Sri Lanka: Green Power Development and Energy Efficiency Improvement Investment Program

Sovereign Project | 47037-002

Summary

In recent years Sri Lanka has improved its energy sector and achieved a national electrification ratio of 94% (2012) compared with 29% in 1990. But a longer-term challenge is to reduce its high dependence on expensive fossil fuel energy. The energy sector struggles to (a) meet growing demand for electricity at a low cost and acceptable reliability rates, and (b) attain long term sustainability. The share of thermal energy in the power generation mix has increased from 6% in 1995 to 54% in 2011 that creates a high energy cost base. Demand growth has been met by expensive oil-fired thermal plants. This is not the solution to the country's energy security and environment protection in the long term. Diversification of the generation mix, especially from renewable energy sources, improved network efficiency, and supply and demand side management is the only way to correct this situation.

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Project Name Green Power Development and Energy Efficiency Improvement Investment Program
Project Number 47037-002
Country Sri Lanka
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8393-SRI: Green Power Development and Energy Efficiency Improvement Investment Program
Technical Assistance Special Fund US$ 700,000.00
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector Energy - Electricity transmission and distribution - Energy efficiency and conservation - Renewable energy generation - wind
Gender Equity and Mainstreaming No gender elements
Description

In recent years Sri Lanka has improved its energy sector and achieved a national electrification ratio of 94% (2012) compared with 29% in 1990. But a longer-term challenge is to reduce its high dependence on expensive fossil fuel energy. The energy sector struggles to (a) meet growing demand for electricity at a low cost and acceptable reliability rates, and (b) attain long term sustainability. The share of thermal energy in the power generation mix has increased from 6% in 1995 to 54% in 2011 that creates a high energy cost base. Demand growth has been met by expensive oil-fired thermal plants. This is not the solution to the country's energy security and environment protection in the long term. Diversification of the generation mix, especially from renewable energy sources, improved network efficiency, and supply and demand side management is the only way to correct this situation. The transmission network also needs expansion and modernization, particularly in the former conflict-affected areas in Northern and Eastern provinces. Another challenge is to improve system reliability and cut technical losses. 33 kilovolt (kV) medium voltage (MV) network is needed to expand power supply into rural areas, where many of the poor households remain unconnected or have poor quality of supplies. The new energy agenda also targets more clean energy. This is yet another means to ensure sector sustainability in the long term. Finally, the government intends to pursue financial, managerial, and institutional reforms, in line with the Sri Lanka Electricity Act, 2009.

The government intends to pursue cost recovery and expects that with the introduction of low-cost coal-fired generation it will be possible to address the current high cost of power generation and achieve cost recovery from 2018. As part of its cost recovery strategy, the government increased retail electricity tariffs by 35% on average in April 2013. While the government aims to increase supply capacity and replace expensive and inefficient oil-fired power plants by constructing the coal-fired plants, the remaining supply capacity will need to come from renewable sources (and conversion of the oil-fired plants to gas-fired plants). The 20% increase in power generation from non-conventional renewable sources will be in addition to the current 45% of the conventional hydropower and will ensure that most of electricity will be generated by domestic clean energy sources in the future. This will address the critical question about the energy security agenda.

Project Rationale and Linkage to Country/Regional Strategy Sri Lanka has a national investment program. The sector investments are based on 10-Year Development Framework prepared in 2006 and updated in 2010. The framework is linked to a National Energy Policy and Strategies and includes a sector roadmap, a long-term investment program, and appropriate policy and reform measures. The intention is to (i) increase power supply capacity to about 6,400 megawatts (MW) by 2020 and reduce the generation cost by adding aggregate base load capacity of about 2,000 MW from three coal-fired plants; (ii) increase the share in grid energy supply from nonconventional renewable energy sources to 20% by 2020; and (iii) reduce the total losses in the network to 10.0% by 2020.
Impact
Project Outcome
Description of Outcome
Progress Toward Outcome
Implementation Progress
Description of Project Outputs
Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design Stakeholder participation and consultation were conducted during PPTA project design.
During Project Implementation Regular communication via fax and/or email is conducted with the representatives of the Ministry of Power and Energy (the Executing Agency) and the Ceylon Electricity Board and the Sustainable Energy Authority (the Implementing Agencies). Stakeholder consultations are being conducted during PPTA implementation.
Business Opportunities
Consulting Services A consulting firm will be recruited for the TA project with 17.5 person-months for international and 19.0 person-months for national consultants. Taking into consideration the complexity of the investment program, the firm will be recruited using quality and cost based selection methodology with an 90:10 technical-cost weighting based on simplified technical proposal. The consulting firm will conduct technical, economic, financial, and governance due diligence, prepare project cost estimates, procurement plan and implementation schedule. The international and national environmental and social development specialists will be recruited on an individual basis to ensure that that they start their field activities early in the process due to the expected environmental and involuntary resettlement categories A for the MFF. Consultants will be recruited following Guidelines on the Use of Consultants by ADB and Its Borrowers, April 2010.
Responsible ADB Officer Mukhtor Khamudkhanov
Responsible ADB Department South Asia Department
Responsible ADB Division Energy Division, SARD
Executing Agencies
Ministry of Power and Energy (MOPE)72, Ananada Kumaraswamy Mawatha
Colombo 07, Sri Lanka
Timetable
Concept Clearance -
Fact Finding -
MRM -
Approval 25 Jun 2013
Last Review Mission -
Last PDS Update 29 Sep 2014

TA 8393-SRI

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
25 Jun 2013 06 Aug 2013 06 Aug 2013 31 May 2014 31 Jul 2015 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
700,000.00 0.00 0.00 0.00 0.00 0.00 700,000.00 25 Jun 2013 655,517.88

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