The unit also has responsibility for administering the off-grid subsidy rolled out by the Government. Its challenge is to further develop the renewable energy industry so that it functions even in the absence of external financing.

3.2.2 Financial Institutions Supporting Energy Efficiency Projects & their Current Status

ADB is providing assistance to establish laboratory facilities for measuring of energy efficiency of appliances. This will help to implement energy labelling scheme. ADB is also providing assistance to carry out energy auditor training programme.

3.2.3 Financial Institutions Supporting Power Development Projects & their Current Status

Plan is to extend the grid to reach 97% of total households and the balance 3% will be electrified through off grid systems such as SHS and micro hydro.


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“Grama Shakthi” program is being implemented to provide SHS for the balance 3% households (40,000 HHs) this year. Under this program Government is providing 1/3 of the total cost and 1/3 will provide by the Donor agencies as a grant. The balance 1/3 of the cost will be charged from the recipient. Given below are some funding available for power sector development;

Table 3.2.1 – Funds Available for Power Sector Development

Project Description Funding AgencyTotal Cost

Million US$

Upper Kotmale hydro power project JICA 289.24

Rehabilitation of old Lakshapana power plant Austria 30.60

Rehabilitation of new Lakshapana and Wimalasurendra power plants France 50.96

Broadland power plant China 69.40

Rehabilitation of Ukuwela power plant JICA 14.56

Coal power plant at Trincomalee India / Sri Lanka 76.40

Uma Oya hydro power project Iran 446.40

Moragolla hydro power project ADB 82.50

Improvement of transmission and distribution system JICA 70.00

Improvement of transmission and distribution system ADB 477.60

Electrification prgramme China 94.40

Electrification prgramme SIDA 55.00

Power distribution development China 16.50

Line loss reduction program JICA 51.60

Rural electrification Iran 94.60

Total 1919.76 (Source: Sri Lanka Sustainable Energy Authority)

3.2.4 Financial Institutions Supporting Thermal Energy Projects & their Current

Status

According to the information available, there is no dedicated funding mechanism yet for thermal energy projects. 3.2.4.1 Promoting Sustainable Biomass Energy Production and Modern Bio-Energy Technologies [39]

The above project is to be implemented in August 2012 and a project brief is given below;

Implementation Agency: UNDP and FAO Project Period: Five years from 2012 to 2017 – To be commenced in August 2012 Executing Partners: Ministry of Environment and Natural Resources (Forest

Department; FD); Sri Lanka Sustainable Energy Authority (SEA) Project Objective: Removal of barriers to realization of sustainable biomass

plantation, increase of market share of biomass power generation mix and adoption of biomass based power generation technologies in Sri Lanka

Project Strategy: “Promoting market approaches for renewable energy” and

“Promoting sustainable energy production from biomass” Total Project cost: USD 19 million


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3.2.5 Incentives Incentives can be broadly categorized as “Financial” and “Non-financial”. Financial incentives are the outright grants, subsidies and loans available on concessionary terms. Provision of free services such as training and advisory services could be treated as non-financial incentives.

Figure 3.2.7 – Incentive Regime

All these forms of incentives are available or had been available for the promotion and utilization of renewable energy options in Sri Lanka in varying degrees, at different times, in different regions for different target groups. In some cases, these incentives are available as a package while in some cases it is just one of them depending on the need. Some incentives have been introduced with a clear plan of phasing out with exit strategies. In the early days, many NGOs such as Practical Action (formerly ITDG) operating in this field offered grants for the developers as well as end users. Soft loans schemes such as ESD, RERED and even E-FRIEND, consisted of grant components. Some Provincials Councils such as “Uva” and “Sabaragamuwa” offered financial incentives to offset the upfront cost of low-income end users of Solar Home Systems and Village Hydro projects. Free services of State, NGO and even private sector are available mostly in the form of training and advisory services. Some of the incentives available are briefly described below. 3.2.2.1 Grant Mechanism of ESD & RERED [11] The grant mechanism of Energy Service Delivery (ESD) and Renewable Energy for Rural Economic Development (RERED) projects for the solar industry reflects the objectives of the five main stakeholders:

Building a market around proven systems and ease of administration (Administrative Unit, DFCC)

Reducing grants over time with a clear exit strategy (GEF)

Providing incentives to deepen the market and enabling access for the rural poor (IDA)

Assuring sustainability of successful product lines and increasing scale (Solar Industry)

Affording quality and choice at reasonable prices (Consumers) The grant mechanism developed by adopting the above objectives precludes subsidies for already viable solar products; limiting grants only to systems smaller than 60Wp during the first year, then only to those

RE

Grants Subsidies

Soft Loans Free

Services

(Advisory & Training)

Financial Financial

Financial Non Financial


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smaller than 40Wp during years 2 and 3, and finally only to systems smaller than 20Wp during the last two years of project implementation. The follow-on RERED Project tried to accommodate the interests of the five key stakeholders in structuring the GEF co-financing grant. The maximum co-financing grant under the RERED Project was set at a value lower than what was available under the ESD Project.

Table 3.2.2 – Grant Phasing Out Scheme

Size of panel

ESD Project (1997- 2002)

RERED Project

First Year 2003) Effective from

Oct 2002

Second and Third Year

(2004/5) Effect from 31st July

2004

Fourth and Fifth year (2006/7)

10 <20 Wp 100 US$ 40 US$ 40 US$ 40 US$

20 <40 Wp 100 US$ 70 US$ 70 US$ No Grant

40-60 Wp 100 US$ 70 US$ No Grant No Grant

Above 60 100 US$ No Grant No Grant No Grant

(Source: Sri Lanka Solar Industry Market Survey)

The GEF grant program was structured with a clear exit strategy in place. The grant of US$70, given for systems above 60Wp was removed in October 2002 with the changeover from ESD to RERED. The grant of US$70, given for the systems above 40W was then removed on 01 June 2004. As the grant removal was properly planed, all the relevant parties were well informed. 3.2.2.2 Government Subsidy for SHS [11]

In addition to the above grant scheme, the Government of Sri Lanka (GOSL) provided a consumer subsidy of Rs. 7,500 (initially Rs10,000) per system per householder in the, Sabaragamuwa, Uva and Northern Eastern provinces. 3.2.2.3 E-FRIENDS Loan Scheme [33]

Environmentally Friendly Solutions Fund (E-FRIENDS) is a concessionary loan scheme implemented by National Development Bank (NDB) with JICA supports through a Japanese ODA loan. Though E-FRIENDS is specially meant for environmental protection projects, renewable energy projects are also benefited by this loan scheme as they are qualified under environmentally friendly projects. More details are given in Chapter 6. 3.2.2.4 Promotion of Eco-efficient Productivity (PEP) Project Promotion of Eco-efficient Productivity (PEP) project was implemented by The Ceylon Chamber of Commerce with the financial assistance from The Royal Netherlands Embassy. PEP provided technical and financial assistance to Private Sector organizations to adopt best practices in cleaner production and environment management. Renewable energy projects (Biomass & Biogas) project also benefited from this project. Eligible projects received up to 50% of the total project cost as a grant subjected to a ceiling of LKR 5 million (USD 43,500) per project. The technical and financial assistance from the PEP Project was limited to private sector organizations having fixed assets of less than LKR 50 million (USD 435,000) excluding land and buildings. Preference was given to Cleaner Production (CP) initiatives of women entrepreneurs. The companies participated in the Project had to agree to share the experiences/results with other


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organizations, who could replicate such activities. Project commenced in mid 2006 and concluded in early 2009. 3.2.2.5 SWICH – Asia Programme SWITCH Asia Programme was developed by the European Union (EU) under EURPOEAID in 2007 to support the Asian countries adopting more sustainable growth patterns so as to minimize the use of natural resources and the emissions of greenhouse gases, waste and other pollutants. The objective of the SWITCH-Asia Programme is to promote sustainable consumption and production (SCP) among small and medium-sized enterprises (SMEs) in Asia by moving SCP practices from demonstration to replication. To achieve this objective the Programme works simultaneously on projects that target producers and consumers. At the same time it addresses the level of policy-making and implementation of SCP related policies. So far, EU has funded 47 projects in 15 Asian countries in areas such as Green Public Procurement, Cleaner Production, Eco-labelling, etc. Each of the funded projects will bring about quantifiable reductions of CO2 emissions and resources, water and energy consumption. In Sri Lanka there are three SWITCH – Asia Programmes. Two of them were initiated by The Ceylon Chamber of Commerce (CCC) one targeting the Food & Beverage sector and the other on the leisure sector (Greening of Sri Lanka Hotels). The third project was initiated by the Industrial Technology Institute to assist the export industry (EEPEx). In addition to promoting specific SCP practices, the projects employ innovative replicating mechanisms, such as voluntary agreements, public-private partnerships, upgrading technical standards or reinforcing existing SCP service providers to make them self-sustainable on the market. In the case of the SWITCH – Asia programme on SCP for the Food & Beverage industry which commenced in January 2009, CCC was able to muster the foreign partners IVAM affiliated to the University of Amsterdam, Netherlands and the Confederation of Indian Industry and the local partners Industrial Technology Institute, Industrial Services Bureau and Industrial Development Board to be associated with this programme. The resource persons from foreign partners who are specialised in the field of Sustainable Development were of immense support on building capacity of the members of the project team who were from the local partners including the lead partner the Ceylon Chamber of Commerce. From the initial stages, the project has been involved with the Ministry of Environment, Ministry of Industry and Commerce, Ministry of Finance, Central Environmental Authority, Sustainable Energy Authority, National Cleaner Production Centre, Gamini Senanayake Associates (Private) Limited, University of Moratuwa, Bio-mass Energy Association of Sri Lanka and National Engineering Research Development Centre on various aspects for successful implementation of SCP practices in industries. In addition to promoting best practices of SCP, the programme encouraged the SMEs in the food and beverage industry to comply with international food safety standards (ISO 22000:2005 / HACCP). It is a remarkable achievement to note that few SMEs have been able to obtain the ISO 22000:2005 and HACCP certificates after the intervention of the SWITCH – Asia programme. One of the objectives of the programme was fulfilled by preparing a policy document with 8 policy instruments on SCP was handed over to the Minister of Environment. The policy on National Green Reporting System of Sri Lanka was approved by the Cabinet of Ministers and was launched. A cabinet paper has been already submitted on Public Green Procurement policy for approval.


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Service package includes training and consultancy for SMEs and policy advocacy and all such services are provided free of charge. So far, over 500 SMEs have been benefited and of which around 30% has adopted SCP practices. This 4 year project will be completed in December 2012. The activities of SCP will be sustained even after the project not only by the Ceylon Chamber of Commerce but also by the other partners of the programme whose capacity has been built to continue the service to the industries and service providers. 3.2.2.6 Government Subsidy for Gliricedia Plantation In order to promote the supply of Gliricedia as a commercially grown wood for biomass heat and power applications, GOSL has offered a grant of LKR 7,500 per ha (USD 60) for ‘under plantation’ of Gliricedia in commercial plantations, especially in coconut estates. However, BEASL questions the effectiveness of this grant as it is not going to make a significant impact on the upfront cost of planting. So far only around 500 acres has come under this grant scheme. Instead, BEASL is in the opinion that it would be more effective if the grant is offered on the basis of a Gliricedia plant at the rate of LKR 10 per plant (USD 0.1) rather than on land extent [40].

________


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3.3 PRIVATE INVESTMENT AND ENABLING BUSINESS ENVIRONMENT

This section shall identify critical gaps and barriers to private investment in energy access, energy efficiency and renewable energy, as perceived by local and international business community in a country. The main purpose is to identify key private sector stakeholders, opportunities and preconditions for scaling up their engagement and investment in support of national SE4ALL goals. It is advisable that this section is written based on contributions solicited from private companies.


Private sector actors involved in supply chain (energy supply companies, technology providers, financiers)

Barriers to private investment in modern energy supplies and technologies for cooking and other thermal applications

28. Power sector

Private sector actors involved in supply chain (power generation and distribution companies, Independent Power Producers (IPPs), financiers, technology providers)

Barriers to private investment in new on-grid and off-grid power generation capacity (especially for RES), grid extension/maintenance, demand-side management (DSM) and energy efficiency


Private sector actors on the demand and supply side (SMEs/agricultural enterprises, technology providers, financiers )

Barriers to private investment in modern energy for productive and socio-economic uses with a focus on energy efficient and renewable energy technologies and solutions

3.3.1 RENEWABLE ENERGY MARKET & INDUSTRIES

This SECTION briefly describes the renewable energy market behaviour of Sri Lanka and major industrial players engaged in either the producing /supplying /distribution of technologies/ machinery/equipment or the producing / conversion of resources. It is estimated that more than 50 organizations with over 2,000 stakeholders are commercially involved in a rapidly growing renewable energy industry, which includes grid-connected, off-grid community and household based renewable energy systems. The stakeholders include microfinance institutions, commercial and development banks, NGOs, project developers, consultants, and equipment suppliers.

(Source: Sri Lanka Energy Balance 2006)

Figure 3.3.1 – Free Market Economic Model of Demand & Supply

The free market economic model of demand and supply which is depicted above is the basis for this discussion. The demand and supply situation of main renewable energy sources in Sri Lanka, viz. Biomass, Biogas, Small Hydro Power (Mini, Micro and Pico), Solar and Wind are discussed in the following sections.

MARKETEnergy

ResourcesEnd Use

Energy

Supply

Energy

Demand

Including production,

conversion & distribution

Free Market Economic Model of Demand & Supply


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Table 3.3.1 – Demand & Supply Comparison of RE

Solar Hydro Biogas Biomass Wind

Supply

Availability of the resource

Availability of manpower

Availability of money

Availability of machines

Availability of methods

Demand

Accessibility to the resource

End user needs

End user awareness

End user affordability

Reliability of service

Availability of methods

The colour code used for the rating is as follows;

High Medium Low

On the supply side, availability of the energy resource, manpower (know-how, skills, capabilities, etc.), money (financing, grants, incentives, etc.), machines (technology, machinery, equipment, etc.), and methods (policies, institutional arrangements, etc.) shall be considered in the discussion. On the demand side, accessibility to the energy resource, end user needs, awareness, affordability (financing, grants, incentives, etc.), reliability of technology and equipment, and methods (policies, institutional arrangements, etc.) shall be considered in the discussion. As can be seen from the table above, of these five main resources, Solar could be treated as the most developed, next is Small Hydro Power (mini, micro and pico) and followed by Biogas. The Hydro market is found to be fully developed in terms of technology, equipment, construction, financing, maintenance & operation. Biogas has around 78% success rate especially when the Chinese continuous systems are adopted. The Wind market is the least developed. The Biomass market for power generation and thermal applications of industry and commercial sectors is also not developed despite its high potential. As the Solar and Small Hydro markets are well developed, their dynamism is further elaborated below.

3.3.1.1 Solar Solar Home Systems (SHS) - According to Pradip Jayewardene, President, Solar Industries Association of Sri Lanka, Sri Lanka has the world's most successful rural solar programme. More than 100,000 homes use solar today, this is 2% of all homes in Sri Lanka which is around 5 Million. This is a very significant percentage. Reasons for this phenomenon are the relatively small size of the country, highly distributed rural population, high per capita GDP and more importantly the excellent cooperation between the private sector and the government for over 15 years. End users have made the highest investment by purchasing a solar electricity system. Solar Industry - How did the cooperation between the government and the private sector work? Firstly, the government acted as the funding agency by obtaining soft loans and providing these funds to private sector financial institutions. These organizations in close cooperation with solar companies offered loans to rural customers to purchase a solar home system. The government also set technical standards for all equipment supplied under the project, provided consumer protection and screened companies who wished to participate. The project also provides grants for companies on a systems sold basis as well as grants for capacity building activities such as training and promotional work. What makes Sri Lanka unique


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is the quantum of investment in both money and effort that has gone into developing this market. In the period 1997 to 2001 it is estimated that around USD 10 m was invested by the solar industry to build an Island-wide distribution network to ensure that products were available in thousands of villages where end users lived. Considering that almost every sale takes place at the customer's home and the delivery, installation and credit collection also takes place at the home, and that almost 2,000 new customers are coming in every month, one can imagine the logistics of such an operation. This is what the industry has created. The government provided access to long term and lower cost funds and a framework for the private sector to operate in a sustainable manner. Today nearly 15 companies compete in the market, driving down costs, improving quality and service and bringing new innovation. The industry also provides jobs for around 2,000 people. Sri Lanka has proven that solar PV is the least cost option for many rural homes and customers are willing to accept solar as a good alternative to grid electricity. Sri Lanka has achieved this by the far thinking policies of the government, assistance from donors and strong private sector participation [41]. Solar Companies - According to a survey carried out by the Sri Lanka Business Development Centre (SLBDC) in 2005, there were 8 solar companies (Access Solar, Alpha Solar, EB Creasy, Selco Solar, Shell Solar, Softlogic, Solar Dynamics and Suriyavahini) operating in Sri Lanka and among them, Shell Solar was considered as the market leader having about 40% market share while Selco Solar and Access Solar account for around 24% each [42]. Panel Capacity by Solar System - According to the above survey, 42% of the systems surveyed had a range of 20 to 40 Wp capacities of solar panels and 39% of the systems had a range of 41 to 60 Wp capacities of panels [42]. Batteries Installed in Solar Systems - According to the above survey, there were 7 makes of batteries (ABM, Ecosolar, Exide, Incoe, Lucas, Nico and Sandya) installed in solar systems. “Incoe” is considered as the market leader having about 37% market share while “Lucas” and “Exide” account for around 24% and 21% respectively. Therefore, these three makes together have the market share of 81% [42]. Out of 300 systems surveyed, 30% of the batteries installed were 90 Ah capacity while 28% of batteries were 100 Ah capacity. 27% of batteries installed had capacity of 70 A. Most of the batteries replaced from the solar systems had a lifetime of 24 to 42 month period. The weighted average lifetime of the first battery installed was 30.4 months [42].

Through an analysis carried out by J.R. Finucane in 2005 on the growth of the Solar Industry in Sri Lanka under the RERED project, it was found that significant PV market opportunities will remain in the foreseeable future, given targets and pace of rural grid extension programs and the market will be competitive, with new entrants gaining market share and no significant barriers to entry [43].

3.3.1.2 Hydro Grid connected small hydropower capacity has grown from just 120 kW in 1996 to 100 MW in 2006. The development of the industry has been supported with appropriate policy changes, establishing of purchase agreements and pricing mechanisms. This, indeed, is an outstanding achievement and depicts the dynamism of the local entrepreneurship once the right institutional backing and investment climate are set in place for the new industry.

The development of the code of practice for micro hydropower projects or village hydropower projects could be treated as a good indication of the maturity of the market. This code sets out guidelines for design, construction, commissioning and maintenance of micro-hydro projects, with a sound base of civil, mechanical and electrical engineering principles and the background of practical experience in the industry [23].


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Under the SARI (South Asia Regional Initiative for Energy) project of the United State Agency for International Development (USAID), Sri Lanka Energy Forum in 2006 developed national micro hydro standards covering three countries: India, Nepal and Sri Lanka. The ultimate goal of the process was to harmonize standards and establish quality programs in the sector and expand the micro-hydro market and provide sustainable energy services to the end users. The indirect objectives of the project were to address the issues such as reducing trade barriers within the SARI region for micro-hydro energy technologies and services as well as ensure sustainable existence of micro-hydro schemes in the region. Micro-hydro sector in Sri Lanka is mainly linked with the RERED Project and hence the World Bank specifications are already in place. The Technical Committee of Sri Lanka appointed for the above task considered the RERED specification as the baseline of the drafting national standards and sought the ways and means of further developing. The drafts covered code of practices, standards for certain electro-mechanical components, software applications for management practices, training requirements and monitoring measures [44]. Code of Practice - The Sri Lanka Micro Hydro Standards were developed having ensured the financial and technical capability of implementing projects under the ownership of community organizations. In Sri Lanka micro hydro standards are not only for the reference of consultants and contractors but also for the electricity consumer societies. It also provided guidelines for following activities [44];

Controlling mechanism in place of RERED project

Comfort to banks and societies while financing projects

Code of practice for manufacturers and consultants

Sustainability of the industry

Guideline for Public Utility Commission (PUCSL) in regulation measures.

3.3.1.3 Biomass Despite its enormous potential, the biomass market for thermal applications of industrial and commercial sectors and also for electricity generation is not developed. The good sign is that many entrepreneurs have begun to sense prospects. Two emerging companies actively involved in this sector by offering unique service packages are featured below.

EnerFab Figure 3.3.2 – EnerFab Thermal Gasifier

M/s EnerFab was founded in 2005 with the vision to provide biomass based renewable energy solutions to the local industry. Since then, EnerFab has been offering local industry turn-key biomass technological solutions along with biomass supplied from sustainably grown and harvested energy plantations.

Vision of EnerFab

Re-Greening of Sri Lanka Restoring Sri Lanka’s Pristine Environment Re-Vitalizing Rural Employment and Affluence throughout Sri Lanka. Re-appreciating Sri Lanka’s Natural Resources


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Mission of EnerFab

To Promote the growing of trees, shrubs, plantations and living-organisms as a natural and renewable source of food, fertility and fuel

To promote the construction and installation of equipment for processing Sri Lanka's natural and renewable resources for the environmentally conducive generation of electrical and thermal energy through solar, hydro, biomass and wind

To design, fabricate, install and operate structures and equipment towards achieving the above.

EnerFab Business Model - The uniqueness of EnerFab is that it offers a total and turn-key solution to its clients. They do not just sell gasifiers and other equipment but the thermal energy requirement in any form (steam, hot water, Thermic fluid, hot gas, etc) as per the client’s need. Their service package include, provision of required buildings to satisfy even the architectural needs of the client, all equipment and appliances including the burners, commissioning, operation and maintenance including manpower, sourcing of fuel wood and all other needs to ensure an uninterrupted thermal energy supply to its clients. This is very similar to the ESCO (Energy Supply Company) concept where the service provider guarantees the agreed performance by relieving the client of all associated risks. EnerFab is paid for the unit of thermal energy supplied based on an agreed price which is linked to the market price of fossil fuel replaced. Of all these elements, from the perspective of the client, supply of fuel wood is the most critical at this stage as the commercially grown wood supply base is not yet developed to meet the demand. EnerFab by taking this burden out of the client has gained a competitive edge in the market. Presently, EnerFab supplies around 50 MT per day of Gliricedia to its existing clientele of around 10 (capacities ranging from 0.3 to 3.5 MW of thermal energy) and maintains a buffer stock of around 1,000 MT. EnerFab sources its Gliricedia requirement from out-growers and maintains a 20 acre nucleus. Their plan is to extend the nucleus to 700 acres. EnerFab is confident of assuring the supply of Gliricedia with a lead time of around just 2 months [45]. According to the Bio Energy Association of Sri Lanka (BEASL), it is estimated that around 250 MT of Gliricedia is being traded currently for industrial/commercial thermal applications and for electricity generation [40]. EnerFab Thermal Gasifier Systems are mostly offered for fuel switching (conversions) from either diesel or LPG gas to biomass. Presently, furnace oil conversion is not economical due to the prevailing fuel prices, but might change with price escalations [45]. A client of EnerFab is featured in Chapter 9 as a case study.


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3.3.2 Energy Efficiency The table below provides some active ESCOs and the energy management activities carried out in 2009-2010.

Table 3.3.2 – Summary of Energy Management Activities Carried 0ut by ESCOs in 2009-2010

kWh kVA LKR kWh kVA LKRM

Shin Nippon Lanka

NERDC

Energy Audit-Thermal

Systems6103GJ 145200 4,812,000

Energy Audit-Electrical

Systems41352 715,000

DIMO

Bulding Sector 180,000 720 3.6 million 180,000 720 3.6

Garment Sector 528,000 5.8 million 528,000 5.8

ENERFAB

Hotel Sector 13

ProffesionalMet

Clarion International

Garment Sector 2856 2285172 1344 944550

Beverages 552 376407Power Factor Correction

11.4

Power Factor Correction

Supply,installation and commissioning of

wood fired 1 Million Kcal/hr Techmic HeaterCOIR

2215Textile

Rubber GlovesSupply,installation and commissioning of

wood fired 1 Million Kcal/hr Techmic Heater94.5

Supply,installation and commissioning of

wood fired boillers

Gassifier Installation

4331001

Maximum Demand Analysis 238.7 1933600

3119 16 0.15

Pending

Building Sector-Detailed

Energy AuditsCapacitor bank installation and ballast change 3119 16

Heat Recovery Unit

Garment Sector-Detailed

Energy Audits2940171 597.2 31901134

Beverages-Detailed

Energy Audits465699

Minaral

Improvements of Steam Distribution System

Improvements of AC System

Improvements of lighting & AC System

Introduce a capacitor bank124210 212 1,532,920

Depends on the

activittiesNo Feedback recived

Project Description

Equipment Replacement

in Holcim Cement

Factory, Puttlam

Redesign of HVAC system and replace the

existing units with new units in Variable

refrigerant flow HVAC system in Holcim

Cement Factory, Puttlam

Annual Saving Achived through

ImplimentationEnergy Conservation MeasuresAnnual Saving Potential Simple Pay Back

Period

204,300.00 3,166,650.00 07 Years To be analyzed


3.3.3 Power Sector

Table below provides the details of power generation by IPPs in 2010;

Table 3.3.3 – Power Generation by IPPs in 2010

Install capacity - MW Generation - GWh

Hydro 175 646

Thermal 842 3600

NRE 42 83



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3.4 Gaps and Barriers

Based on the outcome of analysis in previous section, this section shall identify critical gaps and barriers to achievement of national goals, both with regard to financing and policies, institutions and capacities. Further details on financing requirements will be presented in Annex 1, Table 1.2. The main purpose of this section is to already begin to identify the main areas needing attention and possible candidates for additional support.


Governance (institutions, policies, enforcement capacities)

Supply chain (access to capital, technologies and know-how)

Households (capacities and access to capital/affordability)

31. Power sector:

Governance (existence of enabling regulatory framework for investment, enforcement capacities)

Supply chain (access to grid, capital, technologies, and know-how)

End-users (affordability and access to capital)


Governance (existence of enabling regulatory framework for investment, enforcement capacities)

Supply chain (access to capital, technologies, and know-how)

End-users, agricultural and industrial enterprises, SME (capacities and access to capital)

33. Summary: key gaps, barriers and additional requirements

3.4.1 Barriers to Implementation of Energy Efficiency Measures The major barriers in implementation of energy efficiency improvement projects have been;

1. Lack of financing 2. Lack of end user awareness and commitments 3. Lack of technical capacity among end users and 4. The absence of a regulatory mechanism.

The electricity tariff doesn’t reflect the true energy cost, especially in the domestic category. The tariffs are built, insulated from the ups and downs of the rising energy prices, therefore, it does not act as an incentive to encourage investments in energy efficiency activities. Energy efficiency is not yet a priority for many industries, since there are many other burning issues like material supply and labour related issues, which has a direct bearing on the viability of business. Sri Lankan ESCOs are not yet capable of handling the entire cycle of a given project, commencing from energy auditing to project implementation. In the area of funding, following barriers exist;

1. Lack of legal and financial infrastructure to support performance contracts between end-users and ESCOs,

2. Limited ability of local ESCOs to obtain bank financing or raise equity capital, particularly a problem for new, small ESCOs that are financially weak,

3. Lack collateral and credit history,


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4. Lack of experience among the banks, both with Energy Efficiency Improvement (EEI) projects, but also with the financial concept of performance contracts and lack of confidence on the part of banks that ESCO performance estimates will turn out to be accurate.

Above all, lack of coordination, cohesiveness and long-term perspective of activities, projects and programmes of SLSEA and the absence of a prudent implementation mechanism along with an appropriate monitoring and evaluation scheme have been identified as major bottlenecks in executing an effective national energy management programme despite the significant effort taken by the management and the staff of SLSEA. Majority of current activities, projects and programmes of SLSEA are perceived to be of ad-hoc nature with short-term perspective. Problem is further aggravated by the inadequacy of technical manpower at the management as well as at the operational level. It has been a difficult if not impossible task to attract and retain skilled and competent manpower owing to non-attractive remunerations.

3.4.1 Barriers to Promote Renewable Energy This section presents the barriers for the transferring of renewable energy technologies. Some barriers are generic and common to all renewable energy options while some are specific. Wherever possible, such specificities shall be highlighted in the following presentation. Often the result of barriers is to put renewable energy at an economic, regulatory, or institutional disadvantage relative to other forms of energy supply. Many of these barriers could be considered “market distortions” that unfairly discriminate against renewable energy, while others have the effect of increasing the costs of renewable energy relative to the alternatives [46]. All barriers could be broadly classified into 5 categories and often they are not mutually exclusive.

Figure 3.4.1 – Barriers for Promoting Renewable Energy

Barriers are summarized in the table below under each category and their degree of influence on a particular RE option is also mentioned as either “Specially Applicable to” or “Not Applicable to”.

Table 3.4.1 – Barriers for Transferring RETs

Category Barriers Generic Specially Applicable

To

Not Applicable

to

Technical

Resource supply constraints. Dendro

Grid constraints Hydro, Wind & Dendro

Harmonics distortions in the grid

Wind & Solar

Lack of R&D √

Sophisticated technologies Dendro

Reliability issues of technology √

RETs

Policy Institutional

Financial Information

Technical


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Maintenance issues of equipment

√

Financial

High initial cost √ Wind & Dendro

High interest rates √

High transaction cost √ Hydro

High risks & uncertainties Wind, Dendro

Information

Lack of resource data for project planning

√

Lack of information on supply & demand

√

Lack of information on cost/benefit, performance, and O&M

√

Lack of training, education, etc.

√

Policy

Lack of national priority for RE √

Subsidies for some fossil fuel √ Dendro

Subsidized electricity tariff for low end users

√ SHS

High taxes & import duties

Transport restrictions of biomass

Dendro

Strict environmental regulations

√ Hydro, Wind

Electricity distribution monopoly by utilities

√ Biogas

Restrictions on locations & constructions

√ Wind, Dendro

Institutional

Lack of recognition of RE by national planners

√

Procedural delays for project approvals

√ Hydro

Bureaucratic red tapes √

Inefficiencies of approving authorities

√

Poor coordination between institutions

√

Donor driven projects √

Some major barriers are further described below.

3.4.1.1 Technical Barriers

Resource Supply - In the case of renewable energy based systems such as Wind and Wood fuel fired plants (Dendro thermal power), it was found that lack of assurance of resource supply or availability are the major barriers for their promotions [47].


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In the case of Dendro power, quality of raw materials is also a constraint. This leads to poor combustion efficiencies and keeping the quality of raw materials. Reliability - In the case of renewable energy based systems such as Wind and Wood fuel fired plants (Dendro thermal power), it was found that reliability of technologies themselves is a major barrier for their promotion [47]. A low or moderate level of customer satisfaction with technical performance of SHS has also been reported.

Technology Sophistication - Almost all modern RETs, especially electricity generation technologies, are sophisticated and new to the country and technical expertise and facilities for design, manufacture, promotion and sale, operation and maintenance are still lacking for the successful implementation of RE projects. There are very few local manufacturers and agents who are involved in RE projects, and the existing maintenance networks are not adequate at all. This lack of expertise and facilities is a major technical barrier. At present, there is no familiar technology, except ICSs, that has been properly designed, monitored and assessed in the country. The design and raw materials required to set up RE plants are not based on the resources available locally. This would lead to high initial costs as well as the local community finding it difficult to understand, adopt, operate and maintain the systems, resulting in reduced productivity. Also, this would result in delay in attending to urgent repairs and necessary maintenance. The country is currently in a technology-learning phase [48]. R&D - R&D and demonstration are essential for the successful implementation of RETs. Although there are a number of universities and R&D organizations, the research base required for implementation of national-level RE programmes is as yet undeveloped because of the lack of well-coordinated and appropriately funded research projects, in addition to their limited capacities [48]. Technical Deficiencies - Operational inconveniences and lack of appliances in Biogas systems and maintenance difficulties in Wind systems. Grid Constraints - Inadequate absorptive capacity of the Sri Lankan power system (National Grid) to accommodate renewable sources is considered as a major barrier. According to a study conducted by “Siemens Power Technologies International Ltd.” in 2005 for the preparation of “Technical Assessment of Sri Lanka’s Renewable Resource Based Electricity Generation” under the RERED project, it was found that with the future development of the network, 2008 network will allow a maximum of 330MW to be connected. Similarly the 2012 model will allow 640MW and the 2013 model 690MW [49].

Harmonics - Harmonic Currents from sources such as rectifier/inverter systems will greatly increase the total harmonic distortion experienced on the network. Photo-voltaics and Wind generation systems connected to the network via power electronics will act as sources of odd harmonics [49].

Intermittent Sources - Renewable energy is often an “intermittent” source whose output level depends on the resource (i.e., Wind and Sun) and cannot be entirely controlled [46].

3.4.1.2 Financial Barriers

Financing - In SHS, consumer finance supply is a major constraint to continued growth, and may be contributing to reduced sales levels. The present loan schemes of local banks and other financial institutions do not accommodate small-scale RE projects, unless they are integrated with an income-generating activity (such as a rural industry), in addition to providing fuel for domestic energy applications. Such a limitation is based on their past experience of poor recovery of loans in rural areas [48].


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Proven, cost-effective technologies may still be perceived as risky if there is little experience with them in a new application or region. The lack of visible installations and familiarity with renewable energy technologies can lead to perceptions of greater technical risk than for conventional energy sources. These perceptions may increase required rates of return, result in less capital availability, or place more stringent requirements on technology selection and resource assessment [46]. High Initial Cost - In the case of renewable energy based systems such as Wind and Wood fuel fired plants (Dendro thermal power), it was found that lack of financing instruments and high initial cost are the major barriers for their promotion [47].

As initial costs of RE technologies are too high, dissemination of such technologies requires a supportive financial environment and subsidies, at least during the initial stage of adoption. Most of the financial institutions do not have a separate identified credit line for the energy sector [48].

Even though lower fuel and operating costs may make renewable energy cost-competitive on a life-cycle basis, higher initial capital costs can mean that renewable energy provides less installed capacity per initial dollar invested than conventional energy sources [46]. Interest Rates - Interest rates for Renewable Resource Based Electricity Generation (RERBEG) projects are high compared to those for the conventional power plants.

Long Delays - Inadequate information and past experience of success and reliability of RE projects in the country have resulted in long delay in approving loans and reluctance to finance these projects in general [48].

Transaction Cost - High transaction cost due to high cost of resource assessment, planning, developing project proposals, approvals, negotiating finances, and negotiating power-purchase contracts with utilities.

Risk & Uncertainties - As fuel price risk is associated with Biomass energy, financiers may look for higher risk premium in Dendro projects [46].

3.4.1.3 Policy Barriers

Low Priority for RE in National Planning - RE has been given the lowest priority in energy planning and policy-making. There are no institutions responsible for the promotion of RETs in the country, resulting in the lack of national-level coordination among different agencies [48]. Energy planning in the country has been carried out at the national level with emphasis on commercial fossil fuels [48].

Development thinking in the country promotes and favours only commercial and modern fuels. There is a lack of awareness and proper assessment of the role played by traditional fuels because traditional fuels do not fall within the cash economy. Despite the fact that the major energy consuming sector is the cooking sector and biomass is the major energy resource there is no government policy to address the related issues. As a result there is no institutional mechanism or organizational structure to initiate and sustain any interventions other than the few isolated activities carried out by a few NGOs and GOs on a short term project basis [22]. Taxes & Duties - Taxes as well as duties for Renewable Resource Based Electricity Generation (RERBEG) projects are high compared to those for the conventional power plants. Taxes are levied on all the imported as well as local components and services of RE-based plants sold in the local market. But at present, developers of any large conventional power generation plant enjoy tax


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benefits, which give a competitive advantage to conventional power generation over RE-based generation [48].

Regulations - Policy barriers to the development of RE systems lie in environmental regulations, tax systems, electricity sector regulation, electricity tariff, etc. [48]

Environmental Regulations - The CEA, which is the main body overseeing environmental policy and regulatory processes in the country, has not overlooked the RE sector. However, at present, the regulatory framework governing the use of natural resources in mini-hydro projects, which is equally applied to other RE-based schemes, is unclear and characterized by a multiplicity of institutions at various levels. Further, the local governments’ capacity for environmental regulations is generally weak [48].

Monopoly of Electricity Distribution - According to the electricity sector regulations, only CEB has license to generate and directly sell electricity to consumers, apart from Lanka Electricity Company (LECO) operating in a limited distribution area. Any other independent party can generate and sell electricity to the CEB, which, in turn, will sell it to the customers. However, distribution rights are not given formal clearance, and growth of the RE sector in general requires a clear process and institutional mandates [48].

Utilities may not allow favorable transmission access to renewable energy producers, or may charge high prices for transmission access. Transmission access is necessary because some renewable energy resources like Windy sites and Biomass fuels may be located far from population centers. Transmission or distribution access is also necessary for direct third-party sales between the renewable energy producer and a final consumer [46].

Tariff - The CEB electricity tariff for the domestic sector is heavily subsidized for the lower slabs of consumption, into which over 50 % of the consumers fall. This makes grid-connected electricity cheaper, for domestic consumers, than electricity from RE-based decentralized sources [48].

Fossil Fuel Subsidies - Lighting in rural communities in the country is usually based on kerosene lamps, and kerosene is a subsidized commodity across the country. Electricity from decentralized generating schemes is also mainly used for lighting, and, therefore, a cost comparison is always made with kerosene [48]. Many argue that renewable energy “costs more” than other energy sources, resulting in cost-driven decisions and policies that avoid renewable energy. In practice, a variety of factors can distort the comparison. For example, public subsidies may lower the costs of competing fuels [46].

Restrictions on Locations and Construction - Wind turbines and Biomass combustion facilities may face building restrictions based upon height, aesthetics, noise, or safety, depending on the location. Wind turbines have faced specific environmental concerns related to locating along migratory bird paths and coastal areas [46]. Land Issues – This is applicable especially for Hydro projects particularly in the lands of the Forest Department. These lands are available only on short term lease (1 year) whereas funding agencies require around 20 year lease. SLSEA is mandated to take over such lands (either individually or under the proposed ‘Energy Source Area’ declaration) and make available for the investors and developers on long lease. However, this is yet to be implemented.

3.4.1.4 Information Barriers

Data - In comparison with other energy systems, commercialization of RE systems involves many stakeholders and many resources. Development of RE requires an area-based (decentralized) approach. Collection and analysis of data on energy supply and demand should be carried out in each locality to


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design appropriate RETs. Such activities should be carried out by different institutions at different levels, and there should be proper coordination and interaction among these institutions [48]. Training & Education - In particular, village-level social organizations are very weak in promoting new technologies. Limited experience and exposure of the rural populace to community development activities has contributed to poor organizational skills in initiating and implementing RE schemes. Lack of technical expertise to carry out pre-feasibility studies at community level is a major hindrance to the identification of possible sites and technologies. Also, rural communities are yet to be taught specific installation, operation and maintenance skills, which most modern RETs demand. The absence of such skill development institutions and programs in the country act as a barrier to the promotion of RETs [48]. The markets function best when everyone has low-cost access to good information and the requisite skills. But in specific markets, skilled personnel who can install, operate, and maintain renewable energy technologies may not exist in large numbers. Project developers may lack sufficient technical, financial, and business development skills. Consumers, managers, engineers, architects, lenders, or planners may lack information about renewable energy technology characteristics, economic and financial costs and benefits, geographical resources, operating experience, maintenance requirements, sources of finance, and installation services. The lack of skills and information may increase perceived uncertainties and block decisions [46].

Awareness & Education - Lack of proper education at different levels is a barrier to the effective transfer of information on RE technologies. Awareness of RE technologies and associated environmental aspects among the general public is minimal. There are no specific subject modules on RE in the curricula of primary and secondary education systems. Even at tertiary level, the relevant subjects are taught only in some engineering fields of specialization [48].

Consumer Perception - The social status associated with modern fuels, technologies and related conveniences offered, push the consumers to perceive traditional technologies as primitive and not keeping with the modern standards. However, with a strong policy to support R & D activities to improve efficiencies and convenience of existing technologies using traditional fuels such as in wood gasifier stoves, “Anagi stoves”, biogas stoves, large improved stoves for commercial activities and improved combustion systems in thermal applications in brick. Pottery, limekilns etc, could help to change such perceptions and build confidence of the consumers [22].

3.4.1.5 Institutional Barriers

Donor Driven Projects - At present, there are many GOs and NGOs involved in RE activities, but in an uncoordinated manner. These organizations have limited capacity and resources to undertake RE projects successfully. Moreover, their involvement and interests, in most cases, are just driven by the availability of funding for particular projects rather than influenced by long-term national interests, thus failing to have a real impact [48]. Institutional Inefficiencies - An institutional barrier to the effective promotion of RETs also lies in the inefficient functioning of government institutions as a result of delay in decision-making and implementation, high organizational costs, leakage of funds, non-accountability, etc. [48]

Linkage Issues – Lack of coordination between project approving authorities is a major hindrance for project approvals. Capacity and Competence Issues – Lack of and incompetent human resource in project approving authorities is a major hindrance for project approvals.


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Priority Issues – National importance of promoting renewable energy is not well understood by many including project approving authorities.

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4 Ideas for the Formulation of Projects, Programmes & Activities Given below are the ideas generated through a focus group brainstorming exercise held on 7th and 8th September 2012 that can be used to formulate and develop projects, programme and activities for UN new initiative of SE4ALL. This exhaustive list of ideas need to be further reviewed and hence should not be treated as final and conclusive. The ideas should be prioritized using multiple criteria such as the Degree of impact, Economic and technical feasibility, innovativeness and practicability. List is arranged under three SE4ALL goals; access to energy, energy efficiency and renewable energy.

4.1 Access to Energy & Energy Security

Given below are the country targets;

All households (100%) to have access to basic energy needs by 2017 Energy security (Availability, Adequacy, Reliability, Quality and Affordability) of the nation

ensured by 2017 Policy

Defining energy security indices to be achieved (e.g. 99.9% reliability, …. Affordability, etc.)

Develop a mechanism of obtaining advices / opinions from totally independent technical expert committee (devoid of government influence) on quality and reliability of existing system on continuous bases.

Promote adequacy rather than availability

National policy on agricultural mechanization in terms of energy use efficiency (Need for equipment, Pros and cons, Scenarios – Import vs. options)

Information led policy dialog and media strategy focusing on short to long term energy security (Imports, Domestic production, Sustainability)

Long term supply contact for petroleum and coal

Incorporate energy independence for lighting and ventilation in building codes

Understand and develop strategies to minimize the uncertainties in energy mix (Detailed data, Modelling, Scenario analysis)

Choose low energy intensity industries as the economic development path

Delay the exploration of petroleum / gas in Mannar

Sources / Resources

Source diversification

Indigenous resource development

Explore new sources

Extensive use of renewable energy

Access to resource information

Improve biomass supply chain through regional companies and incentives

Work towards a fully electricity driven energy systems (Multiple fuel resource generation, one common supply route)

Generation, Transmission and Distribution


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Grid improvement and reducing losses

Use of high performance machinery and equipment for power generation

Intra-regional connectivity of grid

Enhance and improve current capacity

Decentralized generation

Minimize voltage drop during peak hours especially in rural areas

Proper maintenance programme for generation, transmission and distribution

Improve distribution system to eliminate breakdowns in electricity systems Energy industry

Develop local energy industry

Promote private sector as energy service organizations at regional level through capacity building

Energy efficiency

Enhance end use energy efficiency

Control on imported electrical appliances / components to ensure quality and energy efficiency Capacity building

Improved capacity in national planning process to do an in-depth analysis on energy security (Training staff, Government endorsement, transparency)

Strengthen the capacity at local level for energy planning and management

Training and capacity building on technology development and resource planning and management

Awareness & Promotion

Conducting media programmes on energy reliability and responsibility of general public.

Promote energy security at household, organizational, cluster / sector levels. R&D

Promote R&D for technology development Modesty

Energy modesty

Drive the nation towards less resource consumption society

4.2 Energy Efficiency


Energy intensity of economy of 500 toe/XDR million by 2017 This will ensure a 20% saving of energy with respect to 2010 energy consumption by 2020

Policy

Energy abuse penalty policy to prevent luxury use, inefficient use, waste, non-compliance of prescribed guidelines, etc.


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Technology and equipment importation policy

Intellectual Property Right (IPR) policy for innovation in EE

Consciously and systematically provide exposure of EE policies into other national and enactments

Promote decentralized policies in line with national policies (Provincial and Local Authority level)

Industrial production policy (Selection of products and processes, Incentives / disincentives, maximum permissible energy use, etc.)

Urban energy management policy (Hybrid systems, net metering incentives, rainwater use, biogas systems, etc.)

Working from home concept to minimize the need for travel

Promote Green Procurement in state sector

Replace inefficient machines and equipment in state sector organizations with high efficiency machines and equipment

Standards & Regulations

Establish standards for commonly used appliances (Strategy)

Mechanism for EE clearance industries with the provision for renewal (similar to Environmental protection licences – EPL)

Funding

Financing schemes and instruments to broad base sustainable energy development (Strategy) Industry

Gradual phasing out of energy intensive industries Technology

Grassroots / indigenous technology promotion (Action)

Dedicated entity for technology information clearing house including new and emerging technologies ((Action)

Capacity building

Empower Local Authorities for EE (Action)

Provide state sector e-services to minimize need for travel (Action)

Energy Ambassador at each workplace (Promote Energy Managers at each work place to Energy Ambassadors after evaluating their performance)


Inculcate EE culture in the nation (Strategy).

Public ally available national indices on national energy efficiency (Action)

Water is energy (Strategy) Monitoring & Evaluation

Impact monitoring of various EE measures (Action)

Assessment of economic impact (including externalities) of energy intensive industries (Action)

National indices on national EE (Action) R&D


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Promote R&D for technology development (Strategy) Modesty

Energy modesty (Strategy) Rewards

Recognize high achievers (Action)

4.3 Renewable Energy


Generation of electricity from NCRE to reach 10% by 2015, 20% by 2020 and beyond. Ten (10%) percent of industrial thermal energy to be switched to biomass. Ten (10%) percent of transport energy from non-petroleum fuels. Increase of biomass as a clean cooking fuel by 10%.

Policy

RE policies at National, Provisional & Local Government levels

Master plan and a road map for RE which is to be reviewed and revised once in two years, make targets and achievements publicly available

Establish combined RE policies with land, water and energy (Characterization of Sri Lankan situation, Detailed modelling training and use, etc.)

Policies promoting forest & wild life areas (Grow biomass in fire barriers, Elephant fences, Forest communities as biomass suppliers)

National policy on fossil fuel importation and use to promote biomass use and other applications

Develop policies with ministries of industries and plantations for the promotion of biomass plantations

Service delivery policy to promote RE in transport (Solar charging stations, Hydrogen use, compressed biogas, etc.)

Industrial RE use optimization policy (Minimum integration, subsidies, incentives, etc.)

Develop mechanism / policy to produce Ethanol at community / domestic level only for fuel purposes

National Hydrogen development and use policy (Understanding options for generation and storage, identification of present and future uses, legal framework, institutions)

National water access & use policy (Linking up with water management / water resources policies regarding hydro power generation – Integrated resource planning, Optimum use discussions, Capacity to do what if Scenarios, etc)

Demarcate / declare and develop areas for RE promotion with the help of other government agencies

Revise the net metering system (Simplify the administrative process and incentivise - cost to be minimum) to make it attractive and affordable even for small consumers

Rationalize feed in tariff pricing policy

Public quoted company for RE development (SEA has provision for this) by attracting Equity from public, developing a process for small investors to participate and to obtain CDM benefits.

Place the major thrust on biomass as the variability of other sources are high and only the biomass could realize around 80% plant factor.


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Develop proper mechanism to implemented biomass plantation (Otherwise, it will not be possible to meet 20% target by 2020)

Implement inter ministerial discussions and identify country goals

Promote large & centralized wind farms over 100 MW

Public Private Partnership (PPP) for RE investments - e.g. Mannar Wind Park. Government could provide land and other infrastructure as its contribution and the private investors could contribute by way of technology, equipment, management and operation to avoid long and undue delays in the clearance and approval process

Service delivery policy on RE (Introduce charging stations, Biogas stations, Firewood exchange, etc.)

Tax concessions for RE products (Introduce appropriate tax systems at the budget. This facility is available for solar panels but not for the other parts)

Develop common industrial parks with energy symbiosis to share renewable sources as well as waste heat.

Promoting biomass production by providing subsidies and tax concessions

Fiscal incentives for biomass energy

Registration / certification scheme for biomass suppliers

Policy and guidelines to enhance the range of biomass applications (Processing for volume reduction, gasification and transport options)

Discouraging standalone industry setups which could operate in industrial parks where they have potential in sharing RE benefits

Promoting energy sharing (grid sharing) mechanisms among neighbouring countries / regions within the country

Incentives to encourage ICS industry

Develop infrastructure for non motorized transports

Integrated transport network

Good town and country planning

Ensue road safety for cyclists and link / highlight benefits of cycling and less use of petroleum (Cross subsidies for infrastructure, economic studies, scenario analysis, investment, enforcement)

Special transport tariff (for off-peak) for EV (Electric Vehicle) charging

Promote mass transport systems

MRT in place of personalized transport

On-line remote working concepts

On-line services Standards & Regulations

Incorporate RE in building codes / approvals (Rain water harvesting and self generation to be included, Develop the guide lines for residential buildings, Energy consumption of buildings to be considered when approving the building plans)

Establishing fuel wood standards (Formal and informal). E.g. Moisture content

Quality assurance of biomass sources and technologies

RE3 certified products

Develop bio-fuel standards Assessments

Resource assessment / mapping of existing, new & emerging sources

Develop a mechanism for optimization of resources (Suitable energy mix)

Assess the potential of multi purpose schemes with irrigation, gravity / pressure tunnels for hydro power generation


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Optimize resources – technology – application (Resource mapping for effective utilization of resources, Technology mapping for the use of appropriate technology, Application mapping for resources use minimization)

Introduce sustainable assessment methodologies (Beyond ROI – Environmental externalities, socio-economic benefits to be considered)

Assess the economic and environmental benefits of using biomass as a clean cooking fuel Planning

Setting decentralized target by developing a bottom up system (Divisional to District to Provincial to National level)

Quantified realistic generation targets in GWh by 2020 to meet the expected demand of 20,000 GWh (SH – 1,200, Wind – 500, Biomass – 2,300, Total – 4,000)

Monitoring & Evaluation

Report / publicise RE targets and achievements including cost

NCRE targets and achievements to be evaluated in terms of “Carbon Foot Prints” / GHG reductions and collectively at national level, Carbon Trading mechanism with Annex 1 countries

Harnessing RE

Promote off grid / self generation (For water pumping, Salterns, Ice making)

Promote RE as non grid energy for generation of Hydrogen for transport sector

Rehabilitation Estate Sector micro hydro systems

Upgrade existing hydropower stations (Re-power) such as Lakshapana, Wimalasurendra, etc. as capacity can be increased up to 20% (through advocacy and enactments)

Hybrid system for costal management (Introducing Wave & Tidal power)

Exploit energy capacity of irrigation systems

Convert sea wave energy to generate compressed air and use it for electricity generation

Gravity rope ways for transport

Water transport

Establish sugar factories to convert their molasses to bio fuels (Ethanol) Biomass

Co-generation with waste agri biomass (Develop a mechanism for Identifying the potential)

On-line database on biomass availability

Plantation coupled Dendro plants

Promote dedicated energy plantation

Promote commercial timber industry

Biomass linking to forestry and timber

Streamline biomass supply chain

Biomass collection network

Biomass exchange centres

Setup infrastructure for sustainable supply of biomass for energy

Make available processed biomass in retails shops for improved stoves

Develop charcoal supply market and charcoal stores (make available in super markets)

Pricing mechanism for biomass

Declare suitable species (with relaxed legal aspects to cut and transport) and promote them

Briquetting of bio mass

Integrated industry / use (Thermal energy, Timber, Furniture, Biogas, Fertilizer, Shade, etc.)


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Encourage community businesses to initiate / invest more on biomass fuel production

Popularize Aurveda Treatments that uses only biomass as energy

Commercialize biomass ICS coupled with standardized fuel

Promote smoke free biomass stoves with fuel supply chains Technology

Dedicated entity for technology information clearing house including new and emerging technologies

Promote co-generation with agri biomass, waste, etc.

Waste to energy at Local Authority level

Integrate electrical energy services with transport energy needs (matching demand with supplying)

Integrate electrical energy services with thermal energy services

Introduce thermal storage systems (such as making ice banks in low peak periods where there are cooling loads / demand)

Strengthen the national grid network to absorb more RE to generate electricity (Identify the barriers and implement an accelerated programme)

Introduce advanced / improved technologies (Saving of biomass is a source itself)

Establish central thermal energy supply at industrial estates (specially in new industrial estates)

Enhance energy efficiency of biomass systems

Compressed Methane to be available as an industrial gas

Wind and solar application for agriculture

Promote / develop industries to convert waste biomass (especially food waste) to Ethanol at large scale

Introduce solar energy driven three wheelers

Electrical Vehicle (EV) taxi fleet for Colombo

Railway electrification

Hybrid vehicles

“Sisuseriya” + (Feeder roads by non motorized transports – Busses linked to trains)

Blend bio fuels

Water hycinth and other water body plants to be used for energy generation in industries

Popularize international protocols on ICS

Centralized waste water and food waste based biogas for urban and community use (Incentives, finances, institutional mechanisms)

Biomass cooking culture at homes

User centric cook stove designs

Gasification for cooking

Improved kitchen to use biomass as fuel

Make available more choices of ICS for use Capacity building

Introduce RE3 concept at technical / vocational educational establishments (for the creation of green jobs)

Introduce training programs for sustainable energy development at various professional levels.

Strengthen institutional mechanisms

Technical know-how to industrial users to improve efficiency of biomass use

Develop local light engineering to meet maintenance requirements of RE systems

Sustainable Energy Development Faculties in universities

Develop ICS producing clusters and distribution networks

Develop compact biogas digestion systems


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Inculcate RE culture

RE branding for self generation

Launch a Green Labelling programme

Upgrade existing EE zones to RE3 Zones (RE +EE) or create new RE3 zones to integrate RE with EE.

Promote RE3 as a brand and introduce a system to have RE3 certified users

Promoting RE3 elite groups (RE3 clubs)

RE3 theme / demonstration park of international repute

Integrate / amalgamate RE3 with existing 5S / productivity systems (5S + RE3) - Beyond 5S – introduce Platinum +

Promote the concept of sustainable productivity

Develop database on RE excess capacities in industrial parks and facilitating externally located industries to get into these clusters or parks

Steps to remove fear of failure in gasification in industries

Publish biomass related crop data (Growth rates, water / fertilization needs, density, moisture, other uses, calorific value, etc)

RE3 facilitation courses at tertiary and technical education

Conducting awareness campaigns together with media sector, development sector, transport sector and health sector for the use of NCRE

Promotion of foot-cycles in town areas with incentives

“Cyclon” (Mega rally, involvement of Celebrities, 5,000 to 10,000 cycles, car free areas / days)

Role models appearing in advertisement using RE

Promote institutional cooking with biomass

Change cooking practices

Advertise / Distinguish biomass powered products (such as firewood fired bread)

Promote domestic fuel wood plantation / residue use

Introduce out-door cooking place system to new houses which have space foe such constructions R&D

Promote R&D for RE

Inviting grass-root level R&D for transport sector greening (non-petroleum based)

R&D on liquid bio fuels through indigenous sources

R&D on Improved Cooked Stoves (ICS)

R&D on cleaning of biogas and packaging (Compressing, storage, delivery points) Funding

Tradable RE bills of exchange / certificates (Develop a proper mechanism)

Government grants / loans to be given for RE & make necessary budgeting allocation

Introduce refinancing mechanisms for RE investment similar to RERED project

Develop programmatic carbon credit project

Promote JVs with foreign investors Rewarding

Recognize industrial parks for their renewable energy utilization level

National reward scheme for biomass energy conversion

Technology characterization to recognize local value addition


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Recognize local manufacturers

RE star rating for organizations / institutions

4.4 Resource Panel

1. Eng. Upali Daranagama, Ministry of Power & Energy (MoPE) 2. Dr Ananda Mallawatantri, United National Developemnt Program (UNDP) 3. Dr Thilak Siyambalapitiya, Resource Management Associates (RMA) 4. Dr Thusitha Sugathapala, Sri Lanka Sustainable Energy Authority (SLSEA) 5. Eng. Harsha Wickramasinghe, Sri Lanka Sustainable Energy Authority (SLSEA) 6. Eng. M.W.Leelaratne, Ex-National Engineering Research & Development Centre (NERDC) 7. Eng. Sena Peiris, National Cleaner Production Centre (NCPC) 8. Eng. Ranjith Pathamasiri, Sri Lanka Sustainable Energy Authority (SLSEA) 9. Eng. Ananda Namal, National Engineering Research & Development Centre (NERDC) 10. Eng. Wimal Nadeera, Sri Lanka Sustainable Energy Authority (SLSEA) 11. Eng. Anura Vidanagamage, Industrial Solutions Lanka Limited (ISL) 12. Eng. Ronald Comester, Ceylon Electricity Board (CEB) 13. Eng. Nimal Perera, Sri Lanka Energy Managers Association (SLEMA) 14. Eng. Nameez Muzarfer, Practical Action 15. Ms Kushani De Silva, United National Development Program (UNDP)

Moderator

Eng. Gamini Senanayake, M/s Gamini Senanayake Associates Private Limited (GSA)

________


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