Cost of electricity in SL is very high compared to other countries in the region

Saumya Kumarawadu

The verbal wrangling between the power regulator Public Utilities Commission of Sri Lanka (PUCSL) and the powerful Engineers Union of the power monopoly CEB, has come to a boiling point with CEB engineers launching trade union action leaving the smooth power generation, transmission and distribution at risk. The Daily Mirror spoke to the President of the CEBEU, Saumya Kumarawadu on the issue. He shared the following views:

• PUCSL MADE FALSE STATEMENTS TO MEDIA SAYING THEY HAD ONLY CHANGED THE INPUT PARAMETERS
   
• BY NOW 40% OF THE WORLD’S ELECTRICITY DEMAND IS MET BY COAL
   
• WE HAVE TO ADMIT THAT THERE ARE SOME ENVIRONMENTAL ISSUES IN LAKVIJAYA POWER PLANT.
   
• EVERY YEAR THE CEB MAKES A LOSS CLOSE TO RS. 50 BILLION

 Q  What is the reason behind the ‘work to rule’ campaign by the CEB engineers?

There has not been an approved Least Cost Long Term Generation Expansion Plan (LCLTGEP)  ​for the construction of much needed power plants of the country since 2015 as the regulator, the Public Utilities Commission of Sri Lanka (PUCSL), failed to approve CEB’s LCLTGEP 2015-2034 and LCLTGEP 2018-2037. The CEB cannot procure or build power plants without a legally approved proper plan.  This situation will definitely lead to a major power crisis for which CEB engineers finally get the blame. As a professional trade union we have a right and responsibility to intervene in this very sensitive issue within our domain.

We had a number of discussions with relevant stake holders and the government in order to get this issue resolved without resorting to trade union actions. Even though their responses at those meetings were positive, no tangible solutions to the issue were foreseeable. This situation made us launch mild trade union actions from time to time. However, when the PUCSL illegally prepared and approved their own Generation Plan discarding the CEB’s LCLTGEP 2018-2037, we decided to fight for the rights of electricity consumers of the country. We started our trade union actions last September in mild form, as mentioned before, withdrawing our members from the Technical Evaluation Committees and Joint Working Groups appointed for the procurement of future power plants. This trade union action was gradually escalated step by step, when we noticed the lethargic approach of the authorities to settle the issue.

"We learnt that the PUCSL was making false statements to the media saying they had only changed the input parameters like coal and LNG prices in the model and their illegal plan had become more economical than the CEB’s plan."

Ultimately, the President intervened and inquired from the PUCSL the reasons that prevented them from approving the CEB’s Generation Plan. The reason given by PUCSL was that the government has a policy of not constructing any more coal plants in the country and, on the contrary, CEB’s plan containing coal power plants. The President clarified that there is no such government policy and advised the PUCSL to grant the approval for the CEB’s LCLTGEP 2018-2037. When the regulator ignored the advice of the head of state too, we had no alternative other than resorting to work- to-rule campaign to win our very fair demands.

 Q  As far as you know why does the PUCSL not approve the LCLTGEP running to 2037 from 2018?

Even before the CEB prepared the LCLTGEP 2018-2037, the PUCSL had decided for what plan the approval should be granted. Their main objective was not to ensure formulation of   the best Generation Plan for the country, but to use their authority to make way for investors who were willing to make money out of power generating projects. Since they did not receive the plan they had in mind from the CEB, they prepared and approved their own plan rejecting the CEB’s plan.  This action of approving their own plan is totally illegal as they don’t have a mandate to do so as per the section 43(2) and 43 (8) of the Sri Lanka Electricity Act No. 20 of 2009. This is just like a person going to a Municipal Council to get his house plan approved, being instructed to put up a house handing him a plan designed to the liking of the MC.

We learnt that the PUCSL was making false statements to the media saying they had only changed the input parameters like coal and LNG prices in the model and their illegal plan had become more economical than the CEB’s plan. But, actually what happened was they had forcibly  removed  coal plants in the CEB’s plan giving irrational reasons even before the model was run. Even if they ran their model assuming their input data were correct, coal would still be there in the outcome.  On the other hand, the CEB had submitted input parameters to be used in the model well in advance to the PUCSL and they had never disputed applicability of them until their plan was published. However, they unilaterally changed the input parameters in order to get the plan they wanted and then ordered the CEB to implement it.

 Q  The PUCSL does not want to approve coal power plants in Sri Lanka’s future power generation. As such, why do you fight for coal power generation?

​When deciding on future power plants, we have to consider not only the generating cost but also a number of other factors. Among them energy security, technical constraints and environmental concerns are key. When making your judgment on power generating technology, due consideration should be given to all those key aspects. If only the environmental pollution is considered, we will end up with a Generation Plan that will give rise to host of other issues such as high cost of electricity, low reliability and vulnerability for energy insecurity. The number one reason the CEB has selected coal power plants for our future power requirements is to ensure the energy security. To have better energy security, we need to have a proper mix of coal, LNG and renewable energy sources. If we are going to depend only on one firm energy source like LNG as proposed by the PUCSL, we are taking a very high risk as then the electricity cost of the country would overly depend on LNG prices. In addition to that, coal is still considered as one of the cheapest options to generate electricity. This shows very clearly when looking at the number of coal power plants planned to be constructed by other countries in the world in future.

 Q  Many countries in all continents have begun phasing out coal power generation. But you want Sri Lanka to depend on coal power. Why?

​By now 40% of the world’s electricity demand is met by coal and many countries like Indonesia, Malaysia, Vietnam, and Bangladesh in our region have planned to put up more coal power plants in their countries. It is better to inquire why countries like Indonesia and Bangladesh, being LNG producers. have decided to construct more coal power plants. Australia is the second largest LNG exporter in the world and yet they produce as much as 63% of their electricity demand using coal.
 Like older people who consume less food, countries like the USA, China and India, which were overusing coal power, have started gradually reducing coal. They are shutting down coal plants, which are harmful to the environment, built in 1970s with older technology.  But countries competing for foreign investments like Bangladesh, Malaysia, Indonesia and Vietnam have plans to increase their coal share in order to make energy prices more attractive to investors.

It is no secret that the cost of electricity in Sri Lanka is very high compared to other countries in the region. Because of that, electricity is subsidized to domestic and industrial consumers. Since the electricity tariff is not cost reflective, every year the CEB makes a loss close to Rs. 50 billion. Before commissioning the Norochcholai coal power plant, average cost of electricity was as high as Rs. 23.66 per unit and after commissioning the three coal power plants, the cost of a unit dropped to Rs. 15.07.  However, cost of electricity has an upward trend again as the coal power plant planned to be constructed in Sampur was abruptly stopped. If the country has to be developed, more and more FDIs need to be attracted to the country. But, prevailing high electricity cost has become one of the key factors that discourage such investments as any industry today is energy intensive.

"When Norochcholai power plant was constructed, a number of measures have been taken to mitigate environmental pollution. They include Electro-Static precipitator (ESP) and Flue Gas Desulfurization (FGD) unit installed in the plant to capture fly ash and sulfur dioxide respectively from the exhaust flue gas."

Not only that, even local entrepreneurs find it very difficult to remain competitive because of the high cost of electricity. Hence, it is very important to bring down high electricity cost by replacing expensive oil based electricity with cheap electricity generated from coal. Since Sri Lanka is a poor country we have to depend on coal power until our economy becomes more stable.  

 Q The benefits of coal power generation are much less than the ill effects of it, the environmentalist say. How do you see this from your perception?

Environmentalists oppose not only coal power plants but also wind, large hydro and mini hydro power plants. For example, 100MW Wind Power Plant being constructed by the CEB in Mannar with a soft loan from ADB had also come under their attack. ADB almost stopped their financing for this project due to a protest by a group of environmentalists claiming it would be harmful to migratory birds. Now a similar situation has arisen in Moragolla 30MW Hydro Power Plant Project as so called environmentalists claim the project would be a threat to certain species of fish in the Mahaweli river.
Similarly, nobody can deny there aren’t any adverse effects of coal power. But, as one of the cheapest sources, coal is still the number one power producer in the world. Due to low cost of coal power, developing countries in the world consider coal as one of the best options for power generation. However, coal power developing countries have started using clean coal technologies to mitigate environmental effects and such plants are even located in highly residential cities of the world. We have proposed in our plan to construct such high efficient coal power plants using clean coal technologies.   

 Q  It is a known fact that the 900 MW Lakvijaya Coal Power Plant has done much harm to the environment in Norochocholai. People in Puttalam complain about plants of vegetables, fruits and houses have been covered with fly ash. How can we minimize these negative effects emanated from coal power generation?  

We have to admit that there are some environmental issues in Lakvijaya Power Plant. At the same time, it is necessary to highlight that it supplies almost 50% of country’s daily demand of electricity. We have experienced power cuts in the country on many occasions when the plant broke down in the past. If not for this power plant, more oil could have been burnt at exorbitant cost to generate the same electricity produced by this very important power plant.

When Norochcholai power plant was constructed, a number of measures had been taken to mitigate environmental pollution. They include Electro-Static Precipitation (ESP) and Flue Gas Desulphurization (FGD) units installed in the plant to capture fly ash and sulphur dioxide respectively from the exhaust flue gas. In addition to that, there are very high chimneys to disperse remaining constituents in flue gas at higher altitudes reducing their impact in immediate surroundings. However, the major current issue in Norochcholai is coal and fly ash dust.

When the percentage of fine coal particles is higher in purchased coal, they are easily airborne and settle in areas close to the power plant. Coal dust problem would have been avoided, had the Standard Cabinet Appointed Procurement Committee (SCAPC) appointed for the coal tender strictly adhered to coal specifications in which the composition of coal particle size has been defined. However, a committee comprising of villagers, environmentalists and other relevant groups have been appointed to look into the environmental issues at Norochcholai. In the meantime, a wind barrier and a lot of other improvements are expected to be carried out in the near future to address issues faced by the residents close to the Lakvijaya Power Plant.

 Q  What do you have to say about the recent media reports that Sri Lanka was on the verge of commercially exploiting Natural Gas resources found in the Mannar basin in the North of Sri Lanka?   

Natural gas exploration in Sri Lanka is conducted by the Petroleum Resources Development Secretariat (PRDS). Two wells namely “Dorado” and “Barracuda” have been drilled. “Dorado” indicates the availability of natural gas and it is estimated to have approximately 300 billion standard cubic feet (bcf) of recoverable gas reserves. Based on the above most likely quantity of natural gas, it is estimated that it could cater for a 1000MW capacity for approximately 15 years with a plant factor of 30-50%. The CEB’s Base Ca​se Plan contains the development of 1500 MW LNG combined cycle power plants during the next 20 years. The same plan proposes to convert existing oil operated combined cycle plants of nearly 600 MW to LNG operated combined cycle plants by 2023. With the proposed development of two new 300 MW LNG operated combined cycle plants in 2019 and 2021 a cumulative​ LNG combined cycle power plant capacity of 1200 MW would be available in the near future. If domestic gas reserves are exploited and could be economically extracted for domestic use, there will be a sufficient demand from the above plants for local gas supply.

 Q  Don’t you think Sri Lanka must delay the construction of coal power plants until the completion of gas exploration, as gas is the most environment-friendly and clean energy?

Every year electricity demand rises nearly by 300 MW. To meet that demand, we need to develop more and more power generating sources. It is true that environmental emission of combined cycle plants is half compared to coal plants. However, electricity generating cost is comparatively higher for LNG even at the cheapest price compared to coal at the highest price. The amount of extra money our country has to spend is higher if coal power plants are replaced with LNG power plants. Hence, striking a balance between coal and LNG is essential. That is why, an energy mix that consists of simultaneous development of both coal power plants and LNG power plants has been proposed by the CEB in its Generation Plan. ​Such a policy is very clearly evident in countries with plenty of gas reserves like Malaysia, Indonesia and Bangladesh where construction of new coal power plants are taking place to supply their growing electricity demands.

" We have to admit that there are some environmental issues in Lakvijaya Power Plant. At the same time, it is necessary to highlight that it supplies almost 50% of country’s daily demand of electricity."

A very important matter of concern in LNG power plant development is the construction of relevant LNG infrastructure to import Liquefied Natural Gas. The cost incurred in developing LNG import and re-gasification infrastructure is significant. Since extraction of commercially utilizable domestic natural gas at desirable levels and the prospective time period taken for the extraction of natural gas are still uncertain,​the decision to invest in LNG import infrastructure has to be carefully evaluated. In the event of discovery of a large quantity of local natural gas, importing LNG based on take or pay contract can never be justifiable. Therefore such decisions should be carefully evaluated in negotiations.   

 Q You are demanding the removal of PUCLS Director General Damitha Kumarasinghe which insinuates that the failure to approve the LCLTGEP is an individual decision and not the collective or policy stand of the PUCSL. Your views on this....

Our country doesn’t have an approved Generation Expansion Plan after 2014 due to irresponsible, unprofessional, illegal and unethical conduct of the PUCSL. The Commissioners and the Director General are directly responsible for this situation. So, we have demanded that the government appoint individuals with highest professional integrity and unblemished records to key posts of the Commission.

 Q  Power and Renewable Energy Minister Ranjith Siyambalapitiya says that Sri Lanka has the capacity to generate enough power for the next few years by the state and private sector providers to uninterrupted 24x365 power supply and there is no power crisis as forecast by certain quarters. Do you agree?   

Since there is no plan in place, no major economical power plant has been constructed after 2014 to supply the growing electricity demand of the country. There are no plans even to put up such power plants in the near future too. It will take a minimum  of six to seven years to construct such a power plant if it is started today. Until then only expensive oil fired power plants and non-dispatchable renewable power plants will be added to the power system incurring more losses to the CEB. The CEB that made profits in 2015 has recorded a nett loss of Rs.15 billion last year! If the government continues to act ignoring policies and plans like this, a power crisis of greater degree is inevitable. When you make mistakes today, you have to pay for them several years later. Therefore, we cannot rule out power cuts in future.