SMALL HYDRO POWER DEVELOPERS ASSOCIATION

Representation to Public Consultation on Proposed Electricity Tariff 2013 by Public Utilities Commission of Sri Lanka

4 APRIL 2013

SMALL HYDRO POWER DEVELOPERS ASSOCIATION

CEB Present Dilemma

The Present Global Oil & coal Price Escalation and Adverse Exchange Rate Movement have increased the Cost of Energy Generation in Sri Lanka. CEB has incurred an accumulated loss of Rs. 80 Bn. CEB needs to cover both of its operational & investment cost to avoid being a continuously loss making entity. Therefore the hike in the Consumer Tariff is inevitable. Considering the complexity of the problem, only a medium to long term solution would be possible.

SMALL HYDRO POWER DEVELOPERS ASSOCIATION Impact of Dependency on thermal Power Plants
Average Unit Cost (Rs/kWh)

Plant Sapugaskanda 1 Sapugaskanda 2 KPS Small GTs KPS GT 7 KPS CCY Lakdhanavi Asia Power AES Kelanitissa Colombo Power ACE Matara ACE Horana Heladhanavi ACE Embilipitiya West Coast Aggreko Nothern Power

2011 11.58 10.43 50.64 31.45 37.57 14.28 16.72 27.34 12.63 14.11 13.94 11.80 15.25 22.00 31.11 17.53

2012 (Jan-June) 16.05 14.41 48.62 29.33 25.09 19.35 21.68 29.02 18.11 17.26 18.80 16.89 18.08 23.15 38.92 22.95

Generation Performance in Sri Lanka , 2012 (Jan- June ) PUCSL

SMALL HYDRO POWER DEVELOPERS ASSOCIATION Impact of Dependency on thermal Power Plants
(contin.)
Crude Oil & Coal Price Movements (March 2003 - March 2013)
200 180 160 US $ per MT (Coal)\ Barrel (Oil)

Australian Coal Price Escalation Rate - 14.6% Crude Oil Price Escalation Rate - 13.5%

140
120 100 80 60 40 20 0 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

The cost tend to go up with the rapid crude oil and coal price escalation in the global market. The current ten year average compound escalation rate of crude oil is 13.5% and coal, 14.6%.

The heavy dependency on the Price -Australian Coal Oil & Coal based power plants Price - Crude Oil will never allow CEB to reduce its generation cost, now and in the Linear (Price Australian Coal) future. Linear (Price - Crude
Oil )

SMALL HYDRO POWER DEVELOPERS ASSOCIATION

What is the Solution in the Medium/Long Term ???....

Renewable Energy!

SMALL HYDRO POWER DEVELOPERS ASSOCIATION A long term based Solution

Unit Cost Movement over the next 20 Years
160 140
120 Rs./kWh 100 80 60 40 20 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Time Hydro Three Tier Oil Based Power Plant (Simple Average) Coal Based Power Plant

The Hydro Tariff are based on the NCRE Tariff for the year 2012/13. Oil based & Coal based Power Plant Unit cost is based on the simple average of Unit Cost for the period January 2012 June 2012 with an assumed escalation of 10%. p.a.

SMALL HYDRO POWER DEVELOPERS ASSOCIATION A long term based Solution (Contin..)
Renewable Energy (RE) generation is much cheaper than the Oil based power plants at present. e.g. - A MHPP being constructed in 2012/13 will be selling at an agreed rate for the next 20 years of SPPA - MHPPs which have completed 15 years of operation , the developers are ready to sell even at a rate cheaper than coal :
Which ever the methodology used to calculate the unit cost of coal power! The following unit cost of Sri Lankas decades old Hydro Power Plants depict how much cheap the Hydro Power is , in the long term.
Power Plant Mahaweli Complex Laxapana Complex CEB Other Hydro 2012 (Jan-June) 5.37 3.49 4.71

SMALL HYDRO POWER DEVELOPERS ASSOCIATION

A long term based Solution (Contin..)

Saving with cost based flat SHP tariff of SLR 16.70/kWh
Saving in SLR Millions Item Saving to CEB 604 GWh from 194 MW in 2011 1,800 GWh from 550 MW

Displacement at SLR 28.57 per kWh

Displacement at SLR 25.34 per kWh Displacement at SLR 19.81 per kWh Saving of foreign exchange 2011 Data (CEB statistical Report)

7,170
5,219 1,878 7,894

21,366
15,552 5,598 23,526

Weighted average generation cost of 5 most expensive thermal power plants is SLR 28.57. Weighted average generation cost of 10 most expensive thermal power plants is SLR 25.34. Weighted average generation cost of all thermal power plants is SLR 19.81. Average fuel cost of thermal generation is SLR 13.07/kWh.

SMALL HYDRO POWER DEVELOPERS ASSOCIATION A long term based Solution (Contin..)
Impact of Renewable Energy on Generation Cost in 2020
Scenarios Sources Cost of Generation SLR in Millions 664,843.65 498,632.74 25,045.03 365,664.01 25,045.03 26,768.13 28,920.00 17,741.90 23.17 26.14 Unit Cost of Generation SLR/kWh (Forecast) 33.18

Generation Mix
100% 75% 25% 55% 25% 8% 7% 5%

Scenario 1 Scenario 2

Coal Coal Large Hydro

Scenario 3

Coal Large Hydro Small Hydro Wind Biomass

Generation cost falls by 30% if renewable energy target of 20% is met.

20%

Assuming that electricity demand grows by 8% per annum, in 2020, demand increased to 20,0036 GWh from 10,023 GWh in 2011.

SMALL HYDRO POWER DEVELOPERS ASSOCIATION A long term based Solution (Contin..)
In 2011, 194 MW of Small Hydro Power (SHP) supplied 604 GWh to the national grid. SHP can contribute 1800 GWh from 550 MW per annum(Potential Estimated). Besides Hydro, Sri Lanka possess tremendous potential of Wind Power generation. The price of Wind Power would be a fixed rate of Rs.20.62/kWh for the 20 Years of SPPA. ( 2012 NCRE Tariff). Bio mass (both Dendro & Agri Waste) can be effectively used to meet the peak time demand. A key component of the tariff paid to the Biomass developers would go to the local farmers for the fuel purchase, uplifting rural economy. The Solar also would be a possible solution in the future with the decline in the module prices and significant improvement in efficiency.

SMALL HYDRO POWER DEVELOPERS ASSOCIATION Conclusion

SHPDA requests the CEB and other relevant institutions to facilitate the utilization of indigenous sources for energy generation to reach 20% by 2020 fulfilling the Mahinda Chinthanaya Targets for NCRE. This will relieve the CEB from the severe impact of global price oil & coal price escalations and the depreciation of rupee at least to certain extent. This Will result in long term cost reduction and a possible strategy to reduce consumer tariff in the long run. Also, we must NOT ignore the environmental, social and health cost of coal and oil see Beijing today.