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Saturday May 25th, 2024

Sri Lanka generation plan renewable power share for 2030 equal to Germany: CEB engineers

ECONOMYNEXT – Sri Lanka’s long term generation plan has set practical target for 53 percent of electricity coming from renewable and 70 percent from clean including liquefied natural gas, engineers of state-run Ceylon Electricity Board has said.

The 53 percent target balances affordability, reliability of supply and network upgrading costs and foreign debt and is around the level of present day Germany engineers say.

Costly Exercise

To take it to levels like 70 percent only from renewable by 2030 at least 3.7 billion US dollars extra would be needed in grid upgrades and energy storage solutions which is around the level of the country’s foreign reserves now.

“As per estimates so far 70 percent renewable by 2020 requires 1.7 billion US dollars to lay a backbone 400kV transmission line network for renewable zones around the country,” CEBEU President Saumya Kumarawadu said.

“Another 2.0 billion US dollars would be needed for storage. How much foreign reserves do we have now?”

However batteries may last around 10 to 15 years and would be recurrent cost.

At the moment about 40 percent of energy generated and 56 percent of installed capacity or 2,539 MegaWatts was renewable.

Of this 1351MW were CEB built large hydro plants, which was the cheapest source of power and was also firm energy with storage which could dispatched or used as necessary by day or night.

A 35MW plant will come on line in September with the Broadlands power station, and 120MW plant was expected from Uma Oya was expected in the first half of next year, basically exhausting available locations for large plants.

Another 1,188 MW made up of variable renewable energy (VRE) such as wind, solar and mini-hydro whose supply was uncertain and depended on the availability of wind and sunlight and dendro which were also small.

Another 350MW or wind was under construction, which would make it closer to 60 percent not counting rooftop solar.

“In the 1980s 100 percent of our power was renewable, hydro. But as demand went up we had to move to thermal sources like coal,” Kumarawadu said.

“When coal plants were delayed we had to go to more expensive diesel plants.”

“When cheaper plants are not built according to the plan, we have to run more expensive plants.

According to a general plan for the 2022-2041 period, another 2674 MW of solar and 1,113 MW wind are planned.

Level of Germany

In term of energy renewables were around 40 percent of the total now. It would be 53 percent by 2030 under the long term plan now proposed.

“The level we are planning to go by 2030 is the position Germany is in now,” Kumarawadu said.

“With additional 20 percent from LNG, clean energy would be around 70 percent. We have to go forward in a planned manner taking into account the examples of other countries.”

He said in Germany VRE was only 25 percent. However Germany was also one of the most expensive countries for electricity.

Germany is a country that makes high end industrial goods and imports items like apparel from Sri Lanka.

Sri Lanka’s export require affordable energy, CEBEU said.

From the current 500MW levels, solar was planned to be raised to over 2000MW.

By 2050 Sri Lanka plans to be zero-carbon.

By 2021 cumulative generation cost 2.34 rupees for hydro, coal 7.83 rupees, CEB owned thermal plants were 26 rupees, small standby generators were 32, private plants made up of combined cycle and diesel engines, were around 24 rupees.

Other renewables which were around 22 rupees or above when ‘feed in’ tariffs were implemented had come down to an average of around 18.10 rupees with competitive bidding. Wind and solar were now coming around 12 to 14 rupees with competitive bidding.

“In the 18.10 rupees are renewable power we are taking at 25-26 rupees a unit and wind and solar under competitive bidding which is coming around 12 to 15 rupees,” Kumarawadu said.

Not Firm Energy

However small and variable energy plants were not firm. They came and went out of the system based on sunlight or wind. In some countries high winds or sun had led to cascading failures.

In order to accommodate higher levels of distributed renewable energy plants which were not firm ‘smart grids’ and battery or other storage was needed.

Because the power delivered by small renewable are uncertain the CEB has to keep additional firm energy which can be dispatched or started when the VRE plants go down and vice versa.

“To take renewable plants to the grid we have to have other firm power plants, like a gas turbine as standby – we call it a spinning reserve – to use,” Kumarawadu said.

“When we take solar we have to have storage like a batter or a pumped storage plant.”

Pumped storage involves pumping water up to a reservoir in when extra power is generated in the daytime and running them down in the night, which is also like a battery with potential energy instead of chemical.

“So when we use a battery the cost of renewable power goes up. If we install batteries the cost will go up to 30 to 35 rupees a unit.”

In recent years, the cost of battery technology has, been falling in dollar terms as technology. However they are still high.

Batteries will also have to be replaced every 10 to 15 years.

There are calls for 100 percent renewable energy.

Kumarawadu says to run the system 100 percent on renewable without firm energy is like drifting on a boat without an oar.

“We have to go towards these targets with discipline and a credible plan,” Kumarawadu. “In order to expand renewable we also need firm plants without going like a canoe without oars.”

Blocking Credible Plans

Due bad decisions and blocking of cheap plants in the CEB long term generation plan, cost of power in Sri Lanka had gone up and selling prices were not enough to cover the costs.

In 2019 the CEB had lost 80 billion rupees due to selling power below cost. In 2020 the loss was 62 billion rupees.

In 2019 the generation cost was 23 rupees a unit. In 2020 it was 21.02. Depending on the availability of rain and total demand, the cost will fall as higher cost plants are shut off under a merit order. The government also cut furnace oil prices last year.

In 2020 the selling price was 16.60 rupees resulting in a loss of 4.76 rupees a unit.

“In order to keep cost down, there has be an optimum mix of high cost and low cost plants,” Kumarawadu said.

“But we are always in this crisis. There are people who want to block cheap plants. It cost only 50 billion to build the Katunayake expressway. We the CEB lost 62 billion rupees.”

The CEB had proposed a fourth 300MW plant at the existing complex in Norochcholai. Now statements are being made that it will not take place.

Though LNG is the main new source of power in CEB plans LNG prices have also started go shoot up as the US Federal reserve in printing in its so-called Powell Bubble.

A tender to procure an LNG floating terminal has also been undermined by unsolicited proposal being entertained halfway through the tender process. (Colombo/Aug02/2021)

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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.

Related

Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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300 out of 1,200 Sri Lanka central bank staff works on EPF: CB Governor

ECONOMYNEXT – About 300 central bank staff out of 1,200 are employed in the Employees Provident Fund and related work, Governor Nandalal Weerasinghe said, with the function due to be transferred to a separate agency after a revamp of its governing law.

“When it comes to the EPF there is an obvious conflict of interest. We are very happy to take that function out,” Governor Weerasinghe told a forum organized by Colombo-based Advocata Institute.

“We have about 300 staff out of 1,200 including contract staff, almost 150 of permanent staff is employed to run this huge operation. I don’t think the central bank should be doing this business,”

The EPF had come under fire in the past over questionable investments in stocks and also bonds.

In addition, the central bank also faced a conflict of interest because it had another agency function to sell bonds for the Treasury at the lowest possible price, not to mention its monetary policy functions.

“There has been a lot of allegations on the management of this fund. This is the biggest fund of the private sector; about 2.6 million active, I think about 10 million accounts.

“When it comes to EPF, obviously there’s another thing. We obviously have, in terms of resources, on the Central Bank, that has a clear conflict because we are responsible for the members.

“We have to give them a, as a custodian of the fund, we have to give them a maximum return for the members.

“For us to get the maximum return, on one hand, we determine the interest rates as multi-policy. On the other hand, we are managing public debt as a, raising funds for the government.

“And on the third hand, this EPF is investing 90 percent in government securities. And also, interest rates we determine, and they want to get the maximum interest. That’s a clear conflict, obviously, there’s no question.”

A separate agency is to be set up, he said.

“It’s up to the government or the members to determine to establish a new institution that has a trust and credibility and confidence of the members that this institution will be able to manage and secure an interest and give them a reasonable return, good return for their lifetime savings,” Governor Weerasinghe said.

“The question is that how whether we have whether we can develop that institution, whether we have the strong institution with accountability and the proper governance for this thing.

“I don’t think it should be given completely to a private sector business to run that. Because one is that here we have no regulatory institution. Pension funds are not a regulated business.

“First one is we need to establish, government should establish a regulatory agency to regulate not only the EPF business fund, there are several other similar funds are not properly regulated.

“Once we have proper regulations like we regulate banks, then we can have a can ensure proper practices are basically adopted by all these institutions.

“Then you can develop an institution that we who can run this and can be taken back by the Labour Department. I’m not sure Labour Department has the capacity to do all these things.”

While some EPF managers had come under scrutiny during the bondscam and for questionable stock investments, in recent years, it had earned better returns under the central bank management than some private funds that underwent debt restructuring according to capital market analysts with knowledge of he matter. (Colombo/May24/2024)

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Desperate Sri Lankans seek risky foreign jobs amid tough IMF reforms

ECONOMYNEXT – After working 11 years in Saudi Arabia as a driver, Sanath returned to Sri Lanka with dreams of starting a transport service company, buoyed by Gotabaya Rajapaksa’s 2019 presidential victory.

However, the COVID-19 pandemic in 2020 and an unprecedented economic crisis in 2022 shattered his dreams. Once an aspiring entrepreneur, he became a bank defaulter.

Facing hyperinflation, an unbearable cost of living, and his family’s daily struggles, Sanath sought greener pastures again—this time in the United Arab Emirates (UAE).

“I had to pay 900,000 rupees ($3,000) to secure a driving job here,” Sanath (45), a father of two, told EconomyNext while having a cup of tea and a parotta for dinner near Khalifa University in Abu Dhabi.

Working for a reputed taxi company in the UAE, Sanath’s modest meal cost only 3 UAE dirhams (243 Sri Lankan rupees). Despite a monthly salary of around 3,000 dirhams, he limits his spending to save as much as possible.

Sanath has been in Abu Dhabi for 13 months but had to wait six months before driving a taxi and receiving no salary.

TOUGH REALITIES

“I had to get my UAE driving license. I failed the first trial, and the company paid 6,500 dirhams on my behalf, agreeing to deduct 500 dirhams monthly from my salary,” he explained.

“So far, I have repaid only 3,000 dirhams.”

To raise the 900,000 rupees for the job, Sanath borrowed money from friends and pawned jewelry.

“I don’t know if I was cheated by the agent, but I must repay that money and also send money for my family’s expenses,” he said, glancing at a photograph of his family in a Colombo suburb.

Working night shifts in busy Abu Dhabi, Sanath said, “If I can secure 9,000 dirhams monthly through taxi driving, I will earn 3,000 dirhams in the month after deductions for the license fee and any traffic fines.”

Sanath came to Abu Dhabi with seven other Sri Lankan men through an employment agency in the Northwestern town of Kurunegala.

“Only two of us have withstood the tough traffic rules and payment deductions for offenses,” he said. Some of his colleagues are still job-hunting, while others have returned to Sri Lanka.

Sanath is one of around 700,000 Sri Lankans who have left the island in the last two years due to the economic crisis that forced the country to adopt difficult fiscal and monetary policies, including higher taxes and costly borrowing, exacerbating the cost of living.

FOREIGN EXCHANGE EARNERS

From January 2022 to the end of March 2024, at least 683,118 Sri Lankans migrated for foreign employment through legal channels, according to the Sri Lanka Foreign Employment Bureau.

They have sent $11.31 billion in remittances through official banking channels during the same period, central bank data shows.

Many Sri Lankans leave on visit visas, hoping to find jobs later, often guided by friends already working abroad. The economic crisis has pushed them to seek better opportunities abroad, despite the risks.

Sri Lankan authorities struggle to stop such risk-takers, who sometimes resort to illegal migration, despite warnings about human trafficking.

In Myanmar, 56 Sri Lankans caught in an IT job scam were detained earlier this year, and the government is still repatriating them.

At least 16 retired Sri Lankan military personnel have been killed in the Russia-Ukraine war after being misled by unscrupulous recruiters. Officials estimate that over 400 retired military officers may have left for similar reasons.

DISPERATE TO LEAVE

In March, Foreign Minister Ali Sabry warned against visiting any nation on open visas, urging Sri Lankans to emigrate only through registered agencies.

Despite the risks, many Sri Lankans are desperate to leave.

Abu Salim, a 32-year-old former rugby player, came to Dubai on a visit visa hoping for a banking job, which he never got.

Now freelancing in an insurance firm, he said, “I survive, and my relatives don’t see my struggle. It’s stressful, but still better than Sri Lanka right now.”

Suneth, a former top garment merchandiser, is also job-hunting in Sharjah after quitting his initial job in Sharjah.

“My worry is the visa. I must find a new job before it expires,” he said.

Many Sri Lankans in the UAE work multiple jobs, compromising their sleep and health to make ends meet. (Abu Dhabi/May 24/2024)

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