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Industry says commercial rooftop solar tariff shakeup dents confidence
View(s):By Dilushi WIjsinghe
Sri Lanka’s renewable energy sector is facing a crisis as recent policy reversals and regulatory uncertainty threaten both economic stability and the country’s climate commitments.
After years of steady progress toward a sustainable energy future, abrupt government actions have triggered an investor backlash, stalled major projects, and raised concerns over long-term energy security.
These concerns were raised at a media gathering and roundtable discussion on “The Current Situation of the Renewable Energy Industry in Sri Lanka” held at the Chamber of Commerce recently. The panel included Dr. Lakmal Fernando, deputy president of the National Chamber of Commerce (NCC), renewable energy specialist Dr. Vidura Ralapanawa, members of the Renewable Energy Council, NCC engineer Parakrama Jayasinghe, and engineer Prabath Wickamasinghe.
At a recent news conference (from left): Dr. Lakmal Fernando, Deputy President of the National Chamber of Commerce, Renewable Energy Specialist Dr. Vidura Ralapanawa, members of the Renewable Energy Council, NCC Engineer Parakrama Jayasinghe, and Engineer Prabath Wickamasinghe. Pic by Indika Handuwala
As of 2025, fossil fuels, mainly coal and oil, still dominate Sri Lanka’s energy mix, accounting for 53% of power generation. Renewable sources, including hydropower, solar, and wind, contribute the remaining 47%. The government’s long-standing goal of achieving 70% renewables by 2030 now appears in jeopardy due to inconsistent policies and growing economic challenges.
Despite this, the government is reportedly preparing to sign a Power Purchase Agreement (PPA) with Sahasdanavi to operate a diesel-based power plant at 72 rupees per kWh — nearly three times the national average. Even if liquefied natural gas (LNG) is used instead, the tariff would still reach 50 rupees per kWh and could rise further with exchange rate fluctuations.
In 2024, the average electricity cost stood at Rs 26.77 per kilowatt hour (kWh), excluding hidden subsidies and cost of fossil fuel imports. Solar energy, the most cost-effective renewable option after hydropower, currently contributes just 12% to the national grid.
One of the most disruptive policy changes has been the rollback of the Net Plus Plus scheme, which previously allowed commercial and industrial solar producers to export surplus energy to the grid. A 2024 revision now prohibits installations beyond contracted demand, severely reducing investment viability for businesses, they pointed out.
At the same time, feed-in tariffs for solar were slashed by 35% — from Rs 42 per kWh to Rs 27 per kWh — without prior consultation with the industry. Developers argue that the government’s justification, citing “grid stability,” was not supported by transparent, or publicly available data.
Perhaps most damaging was the retroactive tariff recalculation implemented in October 2024, which demanded that renewable energy developers return payments received earlier in the year. The move has sparked legal threats from foreign investors and seriously damaged Sri Lanka’s credibility in global renewable markets.
Investors have lost confidence with the removal of key safeguards, including a variable tariff mechanism that previously protected projects from currency and interest rate volatility. Informal curtailments, such as reducing solar and mini hydro output during weekends, have made financial forecasting nearly impossible for operators, they added.
Industry stakeholders warn that constant policy shifts, opaque decision making, and violations of signed contracts have rendered energy sector investments effectively unbankable.
Fossil fuel imports surged by 12 percent in 2024, widening the country’s trade deficit, according to Central Bank data. Over 300 million US dollars in renewable energy projects have been paused, and more than 60,000 jobs in the solar industry are now at risk.
Experts also warn that recent policy rollbacks could undo significant progress in foreign exchange savings, with solar energy currently offsetting over US$500 million annually in fossil fuel costs.
Renewable energy developers have accused the Ceylon Electricity Board (CEB) of “policy sabotage’’, citing a pattern of contract violations and unilateral decisions. A 2024 climate finance report from the World Bank warned that Sri Lanka risks losing up to US$1.2 billion in green funding if current trends continue, they pointed out.
Stakeholders are calling for urgent reforms, including the reinstatement of the Net Plus Plus scheme and an end to retroactive tariff changes. They are also demanding greater transparency in tariff setting processes and the restoration of independent regulatory oversight by the Public Utilities Commission of Sri Lanka (PUCSL).
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