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Sri Lanka consumers warned on impending ‘electric shock’ after coal plant scrapping

ECONOMYNEXT – Sri Lanka’s power consumers, who are already paying high prices will have to shell out even more in the future, after a cheap coal plant which was about to be built was scrapped, engineers at state-run Ceylon Electricity Board has warned.

CEB is now generating coal power at about 4.36 rupees a unit, and the next cheapest source of thermal power from residual oil costs about 17.80 rupees a unit, CEB Engineers Union said, making a gap of about 13.44 rupees.

In August 2016 Sri Lanka is generated about 48 percent of total energy or 566 million units of electricity (GigaWatthours) from coal creating a potential saving of about 7,600 billion rupees a month on a conservative estimate.

Coal Bonanza

At 20 rupees a unit, the ‘savings’ from Norchocholai plants is about 8.8 billion rupees a month or about 295 million rupees a unit in running costs.

CEB Engineers Union chief Athula Wanniarachchi told reporters that with the coal plant scrapped and replaced with more expensive fuels, prices will eventually have to go up.

Sri Lanka was able to reduce power tariffs, and also avoid power cuts mostly due to the Norochcholai coal plant, engineers said.

Global fuel prices are also lower with a stronger US dollar.

"If the CEB makes losses, the costs will eventually have to be recovered from the public with taxes on food or value added tax," Wanniarachchi said.

Sri Lanka’s power consumption, which was in low single digits for the past two years, has picked up with an economic recovery in 2015 and is also growing at over 8 percent in 2016, leading to power shortages by 2018.

A planned coal plant to be built in Sampur around 2020 was suddenly halted by the new administration, in a sad repeat of the cycle seen earlier, which led to high power costs, power cuts, and economic collapses in the past, power sector analysts have pointed out.

Same Game

The start of the Sampur plant was also delayed locations were shifted and CEB officials were battling with India’ National Thermal Power Corporation to build a more efficient plant with a better heat rate to save money.

The coal plants was about to be internationally tendered this year, when a decision to change to LNG was announced and an environmental organization also went to court against the plant at the same time.

CEB has proposed coal plants since the early 1990s but they were delayed due to opposition from Catholic and Buddhist clergy and environmentalists.

Environmentalists oppose both coal plants and renewable large hydro plants which generate cheap power, engineers pointed out.

However there was little or no opposition to diesel plants or to the now proposed liquefied natural gas. LNG is ‘cleaner’ than coal.

If politicians did not block a Japanese funded plant in Norochcholai, a much more environmentally friendly plant could have been built, engineers said.

Power analysts have estimated that a delay in a coal plant from 1996 to 2006 would have cost the CEB and taxpayers about 900 billion rupees extra money, not counting the cost of economic downturns.

"Who is accountable for this?" asked Wanniarachchi. "All those who opposed the plant was nowhere to be seen when the power crisis occurred."


CEB engineers said they did not oppose LNG, but they wanted planned coal plants to go ahead. A proposed 1,200 MW Japanese funded plant in Trincomalee would be modern much cleaner plant.

LNG was more suited to the Western province where existing diesel plants could also be converted.

Engineers also warned that LNG prices, which have been unusually low following the ‘Great Recession’ may also start to move up and resume its historical trend of following oil prices.

The average selling price of electricity was brought down in Sri Lanka to 15.95 rupees a unit in 2015 from 18.50 in 2014 and the CEB also stopped making losses, mostly due to the coal plant. Falling oil prices also helped.

Last month, Singapore, which uses LNG for base load, raised retail prices by 9 percent to 19.27 Singapore cents or about 20.60 Sri Lanka rupees a unit for households.

"For the period from 1 Jul to 30 Sep 2016, electricity tariffs will increase by an average of 9.2% or 1.59 cents per kWh compared to the previous quarter," Singapore power told consumers.

"The increase is largely due to the cost of natural gas for electricity generation, which rose by 26.0 percent compared to second quarter 2016. This was partly offset by lower non-fuel costs."


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