28 January, 2021

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Electricity In Sri Lanka – Costs And Subsidies

By S.Sivathasan

S.Sivathasan

“Despite the revision in the tariff structure, domestic consumer subsidy was Rs. 8.98 per unit and for industrial consumer Rs. 7.83”. So states Ministry of Finance Annual Report 2012. The revision refers to the one in 2012, not to the 2013 May one. As per CEB statistics, gross sales in 2011 were, 10,023 GWh (million KWh). Three major consumers – domestic, general & industrial absorbed 84.1% yielding a revenue of 86.7%.  The domestic segment of 33.7% yielded a revenue of 25%. In this segment the first slab of 1-30 was getting lunch ¾ free. Now it is 2/3 free. The second slab of 31-60 had 2/3 free lunch which is now more than half free. Perhaps this arithmetic made the masses less responsive to the strike. Invoking the IMF mindlessly as the villain and the government as the servile handmaiden of the IMF carried no conviction. It may also explain the stubborn refusal of the Treasury to budge and for the government to remain firm. The protest call was a far cry from Gandhi’s Dandi Salt March. The choice was impolitic.

After the successful Russian revolution, when Lenin was asked for his definition of socialism he said “universal free education and rural electrification”. He even said that the very sight of the high tension wires criss crossing the country would change the consciousness of the masses. He was however harsh on those who had a wrong understanding of, from each according to one’s ability to each according to one’s needs. He was swift in saying “he who does not work, neither shall he eat”. A good principle for SL. The country has extended electricity it says to 93% of households. It will be full coverage soon. Capital cost is by the state. Should the monthly bill be subsidized?

One explanation for high cost of electricity production in SL is the bypassing of coal fired production for 30 years or more. During this period global coal fired electricity more than tripled. According to International Energy Agency (IEA), coal – based energy is on average 17% cheaper than nuclear and 7% cheaper than gas. It says further that capital intensity in natural gas chain can be six times higher than for coal. Studies by the European Community, Congressional Budget Office and MIT show that coal power plants provide electricity at a lower cost compared to nuclear or gas. According to Electric Power Research Institute (EPRI) of USA too coal is cheaper. Hydro is reported as comparable to coal, but can be very high as several factors go into cost upto the consumers’ point. In SL most if not all of the economically better ones are exploited.

Coal is magnified as environmentally disastrous. What ruin has overtaken the following countries? South Africa with 93 % coal generated electricity, Poland 87%, China 79%, Israel 58%, US 45% and Germany 41%. SL had nil % till 2010 and will reach 36% when all five projects at the two locations are completed.

Total world electricity generation by fuel in 2009 was, coal 41%,gas 21%, hydro 16%, nuclear 13% and oil 5%.  In Sri Lanka gross generation in 2011 was 11,528GWh of which Thermal was 59% and Hydro 40%. Was SL any the wiser in veering from coal and deviating widely from world average. Nothing mystical about world averages one would say, if deviation had led to lesser costs to the power consumer.

Every rupee in added cost cannot be explained away by corruption and mismanagement. Over staffing is the most condemnable feature in public sector employment. It has bred inefficiency as no other single factor has. This malady started as early as in in the fifties and has galloped to this day unabatedly. The incidence of this malaise has visited every citizen in its most debilitating form. Electricity is just one and it is felt keenly because it impacts in very precise monetary terms. Minor employees in semi – government institutions are 40.6%. Where in the world do we see such a ratio as 2:3? In the whole of Public Service – including semi govt. – the numbers are 288,000 composing 23% making a ratio of 1:4. Predilection for disproportionate minor is not for need but to shuffle in the least qualified. Every successive government has sought to demonstrate its capability by maximizing unproductive employment in the best of times and sustaining the redundancy in the worst of times. Since independence, was there ever a protest by the public service or the polity? Today there is a collective fine for universal lassitude.

In a few years when all coal plants at Noracholai and Sampur are commissioned, the additional installed capacity will be 1,900 MW. To these have to be added Upper Kotmale and Uma Oya hydro projects which are under construction. Then the final tally in composition will be: Coal Fired 1,900, Other Thermal 1690 and Hydro around 1600. It may be hoped that when all coal plants are on stream, heavy transmission losses are pared to be on par with most other countries and efficiencies are brought about, electricity bills will tally with costs. Break-even, no subsidy and a marginal profit thereafter can be a rational order.

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Latest comments

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    I am disappointed by the utter short-sighted and callous disregard form the environment shown by this writer. The price of all fossil fuels is relentlessly increasing. It has been so since many decades, and prices have gone up predictably. The price of coal will also go up, but it is a less preferred fuel because the cleanup costs are large. WE still have to import it at increasing cost, and pay for each ship load. So countries like south Africa and china which had no regard for environment or the health of their citizens, and were willing to develop at any human cost use coal. The coal ash, as well as the fumes and smoke are rich in cadmium, Arsenic, and such toxic metals, as well as agents which produce asthma and other difficult to treat allergies and cancers. An increase in all these illnesses, kidney disease etc have been amply recorded in all countries using coal. Hence countries with environmental regulations have phased out coal. China, finding that its citizens have to wear masks fitted with air filters in its cities, is also introducing expensive refitting and scrubbing of fumes, making coal as expensive as oil. However, unless the country has enough waste land, there is nowhere to dump the toxic ash.

    But this is not enough. Coal burning leads to very serious global warming, and countries like Sri lanka will find large parts of its coastal areas submerged, as even a rise in 1 degree is enough to change the sea level, create violent wind patters etc.

    Not so long ago there was an excellent technical discussion of what we van do in the future, with alternative energy in the columns of the Colombo Telegraph. In particular, solar energy whose price has been dropping at the rate of 8% every years, showed a drastic drop of about 25 % this year. With the new electricity tariffs, those in the high-consumption brackets have already hit grid parity with solar power — or solar power has become cheaper than CEB electricity!.
    Once set up, we don’t have to bring in sunlight by ship — it comes free except for minimal costs.

    So where the future lies should be obvious to any person with some technical understanding AND vision. Unfortunately, if someone’s vision is based on what Lenin wrote almost a century ago, then we are dealing with antediluvian thinking. The cheap tariffs that existed till recently meant that the poor people of the country subsidized the rich tourist hotel owners, textile-factory owners and others who go below-market electricity while they charged international prices for their hotel rooms and export goods.

    • 0
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      Very factual and realistic article.
      All the people of this country should be ashamed of their narrow minded selfish attitude of opposing Coal Plants.

  • 0
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    We hope apart from the useless aspirations that every household should focus towards utilizing the solar energy soon.

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    At the moment the sluice gates of our reservoirs and tanks are open and thousands of units of energy are being dumped into the sea. One wonders if with better management the output from hydro could be increased prior and during such rainy spells to reduce the cost of production. Perhaps there can be additional capacity or alternate systems that need to be installed to take advantage of our high rainfall. Such initiatives may be beyond the capability of our bureaucratic CEB and Ministry types?

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    Coal power is definitely cheap but the highest polluter. Sri Lanka’s investment on solar power and wind power both of which are available in abundance is relatively, very poor.

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    News report

    CEB loses Rs. 30 mn in power per day by not running all turbines
    June 18, 2013, 10:04 pm

    Despite high storage levels in the catchments, the Ceylon Electricity Board (CEB) is missing the opportunity to generate maximum power output from the Kukule and Victoria hydro power stations, thereby losing more than 30 million rupees worth of hydro power per day, a senior official said.

    The Island learns that since early this month the Board has wasted the opportunity of producing more than Rs. 300 million worth of hydro electricity. Experts expressed shock that of the two turbines of Kukule only one was functioning, while of the three turbines at the Victoria only two were functioning. The Board claimed that one turbine at Victoria was undergoing maintenance.

    “Engineers should have taken prompt decisions to put the turbine in working order when Kukule was running at spill level. It is also absurd to go for maintenance at a time when more could be done through water resources,” the official stressed.

    “CEB management and regulatory body, the Public Utilities Commission of Sri Lanka should be held responsible for such crimes,” says Lanka Viduli Sevaka Sangamaya Convener Ranjan Jayalal.

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    My advice for a domestic consumers should keep a small diesel generator not only to use when a CEB power failure, but when requires to use home iron, hot plates, driers, heaters like high power taking devices.
    This would reduce monthly electricity bill in significantly. Now a daya’s (since government suppose impose VAT for electricity bill,hope this will work well since the diesel cost is less for such a purpose.
    Though i understand this is not feasible to all, but up to a some extent would be helpful.

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