ECONOMYNEXT – Sri Lanka’s renewable power producers are struggling to stay afloat due to payment arrears from state-run Ceylon Electricity Board and inability to buy critical spares for maintenance, industry officials said.
The newly formed Federation of Renewable Energy (FRED) said the CEB had 10-months arrears totaling 35.18 billion rupees dating back to October 2021.
“Some renewable energy suppliers have stopped their plants and we are in the verge of bankruptcy,” Prabath Wickramasinghe, Past President Small Hydro Power Developers Association said.
And in a meeting held last week with Power and Energy Minister Kanchana Wijesekera, he has promised to settle by November.
In September the CEB has started to process the October 2021 arrears of 5 billion rupees. The industry has already sent the August bills.
“Due to the inability to maintain and buy critical spares some developers have stopped their plants,” Wickramasinghe said.
When the renewable operators stop their plants, the energy has to be replaced at higher costs, he said.
Renewables are now paid 17-18 rupees (lower for some older plants), compared to 35 rupees or more for coal and around 100 rupees for diesel, the industry said.
The CEB was not given a tariff hike by the regulator and the political leadership since 2013, despite a falling rupee falling and rising fuel costs leading to frequent losses unless there is heavy rain.
When there is heavy rain the CEB can generate power from hydro plants fully owned by the utility which are depreciated and cost around 2 to 3 rupees a unit.
In 2022 Sri Lanka’s non-conventional renewable power producers are expected to supply 2,812 GWh or 16 percent of the energy for a cost of 50 billion rupees or 17.78 rupees a unit, based on filings the industry said.
CEB’s own plants which are expected to contributed around 3,626 GWh or 20 percent are expected to cost around 8 billion rupees or around 2.14 rupees a unit.
Coal is expected to cost around 35.60 rupees a unit while private thermal plants are expected to cost around 81.73 rupees.
Most renewable – except CEB large hydros – cannot be compared directly with plants which can be stopped and started (dispatched) at any time including at peak times, power sector analysts say.
The regulator hiked tariffs steeply in 2022 after the rupee fell from 200 to 360 to the US dollar. FRED said they were promised their bills would be settled once the electricity tariff is implemented.
Sri Lanka’s rupee falls and the country runs into frequently forex shortages due to mis-targeting of interest rates by the central bank which operates a reserve collecting peg.
The renewable industry had to pay around 7000-8000 workers and also service bank loans. Interest on loans has shot up to around 25 percent,
“Some of us who signed as guarantors for bank loans have been blacklisted,” Wickramasinghe said.
Due to the industry being categorized as high risk, bankers would be unwilling to finance the industry, and investors would also be discouraged, he said.
Independent Power Producers in countries where central banks print money to mis-target interest rates including in Pakistan face payment problems as currencies collapse and utilities run into cashflow crises.
In Sri Lanka analysts have called for changes in the monetary law to limit the ability of the central bank to mis-target interest rates, which then spike steeply as they are corrected and to stop the currency from collapsing further. (Colombo/Oct02/2022)