Critical analysis of the energy sector (electricity focused) in Sri Lanka
Energy costs between 25 per cent and 50 per cent of Sri Lanka’s total import bill in any fiscal year, this number depending substantially on external market conditions and weather. As such, it is the highest import line item we have, and the benefits of mitigating its dependence on two factors that are completely beyond our control should be apparent to any government.
Such a goal can be only achieved by conducting a detailed and candid study of the sector as it is today, setting realistic economic goals and implementing strategies designed to optimise the integration of indigenous and renewable energy (RE) sources, reduce losses, and improve institutional capacity and sector governance. This initiative will also insulate the public from future civil unrest and disruption to productivity when, as often in the past, the supply and quality of such an essential public utility are threatened.
Climate change imperatives and ground-breaking technology disrupters have emerged as compelling reasons to reframe national energy policies in countries around the world. The recent Intergovernmental Panel on Climate Change 2018 report starkly describes the difficulties faced almost everywhere as a consequence of global warming, underlining that commitments made at COP 21 ( setting a 2 deg C maximum target with 1.5 deg C aspirational, to which Sri Lanka is also a signatory) were wholly insufficient and that an increase of even 1.5 deg C from the pre- industrial era average would result in a catastrophic eco- system collapse. Since we are already over 1 deg C+ above the benchmark, it just leaves us with 0.5 degrees of average temperature increase to hit the red zone. The fact that the residents of Cape Town, South Africa, must manage today with a personal ration of water that is only 10 per cent of the quantity enjoyed by individuals in the US tells us that rapid de-carbonisation and control of emissions by everyone is critical to re- balance the world. While Sri Lanka is not a significant polluter on a global scale, our weather patterns are highly sensitive to local and regional conditions.
The fact that severe flooding has increased in both intensity and frequency is testimony to the fact that we cannot adopt an ostrich- mentality to the climate problem.
Recent breakthroughs in RE generation and storage technology have sent costs spiraling down, changing the nature of generation planning in many mature jurisdictions. Utilities around the world have been adapting themselves to different business models, countering increasing grid defection by providing more value-added services to remain profitable.
Those that continue to invest in yesterday’s technology ( often cited in Sri Lanka as “proven technology”) and continue to force consumers to purchase power from them by limiting available options, run the inevitable risk of catastrophic grid defection and accompanying financial shock, to say nothing of leaving the economy burdened with heavily depreciating stranded assets. We therefore need to shift our utilities from being profit-driven to being cost and service- driven. This will take a different approach from our policy and law makers.
Lack of substantive national policy plagues Sri Lanka across many sectors, thereby weakening negotiating strategy across the board, but the foregoing arguments prove that above all, a holistic, futuristic national energy policy is an urgent and fundamental requirement. Apart from curtailing ad-hoc projects, it should drive all other policies and practices such as investment, transport, and manufacturing, and electricity generation planning should be done to strictly support policy objectives. Right now, it seems to be the other way around.
Looking globally, our future direction should be in the direction of lower carbon footprint, higher efficiency and innovative technology in power generation, transmission and distribution. We should be drastically increasing the harnessing of renewable energy and seeking means by which we can convert other sectors to either electricity or natural gas.
Locally, our demand profile should be studied, growth scenarios projected, and steps taken to actively enforce energy conservation and deploy efficient appliances through a combination of policy and taxation.
We need to map our desired energy landscape of 25 years hence and adopt strategies to achieve it through a balanced, adaptable planning approach in line with economic and social goals.
Instead, Sri Lanka is still proposing an arbitrary energy mix in conflict with our least-cost generation principle and merit- order dispatch methodology, embracing more coal and obsolete technology and leaving substantial carbon offset and green funding opportunities untapped.
It is evident therefore, that the fundamental recommendation of this report is that we urgently embark on a systematic policy review based on critical vulnerabilities. In this report are itemized structural changes required to efficiently implement policy. These include transparency by following an open deep public consultative process and organizational reforms to counter the fact that at present, only a handful of individuals have the power to steer ( or subvert) national interest. We are captive to outdated ideologies, possibly due to lack of international exposure and follow a regressive path in terms of new technology when in fact we should be embracing new trends set by other nations that are more sensitive to public sentiment and global imperative.
The compelling need to subject Sri Lanka’s energy sector to a ground- up revision at this time may be ignored at our own peril in the years to come.