A few weeks ago, the Public Utilities Commission of Sri Lanka (PUSCL) issued a directive to CEB expressing its grave concern over the delay in constructing power plants according to the approved Least Cost Long Term Generation Expansion Plan (LCLTGEP) and demanded an explanation from CEB.

The letter further said PUSCL approved the LCLTGEP on 15 September and it is the sole responsibility of the Transmission Licensee to adhere to the approved LCLTGEP and take immediate steps to implement it, given the critical nature of the power during the period 2017-2020. PUSCL has noted that the CEB has requested more time to implement the plan, although critical plants to be built during the period of 2017-2020 have been delayed up to two years from the LCLTGEP which would ultimately result in failure to meet the electricity demand.” 

Long-Term Generation Expansion Plan 2015-2034

CEB’s 2013 proposal included a 300MW coal plant each year from 2020 to 2032, but the proposal was rejected by PUSL and CEB presented the Long Term Generation Expansion Plan 2015-2034. 

The following has been extracted from the CEB report, quote:

“During the year 2014, 300MW Puttalam Coal-fired plant was commissioned and second and third plants later. CEB had considered thermal power plant options as 600MW supercritical and 300MW high efficient subcritical coal-fired steam plants, 300MW LNG fired combined cycle plants, 600MW Nuclear power plants, 35MW and 105MW Diesel-fired Gas Turbines and 150MW and 300MW Combined Cycle Plants.

Hydro Power Projects expected to be commissioned in the near future are Broadlands 35MW – 2017, Uma Oya 120MW – 2017 and Moragolla 31MW – 2020.

The earliest dates for the commissioning of gas turbine and combined cycle plant would be 2019 and 2x250MW Coal Plants in Trincomalee would be 2020 considering the present progress of the project. Other coal-fired power plants were considered from the year 2022. 

The first 100MW wind farm at Mannar will be developed by CEB by 2018 and another 275MW wind farm in Mannar will be developed in two phases.

Usage of gas for power generation had not been considered due to:

1. Discovery of the natural gas resources is still at a very early stage.
2. Gas quantities are not quantified with reasonable accuracy.
3. Gas price delivered to the plants is considered as 15.5USD/MMBTU or 10.5USD/MMBTU without Royalty, Profit and Tax at the well and an additional 1USD/MMBTU was added as the delivery cost.
4. Conversion costs of the existing plants are indicative and actual costs may vary.
5. Costs of additional storage and infrastructure to be developed for the existing power plants were not considered.

It was noted 100MW Ace Embilipitiya Plant was retired from April 2015, according to the Power Purchase Agreement. 

Accordingly, for near future requirements:

1. 60MW Barge Mounted Power Plant will be operated by CEB after acquiring the plant at the end of the Power Purchase Agreement on 30 June 2015.
2. Also, 163MW AES Kelanitissa Power Plant would be operated by CEB after acquiring the plant at the end of the Power Purchase Agreement in 2023.
3. For future power production following plants are proposed:
   • 2018: 2×35 MW Gas Turbine
   • 2019: 1×35 MW Gas Turbine
   • 2020: 2 x250 MW Coal Power Plants Trincomalee 
   • 2022: 2 x300 MW New Coal Plant Trincomalee
   • 2023: 163 MW Combined Cycle Plant 
   • 2024: 1×300 MW New Coal plant – Southern Region
   • 2027: 1×300 MW New Coal plant – Southern Region
   • 2029: 1×300 MW New Coal plant – Trincomalee
   • 2030: 1×300 MW New Coal plant – Trincomalee
   • 2032: 2×300 MW New Coal plant – Southern Region
   • 2034: 1×300 MW New Coal plant – Southern Region

With regard to energy, share of coal will reach 40% by 2020 and 60% by 2034. The contribution from renewable energy power plants will be more than 40% by 2025 and 35% by 2034.

In the short term up to year 2020, there might be difficulty in operating the system due to delays in implementation of Uma Oya and Broadlands hydro power projects. The requirement of 3x35MW Gas turbines arose mainly due to the retirement of 210MW of thermal plants in 2018 and 2019 and to meet the electricity demand and reserve a margin in the generation system.”

Comments from PUSL
In August 2015 CEB submitted the Long Term Generation Expansion Plan (LTGEP) 2015-2034 for the approval of the Commission. Having considered the report and clarifications, the Commission observed that certain areas of the submitted LTGEP do not comply with the existing government policy framework. Hence, in December 2015, the Commission expressed its inability to grant approval for the CEB proposals. In rejection PUCSL notes that the CEB has not provided data on their evaluation, that only the base case had been submitted; while the least cost scenario is not visible.

Accordingly, the Commission advised the CEB to revise and re-submit the LTGEP 2015-2034, giving special attention to absorbing more electricity from renewable energy sources, locally available or imported natural gas-fired plants as an alternative to coal fired plants.

Considering the low reliability of the Norochcholai coal-fired power plant, Sri Lanka could face energy and capacity shortages in 2018-2019 and under drought conditions even with planned plant additions. The Commission emphasised the need for ‘vigorous implementation’ of several measures to avoid possible energy shortages. 

Approval 
According to accepted LTGEP 2015-2034, LNG, coal, renewable energy and nuclear energy would be the major power generation sources. However, the Commission did not approve the proposed coal power plants in Sampur, in line with government policy.

Accordingly 1,275MW power capacity would be added to the national grid during next four years. These plants include two thermal power (furnace oil) plants with capacity of 170MW in the southern region, 105MW gas turbine, 300MW natural gas power plant and several renewable energy power plants with the capacity of 700MW including three major hydropower plants. These should be immediately constructed and operated, to prevent the possible power shortage in 2018.

Even though the 2015-2034 LCLTGEP was sanctioned, the Commission emphasised that the CEB should submit the LCLTGEP for the period of 2018-2037 for approval, by 30 April 2017, giving priority to the government’s policy framework and least cost principles. The plants beyond 2020, mentioned in the plan 2015-2034, should be revalidated with the 2018-2037 plan, in line with government policy.

Power failures in the past

Norochcholai power plant was commissioned in 2011, faced several breakdowns during operation. In July 2012, the power plant was shut down due to a leak in one of the thousands of tubes in the boiler. Same problem reappeared in August 2012, again just before Christmas 2013. In January 2013, the power generation of the plant exceeded its designed level of 300MW causing a complete shutdown. The breakdowns of Norochcholai was partly due to careless operation by locals and the running of the plant was handed over to Chinese. Thereafter, the plant ran without internal problems.

In late February 2016 the country suffered an island-wide power outage, shutting down the 900-MW Norochcholai power plant; on a Sunday daytime, when most offices and factories are closed. According to CEB, the power failure was due to explosions in two transformers located in Biyagama and Kotugoda exchanges in the distribution grid, which tripped the automatic mechanism of the Norochcholai Plant. It later revealed that transformer burst at Biyagama was 30 years old and the Kotugoda transformer was not inspected for over two years.

A few days after the power failure CEB expressed: “Given the urgency of the current situation, it is looking at either extend those agreements or purchase the plants outright. They are looking at getting power from IPP’s ACE power plant Embilipitiya 100MW, ACE Matara – 25MW and Heladanawi Puttalam 100MW.”

Again in May this year, the Norochcholai power plant was forced to close down and CEB explained the reason being a transmission line problem due to “internal reasons”. But CEB failed to elaborate what the “internal reasons” were. Public expected the worst; however power supplies were restored in few hours. Out of Norochcholai three plants of 300MW each, the first plant was brought into operation in a week and others later. With Norochcholai out of commission, how the country’s power requirements were met was a mystery.

Thermal power plant powers Aitkin Spence

The answer to the question came from an unexpected source. According to a statement made by Aitkin Spence PLC to their shareholders in early November, their profits for second quarter of 2016 jumped by almost 50% to Rs. 540.4 million from a year ago, as the group’s thermal power segment yet again started financial muscle to the group’s performance. Aitkin Spence power purchase agreement (PPA) with CEB for its 100MW Ace Power Plant at Embilipitiya came to an end on 31 March 2015. However, the recent back-to-back countrywide blackouts forced the CEB to renew the PPA for one year from 6 April 2016 amid questions raised by the regulator, Public Utilities Commission, regarding the need for expensive thermal power.

Although no public statement was made by CEB, most likely other private power plants too as ACE Matara – 25MW and Heladanawi Puttalam 100MW also would have been brought into generation. This year rains were poor and power generation from hydro-power plants being low, has given an excuse to continue the operation of private power plants.

New development

A few days ago, the CEB Engineers’ Union (CEBEU) made a statement that Government is entertaining unsolicited proposals from China Machinery Corporation for a 400MW LNG power plant to be located in Hambantota, which would be later expanded to 1,000MW. The Government claims the plant would be a Merchant Plant, meaning the plant would supply needs of Chinese Industrial Zone and only additional power would be sold to Sri Lanka. For Independent Power Producers (IPPs) are paid a ‘Capacity Cost’ by CEB to recover their investment cost irrespective whether the plant is in operation or not. In case of a Merchant Plant CEB need not pay the Capacity cost. CEBEU claims the plant is not a Merchant Plant. 

After scrapping Sampur plant India is proposing a 500MW LNG plant. CEBEU claims there is no need for such a plant as CEB has already decided to set up 300MW plant in Kerawalapitiya and a 170MW plant in Hambantota. But their publicised data did not propose such and CEB proposals do not include such plants.

Energy Sector Development Plan 

In 2015, then Minister for Power and Energy Patali Champika Ranawaka presented ‘Sri Lanka Energy Sector Development Plan for a Knowledge-based Economy, 2015-2025’. The plan proposes to increase generation capacity to 6,400MW by 2020, generate 1000MW of electricity using gas discovered in Mannar and convert existing thermal plants to natural gas; develop renewable power as bio-mass, mini-hydro, solar and wind-power to generate 1114MW. Also to achieve self-sufficiency in energy and produce entire petroleum requirement by 2025, based on gas from Mannar becoming available by 2020.

Power development in the past

First coal based power plant was proposed in 1980s in Trincomalee, was unacceptable due to security reasons. Next location was Mawella near Tangalle, by the deep-water harbour, was abandoned when locals protested. Next, Japanese consultants proposed Dungalpitiya in Negombo or Norochcholai. Latter involves ships anchoring 4km from shore and coal be brought to the plant in barges, costing additional US$120million. CEB selected Norochcholai, was challenged by the Church and for over a decade CEB did not propose any other options.

Meanwhile, power cuts in early 1990s were manipulated by CEB to purchase power from Private Power Developers (PPDs), leading to massive losses. Some power purchase agreements had committed CEB to purchase power at rates exceeding Rs.30 per unit for over a period of 20 years. Signing to purchase power from PPDs continued till all stages of Norochcholai came into operation in 2014. 

Earlier problems of Norochcholai

The establishment of a coal-fired power plant took two decades when President Mahinda Rajapaksa decided to go ahead with Norochcholai with Chinese assistance in 2004, and the purchase agreement was signed in September 2005. Construction began in May 2006, with the first unit commissioning in March 2011. When the Norochcholai plant had problems CEBEU blamed the Chinese for the inferior plant. 

But it was pointed out that purchasing the power plant from China was a political decision. The purchase agreement was signed in September 2005, over one year after the MOU by the CEB General Manager and the President of Electrical Engineer’s Association with technical specifications for the plant prepared by CEB assisted by a foreign consultant. Thus Norochcholai power plant supplied by Chinese was as per CEB requirement.

Finally, the problem was solved by offering running the plant to Chinese; today nearly 100 Chinese are engaged in operation of the plant.

Discovery of gas in Mannar Basin

Cairn India was awarded the Mannar basin block in June 2008 for exploration of oil and the first hydrocarbon discovery was made in 2011. Thereafter, Cairn discovered gas in two exploration wells with a potential reservoir capacity in excess of 2 TCF (Trillion Cubic Feet) of natural gas. The two discoveries has been targeted recovery of 300 BCF (Billion Cubic Feet) of gas and two million barrels of oil.

However, following the global petroleum price slump Cairn withdrew from Mannar Basin and the agreement with Caine expired in August 2016. CEB refuses to consider gas from Mannar and the current Government too is not making serious attempts to extract gas from proven sources.

Average oil prices of OPEC

World’s crude oil prices are generally controlled by OPEC and the average movement of prices in US $ per barrel are given below.

• 1960 to 1972: 1.2 to 1.82
• 1973: 2.7
• 1974: 11
• 1979: 29.2
• 1986 to 1999: between 13.5 and 20
• 2000: 27.6
• 2008: 94.1
• 2012: 109.45
• Since 2015: below 50

The world’s oil prices crashed when US companies started using fracking techniques to recover oil and gas. Fracking is the process of drilling down into the earth and water, sand and chemicals are injected into the rock at high pressure which allows the gas to flow out of the well. Usage of the technique made the US self-sufficient in oil.

CEB’s manipulation of power sector

Since the 1980s CEB has manipulated the power sector, when the first coal-based power plant could have been installed in Mawella. Instead CEB insisted on Norochcholai and purchased power from private power producers. Our power crisis is a result of irresponsible planning and manoeuvring of electricity generation and distribution system by CEB engineers. Although they blamed Chinese for Norochcholai, they love purchase of coal and manipulating prices. 

CEB’s own generating plants were registered as separate companies with CEB Chairman as the Chairman of the company. Recently the COPE Chairman faulted CEB for not presenting their accounts for auditing or to COPE. A few months ago it was rumoured that a former CEB Chairman’s name was among those having accounts in Panama.

The discovery of gas in Mannar surprised CEB engineers, who continue to ignore the asset. Gas powered plants pollute less, cost less and can be installed in a shorter time. CEB’s plans ignore LNG plants that could move over to local gas when recovered. For Caine, the crash of oil prices made extrapolation of gas uneconomical leading to abandoning further development. But can Sri Lanka wait for oil prices to rise as time period from discovery of oil/gas to practical use takes around six years. The CEB ignores environmentally friendly mini-hydro which are developed by local entrepreneurs with no cost to the Government.

When Norochcholai shut down in February this year, CEB made use of the opportunity to re-engage the Aitkin Spence power plant which made Rs.270 million profit in a quarter. PUSL is concerned of the ability supply power during 2017 to 2020 and wishes CEB to take immediate action as per approved Least Cost Long Term Generation Expansion Plan. But it is clear that CEB engineers prefer to delay project implementation wish to bring back retired IPPs to fill the gap. They also wish to acquire power plants at the end of the Power Purchase Agreement. Earlier IPP’s were paid a ‘Capacity Cost’ to cover their investment costs. Do the rates presently paid to retired power plants include Capacity Costs? 

The CEBEU is against Chinese power producers wishing to install LNG plants in Hambantota and supply excess power as the Chinese could upset their plans. It is clear that CEB engineers deliberately delay new generations and are attempting to bring their old practices back; PPPs and coal purchases have been very profitable for them, at the cost to the country and the people.

Published in the Daily FT on 7 December 2016