ADB $300 Million Aids Sri Lanka’s Push to Cut Fuel Oil Use, Boost Renewables

MANILA, PHILIPPINES – The Asian Development Bank (ADB) has approved a $300 million dual-tranche loan to help Sri Lanka scale up its use of clean energy and cut its reliance on costly petroleum oil for electricity generation.

“The country’s heavy dependence on expensive imported petroleum oil hurts the economy, undermines energy security, and harms the environment,” said ADB Principal Energy Specialist Mukhtor Khamudkhanov. “This loan will help Sri Lanka expand the use of renewable energy for power generation and have major benefits both for poor communities and the broader economy.”

The first $150 million tranche will finance a 30-megawatt (MW), run-of-the-river hydropower plant at Moragolla in Central Province and expand and upgrade transmission lines and other infrastructure in needy areas, including the former conflict-affected Northern and Eastern Provinces. The hydropower plant will generate an additional 97.7 million units of hydropower for the grid, saving about 72,300 tons of carbon dioxide (CO2) emissions every year while improved transmission lines will further reduce annual CO2 emissions by 98,400 tons.

Environmental and social safeguards will be incorporated into the design of the program to minimize impacts, and a mechanism will be developed to guarantee downstream river flows so that sensitive fisheries, including the endangered Green Labeo, will not be adversely affected by the hydropower plant.

The second tranche, expected to be delivered in 2016, will include expanding the 33 kilovolt medium voltage network to improve distribution of electricity to consumers and the development of transmission network facilities to allow power delivery from two 100 MW wind parks due to be built in the Northern Province in 2017 and 2020.

Assistance will also be given for demand-side energy efficiency improvements including the use of smart grid and metering technologies, the retrofitting of buildings with energy saving features, and the installation of cold thermal storage in selected buildings.

The improved transmission system is expected to boost access to reliable power for about 300,000 customers in rural areas and small towns who currently suffer from low quality supplies. The program also supports Sri Lanka’s wider energy investment road map, including its plan to increase the share of grid power generated from nonconventional renewable energy sources, such as mini-hydropower, wind power, and solar power, to 20% of the total by 2020.

In addition to ADB funds, there will be cofinancing of up to $60 million from France’s Agence Française de Développement, and counterpart funds of $80 million from the Government of Sri Lanka, for a total program cost of $440 million. The program is expected to be completed by late 2020.