Bidding for Renewables will certainly work! Here is the proof

by Dr Tilak Siyambalapitiya

The Financial Review of The Island of 27 Dec., has erroneously quoted me as having said, “Bidding for renewables will not work”. Your reporter may have mistaken what I listed at the beginning of my presentation about the Electricity Act, as misconceptions for my point of view.

The following are the misconceptions I listed.

Bidding for renewables will not work! (while promoting the Act as a means of establishing competition)

Renewables will reduce costs!

Sri Lankan investors have no money to invest; hence foreign investors have to come and wind and solar power must be paid for in USD!

Coal and gas power plants will be stranded assets!

Sri Lanka will get a lot of credits by declaring we will not build any more coal (and even the LNG terminal)

Electricity Act and privatization will reduce costs!

To further elaborate, here is what competitive bidding did to the prices of renewable energy-based electricity supplied to the grid by the private sector. Almost all of them are Sri Lankan investors, supported by local banks. (See tables)

It is clear from the above, that prices paid for wind power dropped from 19.43 to 13.07 Rs/unit, a full reduction of 33%. Prices paid to solar parks dropped from 23.10 to 17.95 Rs/unit, a drop of 23%.

Alas! we got a new government in 2019, and competitive bidding was stopped forthwith, and now the prices are determined by committees, which meet only when prices of renewable energy have to be increased.

When the rupee depreciated and bank interest rates went up, the committee promptly met, and increased the prices paid to new wind power agreements to Rs 34.13 and solar parks to 37.01 Rs/unit. Since then, the exchange rate improved from Rs 380 to Rs 320 to the USD, interest rates dropped down to 14%, but now the committee is silent.

The CEB and Ministry are silent, and the PUCSL, the consumer watchdog, is also silent.So now, no committee; no competitive bidding, and you customers are asked to pay, more and more for your electricity.

Asia Cup for Sri Lanka’s Electricity Prices

For a household using 90 units a month, Sri Lanka charges the third highest price in South and South-East Asia. We know 90 units a month are not a fantastic quantity of electricity. Possibly you have no fridge to be able to manage with 90. Our industrial customers are charged 40% more than their counterparts in all the competitor countries, such as India, Vietnam, Bangladesh, Malaysia and Thailand. All these countries have less than 50% of electricity produced from renewable energy and that too on a competitive basis.

Sri Lanka’s electricity prices are the highest in South and South East Asia for commercial customers (shops, offices, public buildings), and we won the Asia Cup for electricity prices in 2023, thanks to the government’s avoidance of competitive bidding.

With large solar and wind parks being negotiated (again by committees!) at prices up to three times more than what the same companies do such projects in India, the day Sri Lanka gets the world cup for electricity prices is not too far away.