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Sri Lanka power regulator fires salvo against fossil plants by adding up eco-costs

ECONOMYNEXT – Sri Lanka’s power regulator has released a study of ‘externalities’, where an attempt has been made to give a cash value to the pollution caused by thermal power plants such as coal, which will tend to push up costs.

Sri Lanka plans new power plants based on ‘least costs’ which tends to give a higher weighting to coal and now liquefied natural gas plants, and mature technologies such as large hydros where available.

Wind power prices have also fallen since competitive bidding was brought in and the technology also matured elsewhere. By adding externalities, higher cost renewable energy plants look better.

The Public Utilities Commission of Sri Lanka said the study was done by Sri Lanka Energy Managers Association.

The externalities study added 10.23 rupees to the cost of unit generated by a coal plant in Sri Lanka (Lakdanavi), 4.53 rupees to a heavy fuel oil combined cycle run LTL Holdings, 7.55 rupees to a diesel plant in CEB’s Kelanitissa complex, and a 4.55 rupees to a heavy fuel plant in Sapugaskanda.

“Power generation gives rise to a range of environmental issues including air pollution, water pollution, releasing toxic materials and GHG emissions during their operational life,” the PUCSL said.

“These environmental issues lead to adverse community, social and ecological related costs referred to as externalities.

“The right costs will help Sri Lanka to discover the real economic impact from power generation and also will help in preparing power generation plans for the country in the future.”

The ‘internalizing’ of ‘externalities’ however has also drawn controversy as a tactic used by the green lobby to tilt the playing field in their favour.

In Sri Lanka heavy fuels (furnace oil) are artificially priced up by the Ceylon Electricity Board which distorts the ‘merit order’ on which plants are operated (dispatched).

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The government also charges taxes from coal and diesel from time to time, while renewable energy is given tax free status, which tends to further cloud the issue.

Many high costs plants including liquid fuel plans are also not in original generation plans of the Ceylon Electricity Board but are pushed in at the last minute after coal plants are scuttled by various interest groups.

Sri Lanka built a Chinese designed coal plant amid a crisis after a Japanese plant which was specified in a CEB plan was scuttled.

Renewable plants also have their costs. Some small hydro plants are located in montane forests. Some of Sri Lanka’s wet zone forests have point endemism.

Wind farms can disrupt bird flight paths, floating solar can cut off light and destroy under water plants which in turn hurts fish, while land solar farms spread over large distances can destroy the country’s remaining forests and brush land.

Many large hydro projects proposed by the CEB which are cheap, in the past have been opposed by environmental grousp. CEB also had trouble building a wind farm, after costs fell.

“PUCSL plans to extend the study to discover the external costs of power generation from other sources like hydro, wind, solar and natural gas as the second phase,” the regulator said.

The PUCSL is calling for public consultations on externalities.

PUCSL Public Notice

(Colombo/June11/2020)