Privately-owned renewable energy industry facing total collapse

 From left : Federation of Renewable Energy Developers (FRED) President Thusitha Peiris, Small Hydro Power Developers Association  Past President Prabath Wickramasinghe  and    Small Hydro Power Developers Association  Secretary and Legal Advisor  Warna Dahanayake. Pic by Pradeep Dilrukshana 

• Facing major cash flow issues due to non-payment of Rs.35bn by CEB
• Warns of another electricity tariff hike next six months 

By Nishel Fernando 
Amid ill-slighted policy decisions, Sri Lanka’s privately-owned renewable energy Industry is seeing a total collapse within the next few months, as it is set to face increased losses from state-owned Ceylon Electricity Board (CEB), clearing the way for another electricity tariff hike.

Holding the maiden press conference of the newly formed Federation of Renewable Energy Developers (FRED), the association’s President Thusitha Peiris yesterday revealed that the grid-connected private sector renewable energy developers are struggling to continue operations of their power plants due to severe cash-flow shortages with the CEB failing to settle Rs.35.1 billion worth of invoices owed to them over past 10 months.

With a 1, 350MW installed capacity, private sector renewable energy players currently contribute to around 14 percent of the country’s power generation. 

The payments to private sector-owned renewable power sector only amounts to 5 percent of CEB’s overall power generation cost, whereas 74 percent of the cost is incurred to import diesel and heavy fuels.

“If the current situation persists, it is most likely that there will be another power tariff increase within next six months,” Peiris said. Past President of Small Hydro Power Developers Association Prabath Wickramasinghe said
CEB’slosses are higher due to lower energy generation with renewable energy developers as they are unable to adequately maintain their plants under the strained financial conditions. He noted that renewable energy sector’s annual contribution has come down by 60GWH, which has led to Rs.5.35 billion net loss for CEB as CEB is forced to rely more on expensive imported power generation sources such as diesel to meet the shortfall.

As a result of severe cash flow issues, renewable energy developers are now struggling to service around Rs.60 billion project loans with the country’s banking sector with most of the loans classified as non-performing.

As a result, banking and other financial entitles now tend to recognise investments in renewable energy sector as high-risk, which could substantially slow down the country’s renewable energy activities in years to come.
Further, the payment delays are also creating a negative image among foreign investors resulting in lower appetite for foreign investments in renewable energy projects in the future. 

Brain drain has also become another critical issue for the sector with atleast 50 experienced engineers leaving the sector as the industry continues to struggle to pay their salaries on time due to cash flow issues.

The industry has already resorted to legal actions filing an official report with Public Utilities Commission of Sri Lanka (PUCSL) for a dispute resolution process, according to Small Hydro Power Developers Association Secretary and Legal Advisor Warna Dahanayake.

However, it’s not clear how long it might take to resolve these payment issues through the legal process.
The industry says it feels certain parties are intentionally attempting to cripple the privately-owned renewable power sector. 

The sector is yet to secure commercially-feasible tariffs adhering to tariff formula and realistic inputs.
With the supportive policies, FRED is optimistic of adding 1,500MW from non-conventional renewable energy (NCRE) within the 2-3 years.