ISSN: 1391 - 0531
Sunday June 01, 2008
Vol. 42 - No 53
Financial Times  

Brazilian help to solve Lanka’s energy crisis

The Ceylon Electricity Board (CEB), after recent discussions with the Brazilian government on energy saving measures, will most likely seek Brazilian assistance in implementing biofuel energy conservation programmes in the country, CEB Chairman Udaya Sri Kariyawasam said, adding that the CEB might also consider giving rebates to consumers as well as conducting an energy audit.

The long term impact of maintaining a low electricity tariff would be detrimental to the utilities, he said, adding that the CEB had lost Rs.42.9 billion prior to the tariff increase. Addressing the Key Persons Forum organised by the Federation of Chambers and Commerce of Industry of Sri Lanka (FCCISL), Mr Kariyawasam said electricity generation costs cannot be met by utilities if the tariff is lower than what global energy costs demand and that the financial viability of the utilities are affected. A low tariff would also mean government subsidies for fuel purchased to generate electricity which would in turn require the government to increase taxes for recovery of expenditure giving rise to adverse social and economic changes.

He added that the CEB owes Rs.22 billion to the Ceylon Petroleum Corporation of which it has only paid Rs.500 million. He said that if the debt is not paid back, the financial system and the banks will be affected and will have an adverse impact on the economy. Mr Kariyawasam further said the global increase of energy prices affects all industries with adverse effects on industries which need a higher electricity component. The alternative is to use more efficient and cheaper processes for electricity generation and reduction in transmission and distribution losses. He also said industries have to generate their own energy needs or shift to alternative resources not affected by global oil and coal costs.

Now CEB Chairman for a year, Kariyawasam said the CEB needs a good mix of professionals in order to address and correct some of its problems. Eight projects with 24 MW capacity will be coming into fruition over the next two years and there are four other projects in the pipeline.
He said there has been a steady decrease of system losses from 2000 to 2007. Last year, there was 15.67 percent of system losses as opposed to 21.35 percent in 2000. However, to reduce loss by 1 percent, the cost is Rs.1 billion.

Mr Kariyawasam said alternative energy solutions such as solar, wave, wind, mini hydro, biomass and tidal are extremely costly. The investment cost for 1 MW of installed capacity of solar power is US$10 million. Wave power costs US$4 million per 1 MW, biomass US$3 million, wind US$3 million, mini hydro US$1.5 million and tidal US$4 million. In comparison, diesel and natural gas in internal combustion engines cost US$0.9 million per 1 MW while central generation using fossil fuel costs US$1 million per MW.

He said tariff concessions met by the government to industries struggling to survive should be based on sound government policy. Industries that produce essential consumable goods and services should be placed on a separate tariff with a government subsidy on electricity charges. A very effective energy efficiency program will be launched in Sri Lanka, promoting energy efficient equipment and Compact Fluorescent Lamps with tax rebates to conforming industrialists.


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