Non-Conventional Renewable Energy

The government of Sri Lanka has identified the development of Renewable Energy Projects, as a matter of policy to diversify the electricity sector from high cost thermal power generation. Therefore, required incentives and assistance was provided for the renewable energy resource development (Mini Hydro, Bio Mass, Wind, etc.,). Further National Energy Policy 2006 has identified fuel diversify and energy security in electricity generation as a strategic objective and development of renewable energy projects was identified as a part of this strategy. In view of above action has been taken to introduce a cost based, technology specific, three-tier tariff instead of avoided cost based tariff with effect from year 2007.

Cost based, technology specific NCRE Tariff

The cost based approach of determining tariffs for NCRE power plants is commonly used in many countries. The tariff that is computed using this method, allows a project developer to cover its O & M and capital costs. Besides, it ensures an assured return on capital.

This method analyses the cash flows as a result of the project activity with return on equity as one of the components of cash outflow and estimates annual cost of generation. There are some variations in the application of this method. The tariff can be given in tiers where in the initial years (typically the loan repayment period), the tariff given is higher and then lower tariff is given for the subsequent periods, which covers the operational costs and the return on the investment. The cost escalations, the O&M escalation, fuel cost escalation, and incentives in terms of subsidy or other fiscal incentives can also be included while estimating tariffs by this method. The tariff calculated by this method varies from technology to technology depending upon the performance and costs. Moreover, the tariff estimation by this method solely depends on the cost and performance of the project/ technology.

In the cost based approach, ideally tariff should be estimated for each project. However, due to resource and time constraints, technology benchmarking is commonly used wherein the average parameters such as the plant factor and, capital costs, are used for estimation of tariff. Cost based, technology specific NCRE Tariff effective from 01/01/2012 until further notice

National Energy Policy

Sri Lanka has achieved several goals set in the National Energy Policy and Strategies (2008) in the completion of electrification and the development of the renewable energy sector on the island.

The importance of enhancing self-reliance and the continuous development of the renewable energy sector in Sri Lanka is also emphasized as a part of the Ten Pillars of the National Energy Policy (2019). It is described in greater detail on the Gazette Extraordinary No. 2135/61 of 09.08.2019 which can be download from here.

Present Status of Non-Conventional Renewable Energy (NCRE) Sector as at 31st May 2020