Power generation in Sri Lanka has headed upwards over the years as defensiveness made the sector resilient against economic fluctuations according to Utilities Sector (Renewable Energy) “GREEN ENERGY; POWERING THE TRANSITION” Report 2021 complied by First Capital Research.
Power generation measured in GWh has been continuously growing over the past decades while recording a 15-year CAGR of 6% and it is expected to grow at even a faster pace over the next decade.
Growth in electricity sales in GWh over the years has been gravitated to the growth in GDP and is expected to follow a similar trend in the coming years. On the other hand, the population in Sri Lanka is expected to grow at a CAGR of 0.3% over the next 5 years and the per capita electricity consumption over the last decade has also conveyed an upward momentum.
Therefore, the boom in commercial and industrial sectors springing from the anticipated growth in GDP paired with the population growth, are expected to amplify the future electricity consumption.
Sri Lanka has also redirected its journey towards attaining an ultimate goal of 70% green energy by 2030. Accordingly, the largest wind farm, a 100MW facility in Mannar commenced on Dec 2020, and planned capacity expansions of 1,323MW from wind, 2,210MW from solar, 654MW from mini-hydro and 144MW from biomass are expected to fulfil at the end of 20 years.
Furthermore, CEB has signed Power Purchase Agreements (PPA) in Other Renewable Energy (ORE) power plants with a total capacity of 539MW in addition to multiple roof-top solar projects to be developed with more private sector participation as few initiatives are in transition towards renewable energy. Level of substitution remains low and the new entrants are also discouraged due to the high capital intensity, high switching cost and regulation barriers prevail in the sector Currently all players listed in the main board of Colombo Stock Exchange (CSE), namely, LVL Energy Fund (LVEF), Windforce (WIND), Vidullanka (VLL), Panasian Power (PAP), Vallibel Power (VPEL), Resus Energy (HPWR), are involved in renewable energy operations which foresee a substantial upside potential in the future.
In terms of competitiveness, the power generation sector appears to be lucrative with a moderate level of rivalry and also with a moderate level of bargaining power from the largest single buyer (CEB) due to the shortage in electricity supply.
In terms of competitiveness, the power generation sector appears to be lucrative with a moderate level of rivalry and also with a moderate level of bargaining power from the largest single buyer (CEB) due to the shortage in electricity supply.
The portfolio diversification of the players is branched out to projects in hydro, wind, solar, biomass and thermal with a geographical dispersion in locally as well as overseas. Currently, the private players have energy projects in Sri Lanka, Bangladesh, Uganda, Pakistan, Ukraine, Zambia and Nepal that are already commissioned or in near completion.
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