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| Sunday, 19 December 2004 |
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The creeping power crisis and its implications by Lloyd F Yapa The latest terrorist attack on the US consulate in Riyadh, Saudi Arabia should warn all concerned with economic development in Sri Lanka, that the power crisis may continue far into the future. Saudi Arabia is the biggest producer of mineral oil in the world. The objective of these attacks is not only to destabilize the ruling monarchy but also to expel the Americans, who appear to be supporting its continuance for their own reasons. Similar situations prevail in the other two major producers of oil in the Middle East namely Kuwait and Iraq. Oil supplies may be disrupted as such attacks continue. While there is political instability in certain other oil producing areas of the world as well, the demand for oil in countries such as China and India with burgeoning economies appears to be outrunning supply capabilities. Oil prices could therefore remain volatile. Lose no time What does all this tell an oil dependent poor country like Sri Lanka ? Lose no time in developing (cheap) alternate sources of power or forego economic growth altogether. This could translate into severe unemployment, rising prices, worsening poverty and boiling social tensions. Cheap power, key national strategy Any person or authority, who is serious about the national objectives of accelerating economic growth and alleviating poverty in this country, should realize, that one of the key national strategies to be adopted towards this end is making cheap power available for economic activities. The earlier leaders of the country faithfully followed this strategy and diverted resources to develop hydro energy, which was a cheap source of power, due the abundance of sites, which could be tapped for the purpose. These leaders even entertained ambitions of exporting this energy to India. However, it was soon realized, the country does not possess sufficient potential to develop hydro power due to various reasons, one of which is the fast denudation of the original forest cover and another is that the demand for energy for the economy to grow at a faster pace is far in excess of our original calculations. A cheap source of power other than hydro had to be found urgently. The officials concerned pointed out, that coal is the answer to our prayer, but that the initial investment could be rather heavy. Lobbies and their power In the meantime, several strong lobbies had been gaining power in the country- the first being the environmental lobby, which has been advocating rather passionately, that the pristine natural beauty of the land should be preserved (at any cost ?) and therefore the alternative of combustion of coal, which pollutes the air should never be entertained. It appears to be the same lobby, which campaigns against the Upper Kotmale hydro project, which is supposed to upset the natural beauty of the countryside. This lobby has even been able to canvass the support of some religious leaders. Another lobby advocates power generation from alternate sources such as solar and wind power as well as mini hydro plants, which are very much less polluting than coal or fuel oil or auto diesel, whilst contributing towards saving of foreign exchange ; however, many may not be aware, the unit generation costs of these small scale projects are not as low as those of large ones utilizing hydro or coal. The most powerful lobby is that, which tantalizes the people with well- funded, ready made, small to medium scale projects capable of generating power within a short period utilizing auto diesel and heavy fuel oil, which incidentally are as polluting as coal ; additionally these projects do not generate cheap power and do indeed gobble up scarce foreign exchange for import of oil. Unnerved by a serious shortage of power and (confused ?) by fissiparous pressures from lobbies, the leaders of the country had buckled down and allowed the setting up of diesel or furnace oil powered plants, while reluctantly supporting generation of power from alternate sources, forgetting the long term national need for cheap power. The result is that the cost of private and hired power from mini hydro and thermal stations ( for the CEB ) had ranged from Rs. 6/- to 13/- per unit in 2003, whereas for large scale hydro it would have been Rs.1/- to 2/- and for coal around Rs. 4/- per unit. Economic truths There are certain economic truths, that no one in this country can ignore. Ours is a small resource poor country with a small domestic market. Most domestic market oriented projects producing goods and services will therefore be small and since economies of scale cannot be reaped for this reason, unit costs could be high. Therefore there is no alternative but to produce, for the very much bigger export market and earn a higher return as well. When exporting, we have to remember, that we cannot transfer any extra costs to the buyers, as intense competition prevails in the international market place. This is why our unit (energy) costs (along with other costs) have to be as low as possible. A further reason is that our own people should be able to afford it for use in their homes. Those campaigning against cheap power from coal have to understand the significance of such realities. A further point to understand is any human activity disturbs the environment and the best, that can be done is to minimize it, especially when there is no other alternative but to proceed with the activity. ( Modern coal plants in fact are reported to be very much less polluting than the old ones). Lead and not be led This is what the pragmatic Chinese authorities have done, when faced with a similar situation ie whether to preserve the pristine glory of the environment or be overwhelmed by the oil crisis and to allow poverty to continue. They went ahead with the Three Gorges Project despite some negative environmental effects and the displacement of a million or so people. Ours is a democracy and we cannot ignore those who oppose any proposal/project, highly (nationally) beneficial though it may be. The democratic method is to point out the benefits of such proposals/projects and convert such opponents. That is the role of our leaders- to lead and not to be led. One has to, however, to admit there are certain drawbacks to this approach, such as the system of elections in this country, which prevents the formation of clean and strong governments, able to take correct decisions, however unpopular they may be. Let us therefore rectify such weaknesses first, so that we may proceed with whatever, that has to be done to alleviate poverty and make this country prosperous. |
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