Development of wind power plants: Poor tender documents could lead to delays
By Dr. Janaka Ratnasiri
The Ceylon Electricity Board (CEB), in November 2020, invited proposals for the design, supply, delivery, erection, testing, commissioning, operation and maintenance of a Wind Power Plant (WPP) on a Build, Operate and Own (BOO) basis, to be connected to the grid sub-station at Madampe. The closing date is 16.02.2021.
Capacity of wind turbines and plans for future
The request for proposal (RFP) document, issued by the CEB, has indicated the scope of the tender, project description, instructions to proponents, anticipated time (milestone) schedule, proposal forms and letters and model power purchase agreements etc. However, it lacks more important detailed specifications with benchmarks. The tender seeks building power plants in the range 1-10 MW up to 10 MW.
Instead of keeping the number of turbines open, it would have been far better if the number and capacity of each turbine are specified, which would have made the evaluation easier. For example, the RFP could have specified either five two MW turbines or three 3.3 MW turbines. Also, one MW plants should have been discouraged as the unit generation cost could go up with small plants.
The recently commissioned 103.5 MW WPP at Mannar, built on a loan of USD 140 million from the ADB, comprises 30 turbines, each 3.45 MW. As such, the procurement process would have been handled or supervised by the ADB. Hence it was commissioned without any delay. According to a presentation made by a CEB Official, the CEB plans to build a second 100 MW WPP at Mannar and 170 MW WPP at Pooneryn, comprising units of 20 MW, 50 MW and 100 MW, by either the CEB or the private sector.
Benchmark for tariff
A wind power plant has no fuel cost and therefore, the energy charges will be utilised for recovering the capital cost plus operational and maintenance costs. The RFP requests the tariff for delivery of energy during the contract period of 20 years without any escalation. Surprisingly, the RFP also gives an upper benchmark of LKR/kWh 14.54. Most likely, the proponent will tend to offer a tariff close to the benchmark. In a previous tender announced in 2019, a higher tariff benchmark of LKR/kWh 17.42 was given. It would have been far better if such a benchmark is not given, allowing the proponent to make the best offer independently. According to the CEB website https://ceb.lk/project-detail/17/en, the generation cost of Mannar WPP is only UScts/kWh 5.00, or LKR/kWh 9.50. Therefore, the proposed benchmark tariff is on the high side even if allowance is made for the difference in scale. Further, the CEB had invited bids for building WPPs in the Northern Province in 2015 and awards were made for two 10 MW plants which offered a tariff of LKR/kWh 12.29.
The most important of aspect of a tender is the specifications of the item to be procured. Generally, in a procurement, it is the purchaser who has to give the specifications and not the supplier. However, in the RFP Vol. II, Section E, the compliance statement asks the supplier to list specifications, adding that “Wind Turbines should comply with international standard IEC 61400-1 or latest available equivalent Standards”. Instead of asking for compliance with an international standard which is not readily available, the RFP should have listed the basic specification items on which quantified information is required.
For example, the RFP should have stated the Type of Turbine, whether DC or AC synchronous or AC asynchronous, Height range of tower, Diameter of blades, Material of tower and blades, Cut-off and Cut-in wind speeds, Power generated for a specified wind speed giving the minimum limits, Output voltage with tolerances, Output frequency with tolerances, Maximum permissible harmonic content, Maximum tolerable sound level at a specified distance, Accuracy class of meters, etc. The first column in the compliance schedule should include the values for each parameter along with tolerances and the second column should give the values offered by the bidder, which would have facilitated the evaluation process. Unless the specifications are clearly laid down, any evaluation done could lead to disputes and eventually delays and sometimes cancellation of the tender.
Prior tenders for building wind power plants
In December 2002 the CEB had issued an RFP for building one 20 MW wind power plant either at Puttalam or Hambantota on BOO basis. This RFP was similar to that issued for the current tender, except that there was no tariff benchmark given. The proposal-security and performance-security bonds comprising USD 100,000 and USD 1,500,000, respectively, are much less than LKR 2 million per MW and LKR 10 million per MW, respectively, specified in the current tender. Under Specifications, only a list of parameters was given on which information was requested, but without giving any benchmarks.
In a report published by the National Renewable Energy Laboratory (NERL) in 2003, on Site Selection for Wind Farms in Sri Lanka, reference has been made to this RFP saying that “after the bidder qualification process, only one qualified applicant bid a project in response to the RFP. Several concerns have been identified regarding the structure of the RFP and the bidding process that discouraged potential developers from responding to the RFP”. Eventually, no award has been made on this tender.
In 2015, the CEB called for RFPs to build 10 MW WPP in the North, and had awarded the tender to build two WPPs with capacity 10 MW each, accepting a tariff of LKR/kWh 12.29. It is not known whether this RFP has given a tariff benchmark or not or what security bonds were requested. However, up to the end of 2019, there plants have not been commissioned, as they are not reported in the CEB SD 2019.
Again, in November 2019, CEB issued an RFP for building five WPPs each with capacity 10/15 MW with an aggregate of 60 MW at five selected sites on BOO basis. At each site, installation of turbines in the range 01 – 10 MW was expected. The RFP issued was similar to that issued for the current tender, except that a higher tariff benchmark of LKR/kWh 17.46 was given. One of the sites selected for this tender was Madampe with a capacity of 10 MW, the same as that for the current tender. There is no announcement as to whether any award was made on this tender. If the NERL found that the RFP issued for the 2002 tender was problematic, why was a similar RFP issued for the current tender?
Development of wind power plants during 2010-2015
Since the CEB tender calling for building a WPP in 2002 failed, the Sustainable Energy Authority (SLSEA) initiated a scheme of Feed-in-Tariff for purchasing electricity from RE power plants below 10 MW capacity at technology dependent rates, which was announced in the Media. This resulted in the private sector building 15 WPPs during 2010 – 2015 at their expense, mostly in North Western coastal belt and Northern Province. Out of these, 12 have capacity of 10 MW, and their aggregate capacity is 128 MW. It is not known whether the CEB has laid down any specifications for the plants, but they were required to follow the CEB’s Guide for Grid Interconnection of Embedded Generators.
According to CEB’s 2018 Sales and Generation Data Book (S&GDB), CEB had purchased electricity from them at rates varying from LKR/kWh 13 to 26, with an average of LKR/kWh 20.40. Their annual plant factor varied between 20% and 39% with an average of 29%, leaving out two out-liars. This compares well with most regions elsewhere. In 2016, CEB decided to do away with this scheme and had decided to select WPP projects after calling for competitive bids (CEB AR 2016). This was probably fearing a conflict with the Electricity Act.
The result is that the WPP capacity remained stagnant from 2015 to 2019 at 128 MW, as shown in S&GDB and SD publications. The Article by Eng. Parakrama Jayasighe, appearing in CT FT of 19.01.2021 says, quoting SLSEA, that 672 MW WPPs approved by SLSEA have been held up by CEB without signing power purchase agreements.
Compliance with President’s policy
The President has in unequivocal terms expressed his policy to give priority for adopting renewable energy sources to meet the country’s energy requirements and that 70% of electricity should be generated from renewable energy sources by 2030. He has included this in his Saubhagye Dekma Policy Framework and also communicated personally to the Minister of Power, State Minister of Renewable Energy and officials of the two ministries as well as from institutions coming under their purview at two meetings, one held on 14.09.2020 and the other on 15.12.2020, he had with them.
He urged, at this meeting, that officers should honestly work towards achieving his target and implement RE projects expeditiously. However, neither the Ministry nor the CEB appear to have followed the President’s instructions, because even after four months, the President’s target has not been incorporated into Electricity Industry Guidelines by the Ministry, while the CEB has not come out with a Generation Plan consistent with the President’s target.
The CEB has announced an RFP for getting a WPP built on BOO basis for the second time within a year without making any award on the first RFP announced in 2019. There had been a previous RFP issued in 2002, which was abandoned. In the meantime, the private sector commissioned 15 WPPs during 2010-15 on permits issued by SLSEA based on Feed-in-Tariff scheme, which was abandoned by the CEB in 2016, resulting in wind capacity remaining stagnant during 2015-2019.
The RFPs issued on two tenders under the competitive bidding are highly flawed as no detailed specifications with benchmarks are given which would have facilitated the evaluation process. Such flawed RFPs will only lead to disputes and delays in awarding the tender, if not cancellation.
Procurement delays of RE systems will only negate the implementation of the President’s target for achieving increased share of RE in electricity generation by 2030. There is also a delay in amending the Electricity Industry Guidelines and also in preparing a Generation Plan consistent with President’s target. Explanations need to be called from those who cause such delays, if the President wants to ensure that his targets are met on time.
Dr. Janaka Ratnasiri served as the Chief Technical Adviser to the Ministry of Environment (1993-2000). He also served as a Consultant on Natural Gas to the Petroleum Resources Development Secretariat developing a Road Map for the Utilisation of Natural Gas in Sri Lanka in 2013/14 and developing the National Policy on Natural Gas in 2017/18.