Features
Twenty-five years of private sector-led renewable energy development
by Dr Tilak Siyambalapitiya
A policy change in 1995 to allow private investments in electricity generation into the grid, a standard agreement and a standard price for electricity produced, enabled such investments to pick-up faster than in other countries. The first mini-hydro power project with entirely private sector funding and private ownership commenced operations in May 1996.
The agreement and the price
Dubbed the “most investor friendly agreement in the world”, Sri Lanka’s renewable energy developers were offered, since 1996, a non-negotiable 15-year agreement (20-years for projects signed after 2008). The agreement says, literally, “I will buy all your electricity produced for the next 15 years, any day any time; I will not penalize you for delays in your project or for not producing electricity at all or producing less electricity than you promised; I will not ask you to start or stop your power plant”. There is no other agreement in the business world 25 years ago or now, where such agreements are offered to a seller.
Then the price. The agreement carries a price, which too is not negotiable. It says: “I will pay you a price that reflects the fuel saved in major power plants; in case fuel prices go down, I will not drop the price below 90% of the price when you signed; if the fuel prices go up, I will keep on increasing the prices without any limit”.
I shall buy all your all your product at the following price for 20 years. If you do not produce too, even when I need it badly, I will only greet you with a smile !
Government procurements have to be on competitive basis. This policy of competition was further reinforced by the Electricity Act 2009, required to be implemented by the Public Utilities Commission (PUCSL). The legal validity of such renewable energy agreements and price offers, that make a mockery of rules of “competition”, has been debated in many quarters over the past 25 years.
Has it been good ?
Well, yes and no, depending on whom you speak to and your convictions. To the credit of the program, Sri Lanka’s renewable energy development accelerated after 1996. These are smaller power plants using hydropower, wind, wood and more recently, waste. If the government attempted to develop them through a state entity, excessive overheads and inefficiency would most likely creep-in. There would have been a politically appointed Chairman and a fleet of vehicles going up and down, to run a tiny minihydro.
On the other hand, had the state rigidly controlled what is developed and where, renewable energy projects developed would have been more efficient, well-engineered and certainly more environment friendly. Stories are many, where a private mini-hydro project agreed with the Central Environmental Authority to release water for downstream users, but later blocked it 100%. As the saying goes, “Sri Lanka’s streams and rivers are now flowing in tubes”, but we are proud about a vibrant renewable energy industry !
Renewable energy from such smaller private investments reached 1% of total in year 2000 and 4% by 2006. Buoyed by another policy change in 2007 that offered a contract for 20 years and an even more attractive prices, renewable energy from small power plants raced toward a 10% policy target for 2015. It reached the target indeed, with 11% of electricity produced in 2015 from the combined production in 147 minihydros, 15 wind and 3 each of grown biomass, wood waste and solar parks. Unlike many countries who make headlines by stating their renewable energy contribution in megawatt, Sri Lanka’s targets and achievement are stated in kilowatthour, honestly reflecting the true benefits to save fuel and to reduce emissions.
Continuing its race for development, by 2020 (provisional figures) electricity produced from smaller private renewable energy power plants reached 12%. Adding major hydros, the energy share from all renewable energy was 37% by 2020, a share unmatched by all countries and expatriate Sri Lankans that preach Sri Lanka on how to develop renewable energy.
Has the price been good to the investor?
The policy of paying renewable energy projects signed over 1996-2016 was to pay the value of fuel saved in the grid, calculated and published in advance every year. Agreements signed after 2007 enjoy an even more attractive pricing formula: a technology-specific, cost-reflective price. That means minihydros are paid a price to make that a profitable investment; wind power is paid to make that technology, a profitable investment.
Once signed, price paid does not change. If costs go up or down after signing, or bank interest rates go up or down, the price remains the same. Fortunately for all who signed in 2008-2009 or later, equipment costs and bank interest rates both have been on a downward trend. Projects that borrowed at 18% in 2018 possibly borrowed at 8% this year, but still enjoy the price paid calculated at 18% interest. By way of equipment costs, solar power has seen the deepest reduction in costs. More on that later.
What was the benefit to the public?
Why did the government offer such attractive rates and terms to private investors? Sri Lanka did not throw Rs 10 at renewable energy investors and say “do it if you can”. The key principle in the pricing policy was: price paid makes investments profitable (not just profitable but excessively profitable). The agreement still remains the “most investor friendly agreement” in the world.
In other words, the public of this country, through their electricity bills and through taxes, have paid for the investments, bank interest, and profits (above market rates), to make privately-owned renewable energy an excessively profitable venture. Other benefits of renewable energy need not be repeated here; they are all well known. So what is the benefit to the public who fully paid (and continue to pay) for these investments, of which the ownership is private?
It should be the longer-term benefit of cheaper renewable energy. That’s why the 2008 announcement on the revised policy said as follows: “Renewable energy, which is a natural resource, belongs to the State. Developers are provided with a high tariff to cover their expenses and to earn reasonable profits for an adequately long period (in this case the first fifteen years). Thereafter, the benefit of the resource should flow to the electricity customers, while continuing to provide an operating fee to the small power producers and full recovery of maintenance costs”.
The closest example is the CEB-owned fleet of hydropower plants, which are bigger. The familiar ones are Laxapana, Kotmale and Victoria, among a total of 15 power plants. The public of the country paid for those too, starting from 1950. How? Through electricity bills (because loans and government investments were apportioned between CEB and Mahaweli Authority), taxes and benefits foregone. The major hydros today produce at a cost of Rs 3.35 per unit of electricity. True, that except for Upper Kotmale, all are 20 years or more of age. The fleet of minihydros, too, as they mature into their contracts, after 15 years of good profits to investors, should deliver benefits to electricity customers. That’s why the 2008 announcement said: Therefore, once the developers’ costs and profits are paid, it is inevitable that in the long-term, renewable energy should flow into the national grid at prices significantly lower than the cost of thermal energy.
However, information published indicates that the principles on which small power producers were enabled in 1996 and then enhanced in 2008, are indeed being followed. CEB produces electricity from mature hydros at Rs 3.35 per unit (PUCSL assessment 2019). The price for mature hydropower in the private sector was Rs 5.38 per unit (CEB publication 2019), precisely following the principle of fairness: good profits to investor for 15 years, benefits to electricity customer in the longer term.
As more and more minihydros mature, later wind, biomass and solar projects mature, we should be seeing finally, that ALL renewables produce electricity at prices very significantly lower than all the alternatives. Renewables replace thermal power and we should be paid the same price, will not be an argument, now or then, or in the future. “My power plant is not so good, it does not have water, is not an argument”, because no one defined where to build the minihydro; the investor selected it.
The argument that private renewables can produce below the price of oil, gas or coal does not hold, then, now or in the future. Renewables were allowed because fossil fuels were expensive and bad. The price of fossil fuels comprise royalties, production and delivery costs. If one needs a comparison, royalties for renewables have to be paid to the “republic” (the treasury) and production costs paid by electricity customers. Since royalties are not charged for renewables, both CEB and private, then renewable energy prices should be compared only with production costs. The investment has already been fully paid by the republic.
I conclude with a quotation from the 2008 announcement: “Small power producers opting not to migrate to the new agreement by 30th April 2008, will be offered the tier 3 tariff announced for the relevant technology in the year in which the existing agreement expires, after its full tenure of 15 years is completed”. That means, retiring minihydros should be offered prices in the range of Rs 6 per unit.
It is yet to be seen whether the PUCSL and consumer rights groups are willing to fully and comprehensively understand the issue, step-in, and ensure that “renewable energy belongs to the republic”, as stated in the Sri Lanka Sustainable Energy Authority Act 2007.
The country’s streams are now flowing in tubes, but do benefits flow to the public who have fully paid the investors with profits?
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
US sports envoys to Lanka to champion youth development
Rahuman questions sudden cancellation of leave of CEB employees
