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| Sunday, 2 November 2003 |
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| News Business Features Editorial
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Actual cost of Upper Kotmale Energy by G. J. PONNUKONE This has reference to the response from Mr. Shavindranath Fernando, Project Director of Upper Kotmale Hydropower Project (UKHP) in Sunday Observer of October 26th in respect of an earlier article on the subject of "Calling for Coal-Fired Power". The total estimated cost of the UKH Project is Rs. 33.5 billion. This project is estimated to generate 530 million units of electricity annually. Although the Government of Japan has given this loan on very soft terms to the Government of Sri Lanka, the Treasury re-lends this to the CEB on commercial terms. In fact, this is the arrangement for all such loans. As an example, the World Bank granted a loan of US$ 135 million for the RERED project for the development of renewable energy at some 2% interest. But any developer utilizing loan is charged at a rate of 10% payable in 10 years. Neglecting interest during construction, at 10% interest, capital repayable in 10 years, the actual cost of energy from UKHP will be Rs. 10.28 per kWh. On top of this, CEB also incurs costs to erect and operate transmission and distribution networks. More over, 22% of the energy generated is wasted. Thus the final cost of electricity from UKHP to the consumer would be in the region of Rs. 15 per kWh. If and when UKHP is completed, the share of energy from this project will be charged to the consumer at Rs. 15 or more per kWh. Consumers are here by warned to be ready to pay Rs. 15 and not Rs. 2.79 per unit. The estimated capital cost of dendro power, including the cost of establishing the necessary energy plantations for the supply of Sustainable Bio Fuel is Rs. 56 million per MW. Therefore, with the Rs. 33.5 billion to be spent on UKHP we could establish a total 600 MW of dendro power plants and the associated energy plantations. 600 MW of dendro power plants could generate 4,000 million units of energy annually. This is nearly 8 times the annual energy expected from the UKHP. Of course, for the hydro power plant, we need not incur any fuel cost, where as for the dendro power plant we need to spend on labour and transport cost of harvesting and transporting fuel from the energy plantations to the power plant. Based on a price of Rs. 1.50 per kg of wood and capital repayable in 10 years with an interest of 10% the first set of Dendro Power Plants would deliver energy at Rs. 7.40 per kWh. These initial set of Dendro Powr plants, being "embedded" in the distribution network, do not require new transmission or distribution network. In fact these embedded generators deliver energy almost at the 'door step' of consumers thus eliminating any losses in transmission and distribution. In the longer term, dendro power plants are expected to deliver energy even cheaper than Rs. 7.40 per kWh. At the present the CEB system desperately requires steady base thermal power and not seasonally variable hydropower. The Rs. 33.5 billion to be granted by the Government of Japan should be intelligently utilized to generate what is best for the country. Following are some of the benefits of the proposed 600 MW of Dendro Power: * A base-power generation of 600 MW with annual plant factor of 70 to 80%. * Productive employment for 180,000 rural workers. Each worker could earn Rs. 200 per day. * Up grading of 240,000 hectares of degraded land into sustainable energy plantations thus arresting the on set of desertification in the dry zone. * Annual yield of 3.6 million tonnes of foliage (which could be used as cattle fodder or organic fertilizer) with the monetary value of Rs. 1.3 billion. * Annual savings of US$ 168 million in foreign exchange as fuel costs in thermal power plants. (US$ 0.04 per kWh). * Additional income of US$ 21 million (US$.005) kWh) as contribution from Clean Development Mechanism. Avoiding 20,000 tonnes of sulphur dioxide annually, thus preventing further acidification of our agricultural land and preventing ill health to many thousand citizens. |
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