July 20, 2017 (LBO) – Sri Lanka’s Public Utilities Commission has approved an alternate Least Cost Long Term Generation Expansion Plan (LCLTGEP) 2018- 2037 of the Ceylon Electricity Board’s (CEB) with no coal power plants.
PUCSL, the electricity sector regulator, approved 242MW of major hydro, 215MW of mini hydro, 1,389MW of solar, 1,205MW of wind,8 5MW of biomass, 4,800MW of natural gas, 330 MW of furnace oil based power and 105MW of gas turbine power to be added to the electricity generation system in the 20 year period.
The same plan was studied and proposed as an alternate plan in the LCLTGEP 2018-37 by CEB.
However, it was not the proposed base case plan by CEB under least cost principals, considering the cost of investment which was US 15,607.70 million dollars (2,323.67 billion rupees – without updated fuel prices and externalities costs).
After adjusting the updated fuel costs and externalities PUCSL derived at the same alternate plan under least cost principals with the investment cost of US 13,336 million dollars even lower than the proposed base case plan of CEB.
The investment cost of the proposed base case plan of CEB stood at US 14,894.64 million dollars (without updated fuel prices and externalities costs).
“CEB has based its fuel cost assumption from Lanka Coal (coal price for Puttlam coal plant), Ceylon Petroleum Corporation (oil prices) and Japanese Crude Cocktail (JCC) basis (NG prices),” the PUCSL said.
“However, those costs are not fully reflected in the published Platts (Singapore), JCC and NEWC indexes (Australian coal index published by www.Globalcoal.com) at the end of the year 2016.”
The CEB, relied on two years (2015 and 2016) average market prices for fuel cost estimates.
Using such long term (2015 and 2016) averages, the Commission says when the current prices are substantially different appears to misrepresent the actual pricing at the time of preparation of the plan.
CEB has considered coal at 69 dollars a tonne and LNG at 10 dollars per British Thermal Unit where as the PUCSL used adjusted prices of 81 dollars and 8.6 dollars per BTU.
“Most notably, they have used the existing market prices for oil products (which is with taxes, etc and excessively higher than the border prices),” it said.
PUCSL says that the proposed generation expansion plan 2018-38 has also not considered the externalities costs and therefore does not reflect the true economic costs of power generation.
Externalities cost means environmental damage and health effects on people from pollution.
“Ideally, externalities depend heavily on the site specific environmental conditions, plant technology and fuel used. Thus, site specific studies are required to reliably determine the figured on externality cost for a particular technology. Lack of such data in Sri Lankan context is the main shortcoming. Yet it is not recommended to fully ignore such costs, just because accurate, specific data is not available.”
All the renewable addition that CEB suggested in the proposed plan remained same, but with updated fuel prices and cost of externalities under least cost principals coal power plants were not qualified for the 20-year plan.
In total, Sri Lanka on 8,371MW of new additions (including the committed power plants) to the national grid in the period of 20 years from 2018.
PUCSL stressed on the fast implementation of the approved plan to avoid an electricity shortfall or procuring emergency power in the future.
Sri Lanka expects a 5.0 percent energy demand growth and a 4.5 percent peak demand growth rate for the period 2018-2037.