A sustainable solution:

Coal power plant projects to be expedited

By Dhaneshi Yatawara

Amidst dramatic climate challenges and sky-rocketing diesel and furnace oil prices, Sri Lanka lit up the country without interruption. Electricity was provided to the public without power cuts even during difficult times. The buying capacity for electricity generated using diesel and furnace oil has now hit the limits.

“There is a limit for a government or a country to bear costs. Loans are taken from State banks which cannot continue. The banking system cannot break down,” Power and Energy Minister Pavithra Wanniarachchi said.

“We are submitting this to the Public Utility Commission and expect suggestions from the Commission on behalf of the people,” Minister Wanniarachchi said.

“The proposed increase is temporary. We will soon establish the coal power plants and bring this burden down to a manageable level. We need to reach a level that the Government can bear. We are not trying to completely cover up the gap,” she explained.

As per the directives of President Mahinda Rajapaksa, the Ministry of Power and Energy is expediting the already planned low cost power plants to bring a sustainable solution to the problem of the ever increasing electricity tarrifs.

A unit of electricity produced using coal costs around Rs. 7.50. It is more cost effective than purchasing electricity at Rs. 40 – 60 and providing it to consumers at Rs. 3.

“At present we produce only 3,000 mega watts of electricity. A considerable percentage of this is produced using diesel and furnace oil and is purchased at a higher cost between Rs. 40 and 60. The Ceylon Electricity Board (CEB) provides it to consumers; the first 30 units per month at Rs. 3 per unit and up to the next 30 units at Rs. 4.70 per unit. We need to find a sustainable solution which the country can bear,” said Minister Wanniarachchi.

According to the Minister, the mega plan will involve expediting coal power plant construction to produce electricity cost effectively. Thus, the two coal power plants at Norochcholai, each capable of producing 300 mega watts of electricity, are in the pipeline.

Power and Energy Minister Pavithra Wanniarachchi

CEB Additional Finance Manager P.K. Kulathunga

“Whatever difficulties we face, these two power plants will commence this year in addition to the one operating at Norochcholai. Construction of the long-planned Sampur coal power plant too will commence this year. It will produce 500 mega watts. Construction work at the coal power plant at Induruwa with assistance from the Japanese Government will also start this year,” she said.

Private sector plants

The CEB would not purchase electricity from private sector-run fuel-powered thermal power plants when these contracts lapse, to reduce CEB electricity generation costs to provide relief to consumers, said Minister Wanniarachchi. She said the CEB could stop buying electricity at higher prices from the private sector due to the unwavering political decision taken by President Rajapaksa to set up coal power plants that generate a unit of electricity at a low cost.

“I'm concerned more about the poor communities. Our target is to elevate the living standards of the needy communities,” she said. One million people in the country use less than 30 units of electricity and another one million use less than 90 units.

“The Norochcholai power plant is operating. As the previous regimes didn't implement these low cost power generating plants, we didn't have trained engineers. For the country to take development strides, it needs proper policies. With such policies, we can develop the human resources and the infrastructure,” she said.

“I need to take responsibility for all actions of my Ministry. I cannot leave a mess when I leave this post. I'm ready to face any criticism in my efforts to develop the country,” the Minister said.

“We have provided electricity to many rural areas and improved the living standards. Haven't we provided electricity to the poor man? We have not gone for power cuts even with all the difficulties,” she said.

Break even level

Since 2010, the CEB has been operating at a break even level, said CEB Additional Finance Manager P.K. Kulathunga.

As he said, the condition aggravated after 2010 when global fuel prices increased drastically. “During 2008, we bought a litre of diesel for Rs.71 and in 2009 it increased to Rs.90; in 2010, to Rs.115 and now it has sky-rocketed to Rs.121,” he said.

Naphthan, another fuel used in power generation was Rs.47 per litre in 2008 and by 2012, it had shot up to Rs.90. Furnace oil, which was Rs. 35 per litre in 2008 and Rs. 65 in 2012, has now increased to Rs. 90.

“Though fuel prices came down in 2011, they again increased beyond the earlier limit to Rs. 100 per litre,” Kulathunga said, explaining that the cost of oil-generated power will continue to rise.

Power production has been based on thermal power plants lately, according to Kulathunga. In 2011, the production of electricity through hydro power was 35 percent of the total production and by 2012 it had declined to 23 percent. In contrast, the CEB had to depend 70 – 75 percent on thermal power plants, according to Kulathunga. Coal power plants had contributed nine and 12 percent in 2011 and 2012 respectively.

“In 2010, because of good weather, we produced 47 percent of the requirement from hydro power, but with dry weather in 2012, this decreased to 23 percent,” he said.

“The current loss per unit of electricity is Rs. 5.84. We provide electricity to consumers bearing this loss though the actual production cost is Rs.21.50,” he said. At the inception, the generation cost per unit is Rs. 16.29, during transmission Rs.1.15 gets added to a unit and during distribution Rs.4.

Accordingly, the total liabilities of the CEB, to the People’s Bank, independent power producers and the Ceylon Petroleum Corporation is nearly Rs. 80.4 billion. The financial loss of the CEB in providing electricity for domestic purposes alone is Rs. 32.8 billion, of a total loss of Rs. 61.22 billion.

“As of April 1, the estimated cost of a unit of electricity is Rs. 23.13 – higher than the present cost,” Kulathunga said. According to him, CEB losses in 2013 is estimated to be Rs. 78 billion.

To stabilise the situation and bring the cost to a bearable level, the CEB plans to recover its losses with the proposed tariff system. “Out of the five million consumers, 3.6 million fall under the 0 – 90 units category,” he said. Commencing construction of the two coal power plants within this year would bring a sustainable solution to this crisis, Kulathunga said.