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Wednesday February 1st, 2023

Sri Lanka solar projects of 200MW are not viable after currency collapse

ECONOMYNEXT – Around 200 MegaWatts of ground-mounted solar projects awarded before the latest collapse of Sri Lanka’s rupee have been halted as they can no longer be carried out at current costs, according to the Federation of Renewal Energy (FRED), an industry association.

Sri Lanka’s renewable generation costs plunged after competitive bidding was introduced in 2015 and new operators came in. Global renewable costs, especially in wind had also fallen in recent years with newer technology.

Renewable prices fell to as low as 12 rupees a unit under competitive bidding. However global renewable energy prices also went up as fuel prices went up last year.

FRED says after the tendering process was introduced in 2015 replacing a feed-in tariff (an administratively decided rate), the number of new projects slowed. Now non-competitive feed in tarriffs have been re-introduced.

There are close to 200MW of ground-mounted solar projects awarded in 2021 at competitive tariffs which are not viable under the current context, according to data released by FRED at a news conference.

In 2022, the rupee collapsed from 200 to 360 to the US dollar after two years of money printing to artificially keep down rates sharply pushing up the cost of solar panels and other materials.

Sri Lanka suffers forex shortages and the rupee collapses from time to time as the central bank prints money to mis-targets interest rates.

The power to mis-target rates and create forex shortages was given to economists and bureaucrats in 1950 through the creation of a soft-peg. Attempts by some economists to take the power to mis-target rates away and restore monetary stability has so far failed.

Since the hard peg was broken in 1950 the rupee has fallen from 4.70 to 360 to the US dollar. (Colombo/Oct05/2022)

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Sri Lanka bond yields down at close

ECONOMYNEXT – Sri Lanka’s bond yields were down at close following a bond auction on Wednesday, dealers said while a guidance peg for interbank transactions remained unchanged.

“The rates were steady at the auction,” a dealer said.

“This can be a signal to the market saying the rates will go down in the future.”

A bond maturing on 01.07.2025 closed at 32.40/60 percent, down from yesterday’s 32.60/85 percent.

A bond maturing on 01.05.2027 closed at 29.10/35 marginally down from yesterday’s 29.20/75 percent.

The Central Bank’s guidance peg for interbank US dollar transactions remained unchanged at 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 371.38 rupees on Friday, data showed. (Colombo/Feb 01/2022)

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Sri Lanka bill auction hits pothole after 2025 bond spike

ECONOMYNEXT – Sri Lanka sold only 45 billion rupees in Treasury bills at Wednesday’s auction after offering 120 billion rupees, data from the state debt office showed, amid market confusion over a spike in a two year bond at an earlier action.

30.1 billion rupees of 3-month bills were sold at 29.91 percent, unchanged from a week earlier after offering 60 billion rupees for auction.

5.1 billion rupees of 6-month bills were sold at 28.72 percent, flat after offering 30 billion.

10.3 billion rupees of 12-month bills were sold at 27.72 percent after offering 30 billion.

Phase II subscriptions have been opened.

The market was foxed after the 2025 bonds were accepted at sharply higher yield than market on January 30, dealer said.

There was further confusion as the there was an outright purchase of 2025 at around 29 percent earlier in January.

Some investors speculated that the authorities were trying to drive more buyers towards short end bonds as bill volumes were getting larger. (Colombo/Feb01/2023)

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Sri Lanka services exports down 5.9-pct in 2022

ECONOMYNEXT – Sri Lanka’s services exports were estimated to have fallen 5.9 percent to 1,876.3 million US dollars, the island’s Export Development Board said.

Services exports estimated is made up of ICT/BPM, construction, financial services, transport and logistics.

There are more than 500 ICT companies, the EDB said.

Sri Lanka’s merchandise exports were up 4.6 percent to US dollars 13.1 billion dollars in 2022 from 2021.

Sri Lanka’s goods exports are slowing amid lower growth in Western markets. (Colombo/ Feb 01/2023)

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