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Wednesday December 7th, 2022

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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Crisis-hit Sri Lanka sees recovery in cruise ship tourism from zero

ECONOMYNEXT – Seventeen cruise ships are scheduled to arrive in Sri Lanka next year with
Queen Mary 2, one of the largest and popular ships, Colombo’s harbor master said, as the island nation is looking for alternative avenues to boost its faltered tourism sector.

The rise is expected to bring thousands of high end tourists with higher spending capacity after two years. The island nation saw a record high 54 ships in 2019, rising from the previous year’s 42, Nimal Silva, Colombo Port Harbor Master said.

“The 2019 was one of the best years and in 2020 there were more than 60 scheduled vessels to
call but with COVID pandemic all hell broke loose,” Silva told EconomyNext.

Fourteen cruise ships are scheduled to call from January-May next year and another three are scheduled to arrive in Colombo in November, when the peak tourism season begins.

Cruise tourism cycle begins in Sri Lanka from October to May with a dip during the monsoon

Sri Lanka welcomed two cruise ships in November after almost two years.

Three ships are scheduled to arrive in December and Azamara Quest, carrying at least 722 tourists, arrived in Colombo on December 3 and is now heading to Hambantota.

On December 18, Le Champion carrying 264 will arrive in Colombo and depart to Mumbai and the third vessel, Silver Spirit will arrive in Colombo on December 23 carrying up to 648 passengers.

There are two scheduled in January, one in February, and four in March next year, according to the harbormaster.

“Next year more ships could schedule, so far these are the confirmed ones now,” he said.

This also generates income for the port and the prices are charged according to the size of the

Silva said the first medium sized-cruise vessel, 229 meters long, generated about 14,000 dollars
for docking in the port for a day.

He said Queen Mary 2, a 325 meter long ship and one of the largest cruise ships in the world, is also
scheduled to call at Colombo in February. It can carry up to 3200 passengers.

Silva said almost all the ships that were scheduled have arrived on the island and therefore, he is
confident all the ships including Queen Mary 2 will arrive in Sri Lanka.

“Only one ship has been canceled thus far. There are no last minute cancellations if there were some they would have informed us by now,” Silva said. (Colombo/Dec07/2022)

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Sri Lanka President says 2015-2019 policy struggle was ‘warfare’

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe said his attempts to reverse the inward-looking protectionist policies and fix state finances during his last term as Prime Minister was opposed both by politicians and business interests.

“In the 4.5 years as prime minister it was an effort to take this economy out in a different direction,” President Wickremesinghe told an economic forum organized by Sri Lanka’s Ceylon Chamber of Commerce.

“We were able to get a surplus in the primary budget. But it was warfare.

“Politicians wanted to protect their power, businessmen wanted to protect their profits and many others wanted to see what the country would provide them free of charge.”

Wickremesinghe was unable to bring private investment to the port under apparent internal political opposition. Relations with President Maithripala Sirisena also soured and he appointed his own economic advisors.

Meanwhile Wickremesinghe’s free trade agenda was hit by monetary instability as the central bank printed money under flexible inflation targeting and triggered forex shortages which were followed by trade controls.


Sri Lanka controls imports in ‘Nixon-shock’ move to protect soft-pegged rupee

Sri Lanka President calls to expand Nixon shock as rupee falls

Wickremesinghe’s ‘Yahapalana’ administration also went on a spending spree called ‘100-day program’ in 2015 triggering a currency crisis in 2015/2016 as the central bank printed money to suppress rates.

The central bank however had already started injecting liquidity and losing reserves (by terminating term repo deals) from the fourth quarter of 2014 as domestic credit recovered from a 2012 currency crisis before his administration came to power.

The rupee fell from 131 to 152 and stabilization policies led to an output shock. The International Monetary Fund then taught the agency which had already depreciated the currency from 4.70 to 152 to the dollars seeking bailouts 16 times, how to calculate an output target.

Under Finance Minister Mangala Samaraweera taxes were raised and budget were fixed in 2018 to bring deficits back to pre-2015 levels, though state spending went up from 17 to around 20 percent of GDP under the spendthrift ‘revenue based fiscal consolidation’ where cost cutting was dropped.

The central bank then printed money by purchasing bonds from banks to target the yield curve, jettisoning a bills only policy established by ex-Central Bank Governor A S Jayewardena, through term reverse repo and overnight injections taking the rupee from 151 to 162 to the US dollar.

The central bank also created money by entering into a swap with the Treasury in 2018, a type of strategy used by speculators to bring down East Asian pegs putting, further pressure on the currency from around July 2018 onwards.


What went wrong; Sri Lanka’s illiberal economics and unsound money : Bellwether

Stabilization policies then led to another output shock. As forex shortages came Sri Lanka resorted to heavy external borrowing as it was unable to settle maturing loans with domestic borrowings.

After two currency crises and output shocks, macro-economists of the new administration cut taxes saying there was a ‘persistent output gap’ and printed even more money for stimulus (close the output gap). (Colombo/Dec07/2022)

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China calls for joint effort to ease Sri Lanka’s debt burden, no mention of restructure

ECONOMYNEXT — A top Chinese official has expressed hope that countries and multilaterals like the International Monetary Fund (IMF) work with Beijing to play a constructive role in easing Sri Lanka’s debt burden, stopping short of an assurance on debt restructuring.

Chinese Foreign Ministry spokesperson Mao Ning was quoted by international media as saying on Monday December 05 that China attaches high importance to Sri Lanka’s difficulties and challenges.

She was responding to a question on media reports that an IMF team will be in China this week to discuss faster progress on debt restructuring for countries including Sri Lanka, which is negotiating for an IMF bailout.

“On Sri Lanka’s debt issue, I’d like to stress that we support the financial institutions in working out ways with Sri Lanka to properly solve the issue,” said Ning.

“We also hope relevant countries and international financial institutions will work with China and continue to play a constructive role in helping Sri Lanka overcome the current difficulties, ease its debt burden and realise sustainable development,” she added.

She said China has long-standing sound cooperation with the IMF and other international economic and financial institutions.

The spokesperson avoided any mention of debt restructuring, a prerequisite for the IMF extended fund facility (EFF).

Nearly a fifth of Sri Lanka’s public external debt is held by China, according to one calculation. The emerging superpower has been generous in Sri Lanka’s time of need, extending much needed assistance in the form of rice, medicine and other commodities.

The latest arrival in the Colombo port from China was 2 billion Sri Lankan rupees worth of essential medicines and medical supplies, delivered on Tuesday.

However, critics say China is doing everything but what Sri Lanka really needs: agreeing to restructure its outstanding debt.

At least one Sri Lankan opposition MP has demanded that China agree to a restructure.


Sri Lanka debt restructuring: opposition MP warns of “China go home” protests

Tamil National Alliance (TNA) legislator Shanakiyan Rasamanickam, who had been on the warpath with Beijing over an apparent lethargy in helping the crisis-hit island nation restructure its debt, recently warned of a “China, go home” protest campaign similar to the “Gota, go home” protests that unseated the country’s powerful former president in July.

The MP told parliament last Friday December 02 that Sri Lanka owes 7.4 billion dollars to China, a nearly 20-trillion dollar economy, and if the latter was was a true friend, it would agree to either write off this debt or at least help restructure it.

Colombo has been vague at best on the status of ongoing restructure talks with Sri Lanka’s creditors, and opposition lawmakers and others have expressed concern over what seems to be a worrying delay. Rasamanickam and others have claimed that China, Sri Lanka’s largest bilateral creditor, is the reason for the apparent standstill. (Colombo/Dec06/2022)

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