CEB Engineers oppose handover of two renewable energy projects to India’s Adani Group evading tender procedure

• Warn on potential foreign exchange outflows in years to come
• Share concerns on power purchase agreements yet to be entered 
• Urge govt. to uphold principle of ‘local preference’ when developing indigenous energy sources

By Nishel Fernando
Expressing serious concerns on the management of Sri Lanka’s wind resources and potential foreign exchange outflows in decades to come, Ceylon Electricity Board Engineers’ Union (CEBEU) yesterday opposed the government’s decision to entertain unsolicited proposals from India’s Adani Group to develop two power projects in wind resource-rich North-West region of the country by completely undermining the tender procedure.

Adani Green Energy Ltd, a unit of Adani Group, early this month signed Memorandums of Understanding  (MOUs) for two wind power plant projects to be developed in Mannar and Pooneryn with the Sri Lankan government. Accordingly, Adani Group is planning to invest US $500 million in two renewable energy projects with an aim of generating combined power capacity of 500 MW.

End of last year, Adani Group Chairman Gautam Adani held talks with President Gotabaya Rajapaksa during his visit to the island nation and simultaneously a group of Adani officials also paid a visit to Mannar District to assess the wind energy potential of the area.

“… offering Sri Lanka’s prime locations for wind power generation to foreign investors without following due procurement process will be detrimental to national interests, and as a result, the full financial benefit of indigenous resources will not be gained by the nation,” CEBEU warned in a media statement yesterday.

It argued that the tender procedure needs to be followed in order to ensure maximum utilisation of the wind potential in this region, which would be critical to reach the government’s ambition to generate 70 percent of the country’s electricity needs through renewable energy sources by 2030.

CEBEU demanded the government to fully disclose the full details of the MOUs already signed between the two parties.

According top officials at the Power Ministry, the two projects were given to Adani Green Energy on a government-to-government basis. 

Although, the Adani Group had announced intentions to develop two wind power plants in Mannar Island and Pooneryn, so far, it has only moved ahead with the proposed 250MW wind power plant in Mannar Island.
“Sustainable Energy Authority (SEA) is currently conducting a feasibility study into the proposed wind power plant in Mannar island. It is already half way through. It will be completed within a few months. If all goes well, we can connect this to national grid by end of next year,” a Power Ministry official said.

Although, SEA had started clearing the proposed site for the project that has a capacity to generate 400 MW through both wind and solar, Adani Group is yet to clearly express its interest to take part in the project. 
However, CEBEU overwhelmingly opposed to any move to offer the Adani Group a power purchase agreement (PPA) with a US dollar denominated tariff, expressing deep concerns on foreign currency outflows in the decades to come with no added cost advantage to the country.

CEBEU pointed out that since renewable energy based power purchase agreements are typically 20 years or more in nature, CEB will be liable to pay the PPA holder in foreign currency for freely available wind resources in the country, while absorbing exchange rate losses due to rupee depreciation.

Though foreign investment is an important element in the struggle to overcome the present economic crisis, CEBEU further noted that local investment and low-cost funding through donor agencies/bilateral agreements should be encouraged to the maximum extent before going for long-term commitments for power purchases under US dollar terms. It stressed that unit price per power generation for the two proposed power plants should not be in contrast from prices quoted for recent wind PPA agreements.

According to the CEBEU, the levelised cost of flagship Asian Development Bank (ADB) funded Thambapavani project in Mannar is Rs.8.90 per unit of electricity generated including the cost of debt servicing, while the most recent tender for wind power generation in Mannar island was awarded at Rs.9.45 per unit.The recent tenders in other areas were awarded at Rs.13 per unit.

However, the Power Ministry official noted that the government is yet to propose a tariff system to Adani Group.
“Only upon completion of preliminary studies and clearances, the CEB and relevant government authorities can decide on an appropriate tariff system,” he stressed.

In addition, CEBEU also stressed the government to uphold the principle of ‘local preference’ when developing indigenous energy sources as the union believes local entrepreneurs are fully capable of implementing wind and solar based power generation in the country.

“Promoting local investment will further develop local expertise in the field of renewable energy including plant designing, operation and maintenance,” it added.