CeylonToday FT: Cost of Electricity Generation and the National Economy

The total annual electricity generation of the country is about 15 billion units at present,  and it increases nearly by 1 billion each year. Hence, if the cost of generation of one electricity unit is increased by a mere one rupee, it would incur a loss of more than Rs 15 billion to the country at present.

It is a duty of the Ceylon Electricity Board to prepare a Least Cost Generation Expansion Plan identifying most appropriate power plants complying with technical requirements of the Sri Lanka electricity system. After commissioning the Norochcholai coal power plant as identified in CEB’s long-term plans, the cost of generation of one unit was reduced from Rs 23.66 in 2012 to Rs 15.07 in 2015. In line with this, the Government reduced the electricity bill by 25% for the first time in history.

However, since no low cost major thermal power plants were added to the system after 2014, electricity generation from diesel power plants (like emergency power plants) were increased, which in turn has increased the cost of generation up again to Rs 21.32 in 2017. As a result of this Ceylon Electricity Board, which made profits with the commissioning of the Norochcholai coal power plant, has incurred a loss of Rs 45 billion in 2017.

After spending nearly 10 years on resolving political, social and environmental issues, the Sampur Coal Power Plant was cancelled at the very last moment at which it was about to be tendered. Even if the Sampur Coal Power Plant was cancelled,there are no signs of commencing construction of any new major power plant as a successful measure to resolve the crisis caused by the cancellation of the project. Under these circumstances, it is inevitable that CEB will incur heavy losses of more than Rs 50 billion annually in coming 6-7 years until a low cost major power plant is commissioned.

The damage to the country’s economy due to the increased diesel power generation as a results of the delaying the commissioning the Norochcholai coal power plant by 15 years, was a staggering Rs 900 billion. This amount is equivalent to the construction cost of eight more highways similar to the Southern Expressway. Similarly, the loss of terminating the Sampur coal power plant at the very last minute is nearly Rs 200 billion for five years. This could finance the construction of four more highways similar to Katunayake expressway. Accordingly, it is evident that unlike other sectors, the erroneous decisions taken by top Government authorities for the power sector can have massive impact on the nations’ economy.

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