Sri Lanka needs consistent energy policy to attract investors: Prof Samarajiva

Rohan-Samarajiva

Oct 09, 2019 (LBO) – Sri Lanka is in the need of consistent and solid policies in order to attract investors and planned infrastructure framework which should not be changed from government to government, a regulatory expert said.

“Infrastructure should not have politics associated with it. Because governments come and governments go but it takes time for infrastructure to be planned, deployed and used. So, in that kind of perspective it is important that we do these heavy sunk costly investments that stretched over long periods of time and that we should have good policies that have been widely consulted and are coherent and are implementable which are based on realistic understanding of what happened before, what happened with the policy that had in the past and what are the chances that the new policy would be better and more implementable than the one that we had earlier,” Prof. Rohan Samarajiva, Founding Chair of LIRNEasia & Chairman of Information and Communication Technology Agency said at the Energy Forum 2019.

The Energy Forum 2019 was hosted by the Public Utilities Commission of Sri Lanka, the electricity sector regulator to create a policy dialogue on the importance of an efficient energy sector for economic and investment growth in Sri Lanka with the participation of more than 500 professionals, experts, officials, investors and industrialists.  

Prof. Samarajiva said a solid policy valid not only for the private investors who are doing the power purchase agreements, generators and who are worried about different complex price formulas but also for the people who are making relatively small investments and putting some solar panels on their rooftops.  

“They are also participants in the system,” Samarajiva said.

“For all these people it is important to have a certain degree of policy stability that the rules of the games when you took the decision to make the investment will not change, halfway through,”

“When we teach the subject, we call this problem, the problem of regulatory risks which can include taxation regimes and various things like that. But within that, a stated policy which has got a certain solidity to it is important.”

He said even though the latest Energy Policy of the Government gives a clear direction of fuel, the cabinet papers that have been approved so far tells a different story.

The new energy policy came into light on this year (2019) were highly criticized by the experts in the industry as the sector failed to complete the implementation of the 2008 National Energy Policy and Strategies of Sri Lanka.

Samarajiva says policy uncertainty will continue to plague the sector in the coming years.  Therefore, investment both public and private is likely will be affected and increased risk impact the costs of the investments.

There is, however, no analysis provided of the previous failure and no evidence provided that it will not repeat, he added.

“The New Energy Policy – I was actually quite disappointed,” Samarajiva said.

The largest problem is low-cost baseload power, Samarajiva explains.

In the Energy Policy of 2008, coal was the solution for low-cost baseload power in Sri Lanka. The policy was incorporated in the least Cost Long Term Generation Plans (LCLTGEP) developed by the utility Ceylon Electricity Board which were approved by the regulator, Public Utilities Commission of Sri Lanka.

However, despite the policy being in place and being incorporated into the Long-Term Generation Plan, the Secretary of the Ministry of Power and Renewable Energy, Dr B M S Batagoda, gave an undertaking to the courts that coal was off the table, resulting in the cancellation of the long-delayed Sampur Plant.

“The 2008 policy very clearly stated that the fuel of choice to solve this problem was coal. We may like coal or not but that is what the policy says. The long-term generation plan that was developed consistently to the policy also said coal. Time tables were given. Lands were demarcated. All this was done. But nothing much happened. I can remember, I actually went to Sampur and ask where is this thing (Plant). I wanted to look at this nonexistent plant. So, nothing happened. Then there was a court case. And the government of Sri Lanka through the secretary of the Ministry gave a formal undertaking to the court that Sampur coal was off the table. Despite the policy said, despite the long-term generation plan said, said we are not proceeding with this,” Samarajiva said.

He said, the new 2019 Energy Policy clearly indicates the government will focus on LNG as the next fossil fuel for the country in one part but suggest adding more coal power into the national grid in the other part of the document.

The 2019 policy states:

3.1.2 Considering the recent price profiles, natural gas would be the next fossil fuel option for the country to broaden diversity.  A liquefied natural gas (LNG) terminal of optimum size and technology would be established at the most suitable location. Considering the impact to the country’s energy security, operation of the first terminal and LNG procurement shall be kept under state control.

“What it says that the next fuel in black and white terms will be LNG. It goes on to say, this is paragraph 3.2.1, it says the next fuel is LNG and due to various reasons, we are choosing LNG and it will be because of its critical importance, the government will have to have ownership and location decisions and everything is in that paragraph. So, I read that and I was okay, they have got another decision,” Samarajiva said.

“Now let’s see whether we are consistent with that. Even within the same document, now this is the tragedy, in the same document, there are three mentions of coal. If the next fuel is LNG why are we talking about coal? Is this sort of a schizophrenic document. One part doesn’t know the other part of the document. It says the and will be demarcated and allocated for coal. Now, I am completely confused. Because what I want is certainty. I may not want the fuel of my choice. But what I want from the policy and the entire purpose of the policy is to give me certainty,”

“I am an investor and I have got all kind of interests in this subject. I need certainty, so give me certainty at least in the document,”

“If you can’t make up of your mind even within the document it is basically a floating document. Now external to the document, I understand that various cabinet papers are moving about coal again. If coal is going to be put on the table now, why on earth we did not do coal when we could do coal, we could have avoided the blackouts, that we had earlier this year.” He asks.

Prof Samarajiva also added the sector needs to evaluate the reasons for the failure of implementing of 2008 policy and address it before the same reasons fail the new policy.

“If you go to the back of the document, they have assigned responsibilities for various tasks, you will see the most of the tasks has been given to the ministry of power and energy. I would ask, if you would go back to the 2008 document and see that most of the 2008 policy has not been implemented and the entity that had the responsibility of implementing it for whatever the reasons, despite desire the goodwill to do it has failed. Then we have to realistically access the situation and see what has been going on,” Prof Samarajiva said.

“Why have we not addressed the problem of taking a policy actor who has been quite susceptible to these political pressures and various kinds of VTO powers and why are we giving all these responsibilities back again to that same actor,”

“It was I think Einstein who said if you keep doing things over and over again expecting different results that is the definition of insanity.” he added.