Sri Lanka remains electrically isolated from the larger Indian subcontinent. Asian Development Bank (ADB) has supported studies on technical and commercial aspects of a prospective India-Sri Lanka interconnection, on which the progress has been slow.
The feasibility study on the interconnection jointly conducted by India and Sri Lanka is yet to be completed, according to Asian Development Bank’s recent report on Sri Lanka Energy Sector Assessment strategy and Road Map.
“Clear indications on how best such an interconnection should be sized, financed, and structured into the markets of the two countries have emerged in the feasibility studies, but no firm decisions have been made.
As more renewable energy enters the grid, sharing reserve and spinning capacity become increasingly important, as well as real power interchange between countries. The larger Indian grid would offer such stability to the Sri Lanka grid, and the bottlenecks on the Indian side, especially in the southern grid, are gradually cleared”, the report stated.
The report also said that Investments on bulk power generation, to match forecast demand, are required to be made in accordance with the long-term plan, such that new power plants of the correct fuel type (to manage cost of supply) would be built on schedule (to avoid capacity shortage and blackouts).
The inevitable transition to fossil fuels for bulk power generation from previously hydro-dominated status caused a debate that extended from 1985 to 2005, during which period; the increasing demand was met with all oil-fired generation. The debate to move into cleaner fuels, including renewables has commenced, while for major power plants to produce bulk power has been postponed or canceled, the report said.
Therefore, Sri Lanka’s power generation situation continues to be at high risk and threatens to fall back into oil dominance. The current forecast share of electricity to be generated from oil in 2020 is 25%, with a further 20% produced from new renewable energy (small hydro, wind, and solar). With both oil-fired generation, wind, and solar PV priced in the range SLRs20/kWh to SLRs22/kWh, Sri Lanka’s cost of supply, at constant December 2016 fuel prices, is forecasted to increase again to about $0.15/MWh.
The additional burden on the fuel bill is estimated to be Rs. 63,000 million (about $430 million) annually by 2020, at December 2016 oil price levels.
Energy efficiency and demand management in Sri Lanka has had modest achievements, with a stable commercial specific energy consumption66 in the economy, and declining energy consumption in overall energy use. However, energy performance standards and labeling regulations have not been established for appliances that deserve such standards. Demand-side management (DSM) projects have not been implemented by any of the utilities, except for indirect initiatives, such as time-of-use pricing of electricity. In addition, the government is planning—with ADB support—a major upgrade and electrification of the suburban railway network, of which, energy efficiency in transport is a key objective. Accordingly, enhanced energy efficiency and accelerated demand management is included in ADB’s strategy for Sri Lanka.
By the end of 2016, Sri Lanka’s electricity generation, transmission, and distribution infrastructure has reached the key milestones of (i) a reasonable fuel mix in generation, with over 48% of electricity being produced from renewable energy sources, 34% from coal, and 17% from oil; (ii) transmission network completed to cover the entire country; (iii) distribution network expanded to reach over 98.5% of households; and (iv) transmission and distribution losses below 11% of net generation.
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