Sri Lanka: Energy Sector Assessment, Strategy, And Road
SRI LANKAENERGY SECTOR ASSESSMENT,STRATEGY, AND ROAD MAPDECEMBER 2019ASIAN DEVELOPMENT BANK
SRI LANKAENERGY SECTOR ASSESSMENT,STRATEGY, AND ROAD MAPDECEMBER 2019ASIAN DEVELOPMENT BANK
Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) 2019 Asian Development Bank6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, PhilippinesTel 63 2 8632 4444; Fax 63 2 8636 2444www.adb.orgSome rights reserved. Published in 2019.ISBN 978-92-9261-888-9 (print), 978-92-9261-889-6 (electronic)Publication Stock No. TCS190557-2DOI: http://dx.doi.org/10.22617/TCS190557-2The views expressed in this publication are those of the authors and do not necessarily reflect the views and policiesof the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for anyconsequence of their use. The mention of specific companies or products of manufacturers does not imply that theyare endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area, or by using the term “country”in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 o/. By using the content of this publication, you agree to be boundby the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisionsand terms of use at https://www.adb.org/terms-use#openaccess.This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributedto another source, please contact the copyright owner or publisher of that source for permission to reproduce it.ADB cannot be held liable for any claims that arise as a result of your use of the material.Please contact pubsmarketing@adb.org if you have questions or comments with respect to content, or if you wishto obtain copyright permission for your intended use that does not fall within these terms, or for permission to usethe ADB logo.Corrigenda to ADB publications may be found at n this publication, “ ” refers to United States dollars, and “SLRs” refers to Sri Lankan rupees.ADB recognizes “Ceylon” as Sri Lanka.Cover design by Jasper Lauzon.
CONTENTSTables and FiguresAcknowledgmentsAbbreviationsWeights and MeasuresivviiviiiixEXECUTIVE SUMMARY1I.5II.SECTOR ASSESSMENT: CONTEXT AND STRATEGIC ISSUESA. Overall Sector Context1. Energy Consumption2. Energy Resources3. Organization of the Energy SectorB. Electricity Supply and Use1. Overview of the Electricity Supply Industry2. Electricity Use and Efficiency3. Core Sector Issues, Causes and EffectsC. Petroleum Sector1. Overview of the Petroleum Industry2. Issues in the Petroleum Sector56101215153742616164SECTOR STRATEGY69A. Government Strategy, Policy, and Plans1. National Energy Policy and Strategies 2008:Summary Status of Implementation2. Sri Lanka Energy Sector Development Plan 2015–20253. Policy Changes of the GovernmentB. ADB’s Sector Support Program and ExperienceC. Other Development Partner SupportD. Future Support by Development PartnersE. ADB Self-Evaluation1. Lessons LearnedF. ADB’s Energy Sector Strategy69697374757677787982III. SECTOR ROAD MAP AND RESULTS FRAMEWORK85APPENDIXES89iii
Tables, Figures, and AnnexesTABLES AND FIGURESTABLES123456789101112131415161718Key Economic Indicators, 2017Key Indicators of Petroleum Industry, 2017Key Indicators of Electricity Industry, 2017Electricity Generation by Source, 2017Number of Accounts by Customer Category, 2017Distribution Assets Owned by Each Distribution Licensee, 2017Target Transmission and Distribution Losses and Actual Lossesin 2016Cost of Supply to Customers and Revenue, 2016Structure of Approved Costs of Supply and Sales Income, 2011–2017New and Renewable Energy Power Plants Serving the Grid, 2017Avoided Cost-Based Feed-In Tariffs for Agreements Signed upto 2007Cost-Reflective Feed-In Tariffs for Agreements Signed after 2007Subsidy Providers and Subsidy ReceiversBase Case Generation Expansion Plan, 2018–2037Status of New Generation ProjectsPower Sector Investment Requirements, 2017–2025Electricity Price Comparison in the RegionADB Sector Road Map and Results 234567891011ivEnergy Intensity of Countries with Similar Per Capita GDPShare of Primary Energy Supply by Source, 2017Primary Energy Supply, 2009–2017Energy Use by Sector, 2000–2017Organization of the Energy Sector, 2017Functionally Unbundled Power Sector Monopoly, 2009–presentChanging Market Structure of Electricity SalesTotal Installed Capacity and System Peak DemandSystem Load Profile on 17 May 2017System Load Profile Normalized to the Peak DemandSystem Annual Load Factor, 2000–2017677912161717181919
Tables and ation Capacity Mix, 1986–2017Generation Fuel Mix, 1986–2017Energy Mix in Power Generation, 1986–2017Installed Capacity Share, Ceylon Electricity Board, and PrivatePower Producers, 1990–2017Generation Energy Share by Ownership, 1990–2017Planned Transmission System, 2025Share of Customer Accounts of Each Distribution Licensee, 2017Costs of Supply at Each Level of Delivery, 2016Development of Generating Capacity from New Renewable EnergyConsumption and Customers in Each HouseholdConsumption BlockEstimated Generation Capacity Deficits, 2017–2025Comparison of Electricity Prices for Medium-Scale CustomersCountry Comparison of Electricity Supply CostForecast Costs of Supply, 2017–2025Import of Crude Oil and Petroleum Products from 1990Domestic Sales of Petroleum ProductsMarket Share of Refinery Output and Refined Product ImportsCeylon Petroleum Corporation Sales and LossesSri Lanka Energy Sector Problem Tree20212222232627303637525859606263646588v
viTypical grid substation in Sri Lanka.(photo by Pushpa Kumara)
AcknowlegmentsACKNOWLEDGMENTSThis report was prepared by a team led by Aiming Zhou, principal energyspecialist, South Asia Department (SARD), N. K. Ranishka Wimalasena,senior project officer (energy), SARD, and consultants Tilak Siyambalapitiya andPil-Bae Song. The team was supervised by Priyantha Wijayatunga, director, energydivision, SARD. Staff support was provided by Angela Francesca O. Bernaldo,project officer, Karen Grace Ochavo, associate environment officer, and MariettaL. Marasigan, consultant. Guidance and support was also provided by YongpingZhai, chief, energy sector group, Sustainable Development and Climate ChangeDepartment.The team was grateful for the guidance and support from the Government ofSri Lanka, Ministry of Power, Energy and Business Development.vii
AbbreviationsABBREVIATIONSviiiADBAsian Development BankBSCbreaker-switched capacitorsCEBCeylon Electricity BoardCFLcompact fluorescent lampCPCCeylon Petroleum CorporationDSMdemand-side managementEA 2009Electricity Act No. 20 of 2009ERA 2002Electricity Reform Act No. 28 of 2002GDPIMFgross domestic productInternational Monetary FundIPPindependent power producerJICAJapan International Cooperation AgencyLAUGFSLanka Auto Gas Filling StationsLCCLanka Coal CompanyLECOLanka Electricity CompanyLIOCLanka Indian Oil CompanyLNGliquefied natural gasLOLPloss of load probabilityLTGEPlong-term generation expansion planLVlow voltageMPRDMinistry of Petroleum Resources DevelopmentMOPE&BDMinistry of Power, Energy and Business DevelopmentMVmedium voltageNREnew renewable energyPPApower purchase agreementPRDSPetroleum Resource Development SecretariatPUCSLPublic Utilities Commission of Sri LankaPVphotovoltaicSLRsSri Lankan rupeesSLSEASPPSPPASri Lanka Sustainable Energy Authoritysmall power producerstandardized power purchase agreement
AbbreviationsWEIGHTS AND MEASURESbblbarrel of ogramkgoekilogram of oil equivalentkmsquare kilometerktkilotonktoekiloton of oil ykilowatt-hourkilowatt-hour per square meter per dayMvarmegavolt-ampere reactiveMWMWhmegawattmegawatt-hourtoeton of oil equivalent2ix
Access to electricity.The Mahiyanganaya Grid Substation has improvedaccess to electricity for 150,000 homes(photo by Pushpa Kumara).
EXECUTIVE SUMMARYEconomy. With a population of 21.4 million and a land area of 65,610 squarekilometers (km2), Sri Lanka is a high population density country with 326 personsper km2 (40th in the world, according to the World Population Review). Thecountry’s per capita GDP was 4,065 in 2017. Sri Lanka entered the upper middle-income category of countries (as defined by the World Bank) for the firsttime this year.Energy supply and use. Sri Lanka used 12.8 million tons of oil equivalent energyin 2017. At 7.5 of economic output per kilogram of oil equivalent in 2014, SriLanka ranks high among countries that report similar per capita economic output.Petroleum, imported as crude oil and finished products, provides the highestshare (43% in 2017) of energy to the national economy, followed by biomass(37%), coal (11%), hydro (6%), and new renewable energy (3%). The countryhas succeeded in delivering modern energy sources to its whole population;petroleum products and bottled liquefied petroleum gas are widely available. Electrification of households reached 100% in 2017. Energy end-users arehouseholds and commercial (40%), transport (36%), and industries (34%).Renewable energy. Much of the hydropower capacity has been developedalready for electricity generation: 1,390 megawatts (MW) in larger power plantsby the state-owned utility, Ceylon Electricity Board (CEB) and 350 MW in smallerpower plants by private investors. About 250 MW of hydropower capacity is invarious stages of development, which would most likely be the last medium-scalehydropower plants to be developed. A few more small power plants remain to bedeveloped, by the private sector. The technical resource potential for solar powergeneration is estimated to be 6,000 MW. Net-metered rooftop solar photovoltaic(PV) was allowed since 2008, and since 2016, surplus energy sent out to thegrid was paid. The target capacity of rooftop solar PV is 200 MW by 2020. Theexploitable wind power potential is estimated to be 5,600 MW, of which about130 MW has been developed, with a further 130 MW under construction.Fossil fuels. Exploration for gas and petroleum have not resulted in commercialproduction, although some deposits of gas have been discovered in Mannar basin,offshore on the western coast. More exploration is planned in other offshoreareas on the west and east coast. About 30% of petroleum requirement isimported as crude oil and processed in the country’s single refinery, while thebalance r equirements are imported as refined products. Liquefied petroleum gasis imported and supplemented with the output of the refinery, bottled anddelivered to customers. Coal is imported for electricity generation for the900 MW power plant, and for smaller industrial applications.1
Executive SummarySector management and regulation. Two ministries are responsible for policyformulation and supervision of energy sector institutions and utilities. TheMinistry of Power, Energy and Business Development prepares energy policy,supervises the main state-owned power sector utility CEB, the state-owneddistribution utility Lanka Electricity Company, Sri Lanka Sustainable EnergyAuthority, and several other state-owned entities in the energy sector. TheMinistry of Petroleum Resources Development oversees exploration for gas andpetroleum, supervises state-owned Ceylon Petroleum Corporation (CPC) andseveral entities in the petroleum sector. The Public Utilities Commission of SriLanka (PUCSL) is the multisector regulator, which is presently empowered toperform the functions of technical, economic, commercial, and safety regulator ofthe electricity industry. Petroleum and water supply are expected to be assignedto PUCSL for regulation, in the near future.Ownership of energy utilities. The electricity industry and the petroleumindustry are both managed largely by state-owned corporations. Private sectorparticipation in the electricity industry is limited to power generation, while inthe petroleum industry, the private sector is engaged in petroleum distribution,bunker supplies, gas distribution, and oil exploration.Electricity sector reforms. Electricity generation and supply in towns previouslyhandled by private entities were taken over by the government in the 1950s, andin 1969, handed over to the government-owned corporation CEB. Electricityindustry reforms commenced in 1983, when distribution previously handled bycity councils was transferred to a government-owned company. In 1996, privateinvestors were allowed to produce and sell electricity to the single -buyer CEB.In the same year, feed-in tariffs to enable private investors to build, own, andoperate small (up to 10 MW) power plants to use renewable energy, wereannounced. However, to this date, CEB remains substantially a verticallyintegrated electricity utility. Unbundling the utility into separate generating, transmission, and distribution companies proposed in the Electricity ReformsAct 2002 did not materialize. The Electricity Act 2009 introduced limitedunbundling, where all businesses remain under one corporate ownership, whilegeneration, transmission, and distribution functions were separately licensed.PUCSL commenced regulatory functions in 2009.Petroleum industry reforms. Similarly, in the 1960s, the government-ownedcorporation CPC was established to import, refine, and supply petroleumproducts, previously marketed by private companies. CPC continues to operatethe 50,000 barrels-per-day refinery, and imports and markets much of refinedproducts. In 2004, about 35% of CPC’s retail outlets were transferred to LankaIOC. Since 2004, most storage facilities are jointly owned by CPC and LankaIOC, through a company. After years of planning, the Petroleum Industry Act,which would corporatize the presently government-owned corporation CPCand empower PUCSL to regulate economic, technical, commercial, and safetyperformance of the sector, has not been presented to Parliament as yet.2
Executive SummaryElectricity demand and supply. Sri Lanka’s per capita electricity consumptionwas 626 kWh/person in 2017, lower than India and many of the developingcountries in Southeast Asia. In 2017, the share of sales to household customerswas 37% and to industrial customers was 32%, and the sales to the commercialsector was 29%. As the economy moves toward higher growth in the servicessector, the share of electricity sold to industries has been on the decline forseveral years. Annual sales growth in the past five years was below 9% per year,while the growth in peak demand was below 7% per year. Thus, the load factorhas grown from 63% to 68% from 2010–2017, indicating that the mandatorytime-of-use tariffs for industries since 2011 and to commercial customers since2013 have the desired impacts. Completion of household electrification in 2017and the higher growth in daytime sales to commercial customers also positivelyimpact the load factor.Electricity demand growth and investment needs. Single-buyer and transmissionlicensee CEB forecasts that sales will grow at the rate of about 7.5% until 2021,and then decline to about 5% per year by the end of the decade. The peakdemand is forecasted to cross 3,000 MW by 2020 and reach 4,800 MWby 2030. Significantly, the time of occurrence of the peak demand is expected toshift from the present late evening (typically 7 p.m.) to early afternoon (typically1 p.m.), by 2027. To meet the growing demand at the lowest cost, CEB plansindicate the investment requirements for power generation to be 2,400 millionfrom 2020–2025. Matching investments are required for transmission (to interconnect generating facilities), estimated to be 320 million and in distribution(to serve the growing demand and to improve reliability of supply to customers) afurther 60 million.Petroleum sales growth. No formal forecasts are published by CPC, but it isexpected that the growth in sales of petroleum products will remain at 5%– 10%per year. No specific investment plans are published by the petroleum industryentities.Electricity industry outlook. At present, the electricity industry has three majorconstraints: (i) capacity shortage and delays in implementation of mainstreampower plants; (ii) slow growth in renewable energy development; and (iii) severefinancial crisis, mainly attributed to noncost reflective tariffs. The capacityshortage has to be resolved by building larger power plants. CEB has proposedthat the two canceled coal-fired power plants be revived and built using thelatest technology. Additionally, two combined cycle power plants are required tobe built to cater to seasonal shortages of hydropower. CEB expects the liquefiednatural gas (LNG) import terminal to be ready by 2023, already behind itsprevious schedule at 2020. Renewable energy development through solar andwind investments by the private sector is effectively at a standstill owing to legalimpediments and lack of clarity on the feed-in tariffs. Solar and wind parks havebeen put out for competitive bids, but only a handful have materialized. Theseshortcomings have to be resolved, to create a healthy environment for privateinvestors to build solar and wind power plants in the long term. The financial3
Executive Summarycrisis would only be managed by PUCSL, with CEB cooperating by submittinginformation to calculate allowed revenues, and then gradually working through atariff increase and rebalancing process.Unfinished reforms in the electricity supply industry. While unbundling ofCEB is effectively stalled, it is still an integrated structure with functional units.CEB corporate remains largely intact although it is functionally unbundled. CEBcorporate manages the entire institution, while licensed entities within CEB havenot been made accountable to the allowed revenue they receive. The presentmethodology allows the penalties for increased network losses, and incentivesfor reaching loss levels above the target. Lanka Electric Company (LECO), theonly corporate entity in the power sector, distributes about 10% of the totalenergy and has experienced the benefits of economic regulations, as well asresponding to energy efficiency targets. Quality of supply reliability is managedby PUCSL, the direction should by now be catering to the needs of the electricitycustomers, by establishing reliability targets, measuring or estimating systems,and imposing penalties when targets are violated. Similarly, commercial quality ofelectricity service requires regulatory oversight. Currently, CEB does not submit toPUCSL, information required for economic, technical, and commercial regulatoryactivities. Accordingly, determination of allowed revenues and the cost of supplyhas not been done since 2017.Reforms in gas and petroleum industry. The petroleum industry remainspartially unbundled, while CPC remains intact as a large integrated entity. ThePetroleum Industry Act that would establish unbundling and regulatory oversightrequires to be completed soon and approved by Parliament. Petroleum pricingis conducted by the Ministry of Finance, which is required to pass on to PUCSL,to establish a more transparent pricing procedure. Sri Lanka does not have agas industry law; a decision is required on whether a separate gas authority isto be established to manage the planned import of LNG and distribution ofregasified LNG, or whether CPC is to be empowered to manage the gas industryas well.Energy efficiency outlook. Sri Lanka requires the completion of initiativesalready in
kilometers (km2), Sri Lanka is a high population density country with 326 persons per km2 (40th in the world, according to the World Population Review). The country’s per capita GDP was 4,065 in 2017. Sri Lanka entered the upper middle-income category of countries (as defined by the World
Coastal Areas in Western Province, Sri lanka," Journal of Environmental Professionals Sri Lanka, vol. 3, 2014. [15] "Clean Air in Sri Lanka: Summary of progress on improving air qulity," Country Network Sri Lanka, 2008. [16] D. S. R. O. S. Lanka, national environmental act, No. 47 of 1980, Department of government printing, Sri Lanka, 2009.
Sri Lanka (formerly Ceylon) is a large island near the southeastern coast of India, . 1974, whereupon the name was changed to Sri Lanka. Lanka was an old name associated with the country. Sri Lanka, or "magnificent" Lanka, now reflects a new . made of the Royal Botanical Garden "Purple Hybrid," a local selection.
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source of imports to Sri Lanka) while Sri Lanka's exports to India stood at 5.8% of overall exports of Sri Lanka (3rd largest destination of Sri Lankan exports) with total trade between the two countries amounting to US 4.2 billion. The ISFTA has made a substantial contribution in
Sri Lanka: Ethnic Fratricide and the Dismantling of Democracy (University of Chicago Press 1991) 93-102. 7. Michael Roberts, ‘Ethnic Conflict in Sri Lanka and Sinhalese Perspectives: Barriers to Accommodation’ (1978) 12 (3) Modern Asian Studies 353. 8. Roshan de Silva Wijeyeratne, Nation, Constitutionalism and Buddhism in Sri Lanka
ber 2007; N 134, Sri Lanka’s Muslims: Ca ught in the Crossfire, 29 May 2007. For analysis of the nearly three-decade civil war and insurgency of the Liberation Tigers of Tamil Eelam (LTTE), see Crisis Group Asia Reports N 125, Sri Lanka: The Failure of the Peace Process, 28 November 2006, and N 191, War Crimes in Sri Lanka, 17 May 2010.
II. OVERVIEW OF SRI LANKA DEVELOPMENT CONTEXT 6 2.1 Summary 7 2.2 Sri Lanka’s performance in achieving the MDGs 8 2.3 Sri Lanka – Overview of the post-conflict political situation since 2009 10 2.4 Sri Lanka’s economic growth 13 2.4.1 Poverty and exclusion 13 2.4.2 Unemployment 14 2.
a) Interest accruing to or derived by any person outside Sri Lanka, on any loan granted to any person in Sri Lanka or to the government of Sri Lanka 1 April 2018 b) Interest income earned by any person on foreign currency accounts opened in any commercial or specialised bank in Sri Lanka, with the a
