Coal prices soar, aggravating CEB woes

By Rathindra Kuruwita

The recovery of coal prices in the world market coupled with the decline in the value of the rupee would result in the cost of electricity generation increasing rapidly in Sri Lanka with the Norochcholai coal-fired power plants accounting for the bulk of power produced in the country, energy experts said yesterday.

They said the recovery of coal prices meant that calculations made by a number of energy sector decision-makers on the cost of electricity in the future would be incorrect.

The price of coal, which was trading at around USD 50 per tonne late last year, has rebounded.

Independent energy expert, Vidura Ralapanawe said that coal cost had risen to USD 90. With freight, insurance, VAT and lightering, the total cost of coal received by the plant is USD 120 per ton.”

He added that at the current exchange rate, when the rupee was hovering around Rs. 200 per USD it would result in cost of the fuel rising by about Rs 24 per kg.

“It is estimated that around 380 grams of coal is needed to produce a unit of electricity. This gives the coal cost per generation at Rs 9.12. When we add the diesel cost for the plant, the fuel cost per unit alone comes to about Rs. 9.90 per unit. Adding other costs of the plant (except financing) brings the unit cost to around 14.50.”

Ralapanawe said that a number of CEB and Ministry officials had claimed that they could produce a unit of electricity for about Rs. 7 to 8. They had done so by keeping the exchange rate at a constant, sometimes at around Rs. 150 per USD and setting the coal prices at around USD 50 per ton, which was the price when coal hit an all-time low last year.

Engineer Parakrama Jayasinghe, former president of Bioenergy Association of Sri Lanka, told The Island, “Even if we assume that the price of coal will remain stable, we have to think about the price fluctuations of the rupee.

“For years the CEB has been lying to the public about the real price of a unit of electricity produced using coal. They tell the people that the unit cost is about Rs. 8 but the documents they give to PUCSL show that the actual cost is around Rs. 18 per unit. They have been telling people that the unit of electricity from a new coal power plant will be about Rs 7-9 but they have calculated that keeping the exchange rate at Rs.150 per dollar. Now it’s at Rs. 200 and it’s unrealistic to expect the rate to return to Rs. 150 per USD.”

Maithri Gunaratne, former Chairman of Lanka Coal said that coal prices had been extremely low in 2020 and that it was not wise to make long term predictions with those numbers.

“We also have to factor in corruption too unfortunately.”

President of the CEB Engineering Union Saumya Kumarawadu however said that the rebounding of coal prices shouldn’t be too much of a problem and that coal was still the cheapest option they had.

Attempts to contact Minister of Power Dullas Alahapperuma failed.