A Renewable Energy World Beckons
By Dr. Vidhura Ralapanawe
By 2030, 80% of our energy will come from renewable energy – thus spoke the ‘Vistas of Prosperity and Splendor’, the political manifesto of President Gotabaya Rajapaksa and the SLPP.
This was a visionary and far thinking announcement when delivered in 2019. It spoke to our abundant potential for wind and solar power, the large hydro base, biomass and supporting technologies.
By 2021, this target has been downsized to 70% renewables due to pressure from CEB who wants it reduced to 50% (the target set by previous government in 2017). While we were bickering over the target, other countries committed to targets similar across the globe many announcing them at the climate ambition summit in December 2020.
An ambition turned awry through small-minded and regressive bureaucracy.
The Renewable Energy Moment
We are living in the renewable energy moment, and the world doesn’t wait for Sri Lanka to get her act together. In 2019, only 25% of global generation capacity addition came from fossil fuels globally as Bloomberg reports. 80% of total global electricity generation investment will go to renewables and storage in the next 30 years.
The transformation is global. Countries all over the world are contracting large scale¬ renewable energy leading to prices coming down at a rapid pace.
Two trends drive the transition. First is Climate policy. This has found new champions in the corporate sector. In the USA, corporate renewable energy contracts are the largest capacity additions. This trend also persists in countries like Australia and Vietnam, where corporate decarbonisation goals drive adoption.
The second trend is price. Globally, renewable energy is now the cheapest form of generation additions in the power grid driving rapid adoption.
Shift from Baseload Power
The tragedy of our electricity sector is that utility engineers are still living in an outdated paradigm. At a recent meeting at a Ministry, a senior utility engineer insisted on fossil fuels stating a need for baseload power.
Baseload power existed when the cheapest electricity came from coal and nuclear plants running 24x7. This model failed when renewables became cheaper than fossil fuel plants. Due to cost utilities all over the world now want as much renewables as possible. To match the variability of renewables, the fossil fuel plants need to be flexible.
While fossil plants such as gas provided flexibility, this was merely a transient need. Battery storage is increasingly fitting this space – with massive battery storage installations coming up globally to support renewables. Australia recently announced the world’s largest battery storage of 1200MW.
Sri Lanka and India – Two Different Realities
While Sri Lanka remained ambivalent, the targets of the Indian Prime Minister Narendra Modi in 2016 and 2019 were embraced by the utilities, State Governments and businesses.
India will increase its renewable energy percentage from 19% in 2019 to 50% in 2030 according to their approved plans while doubling the total energy demand during this period. Sri Lanka began in 2019 with 45% renewable energy – and as per CEB plans and Cabinet Papers, it is projected to reduce to 40% by 2030.
Persistence of Indian power sector officials has resulted in Solar PV tender prices reaching USD 0.04 (less than LKR 8.00/kWh). This is a result of contracting at scale (over 100MW) and regular rolling tenders/auctions building skill. This allowed India to build local capacity - Adani Green is currently the world’s largest renewable energy developer with own manufacturing. Large global renewable energy developers are bringing FDI and low cost financing to India with technology and skill.
Sri Lanka in the meantime tenders 1MW – 3 MW scale losing out. Small scale should be with Feed-in-Tariff and complemented by globally competitive large scale tenders to attract low tariff and FDI.
Sri Lanka – A Country for Renewables
Sri Lanka is a country ideal for renewables. High solar insulation with availability of large water bodies to instal floating solar systems avoiding land use conflicts are key factors enabling renewable adoption. High wind potential in the North-Western/South-Eastern coasts and central highlands offer significant capacity. Mannar land/off shore and Hambantota off shore offer high yields for wind pointing to low-cost electricity.
We can easily develop over 50 GW wind and solar power while we need mere 10GW to reach 2030 80% target.
We have a large hydropower base currently used only for storage and generation. They can be easily reconfigured to also support regulation – providing balancing to the grid to support variable renewables (as done in USA and Canada). This allows us to defer investments on storage.
Renewable grid requires looking at seasonality and variability. Sri Lanka is well placed due to its mix of the three primary sources (hydro, wind and solar). At present, our generation is challenged during March/April and November periods of low hydro and low-Wind. During these periods we have high solar yield enabling us to leverage solar + battery storage to meet the demand successfully. Having large amounts of wind and solar also allows us to retain more water in our reservoirs to use during critical periods.
Looking at wind availability, we have been able to identify six different wind zones in Sri Lanka which show different characteristics. Strategically planning wind power locations (including offshore) will enable us to reduce variations.
Fossil fuel will balance the capacity up to 2030 and they can be replaced by additional renewable energy with storage as we move forward.
Economic and Financial Implications
Since the cost of renewable energy is significantly cheaper in Sri Lanka than fossil fuels, the 80% renewable energy scenario will be the cheapest for the economy, CEB and the consumer- even without considering environmental impact of fossil fuels.
CEB plans of large scale fossil fuel development (1700MW gas and 300MW coal by 2030 as per recent Cabinet Paper) will force large cost increases to the consumer.
CEB uses ‘constant exchange rate’ calculations, assuming a constant LKR/USD, making the rate escalation invisible. The tariff calculation for the recently awarded 300MW plant assumed Rs 150.03 per USD across the contract period. The figure shows the real cost implications using a 3% YoY Rupee depreciation.
In 2024, the earliest possible year that R-LNG can be made available, cost of electricity will be 21.70. This is with keeping all other CEB assumptions constant (including RLNG delivered cost at 10 USD/MMBTU). LNG Asian prices recently went over USD 12 – indicating additional price risk.
The coal plant expansion is priced at USD 0.10/kWh (20 Rupees at current rates) based on reasonable assumptions. From 2016 fuel cost of coal plant rose from Rs 4.73/kWh to Rs 9.12/kWh in 2021– a 93% rise. Fixed and O&M costs also rose as most are in USD and the new plant will have a USD profit for CMEC China as well.
Contrast this to last wind and solar tenders that offered prices around Rs 10/kWh, and we can see the price advantage.
CEB sells electricity at Rs 16.63; Sri Lanka cannot afford to generate electricity from imported fossil fuels at these rates without destroying the economy and hurting consumers with 50+% electricity price hikes.
Grid Stability and Network
CEB has been raising concerns on grid stability due to variable renewable energy. These issues have been successfully solved in other countries. South Australia with a similar energy consumption to Sri Lanka, generates 60+% of energy from wind and solar at present. On 11th October 2020, 100% of the demand was met by renewables. Though it is connected to the other States, the grid is capable of balancing itself without these interconnections, as it showed during transmission failures in 2020.
The Tesla big battery – at 150MW at present, even provides services such as digital inertia to the grid, and they are at the forefront of innovation. They plan to generate 500% renewable energy – diverting the balance towards making green hydrogen for export.
While we also have transmission limitations, these are not solely renewable energy problems, as it is a problem for fossil fuel generation expansion as well.
As many experts have indicated, supporting transmission and stability based on a good renewable energy plan is cheaper than the current fossil fuel madness.
Renewable Energy for Future
We are running with an energy deficit, and we need rapid scaling up of renewable energy. Government must first gazette the 80% renewable energy by 2030 target and request CEB to present a combined generation and transmission expansion plan for the same. We must begin contracting renewable energy at scale to attract FDI and global developers who can give us better prices. A lot of work needs to to be done to be in par with the rest of the world. A renewable energy future is beckoning, we must embrace it.
Dr. Vidhura Ralapanawe is a sustainability practitioner and an independent energy analyst.