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Govt. gearing for US entry into power sector

  • Nov 16, 2020
Sri Lanka Sunday Times

The Government is gearing for a US entry into Sri Lanka's power and energy sector after the US Embassy submitted an unsolicited proposal from two American companies for a liquefied natural gas venture to generate emergency power, according to papers submitted to the Cabinet.

US-based companies New Fortress and General Electric (GE) had forwarded a project proposal through US Ambassador Alina Tepliz, 'proposing a Liquid Natural Gas (LNG) solution to meet this emergency requirement', says a Cabinet memorandum recently submitted by Minister Dullas Alahapperuma.

The proposal was then submitted to the Cabinet before the general election in August. Minister Alahapperuma says the US Ambassador met him and 'expressed the interest of the Government of the United States of America in promoting this project that offers power at US$ 0.099 [Rs 18.29] per kilowatt hour…for a period of five (5) years'.

Prime Minister Mahinda Rajapaksa, submitting his observations as Minister of Finance, has said the proposal 'appears to be technically and environmentally feasible, even though a detailed evaluation of the proposal is yet to be undertaken'. He indicates that he has no objection to it.

The Prime Minister has suggested that a detailed proposal be obtained from New Fortress Energy and GE to evaluate its technical viability and to call counter proposals (if it is found to be viable) from prospective bidders.

A Project Committee and the Cabinet Appointed Negotiating Committee are to go through these proposals to make recommendations to the Cabinet to authorise the Ceylon Electricity Board (CEB) and the Treasury to sign a power purchase agreement, implementation agreement and other relevant documents with the selected investor.

It is not clear what sort of LNG project-for instance, if it is a power ship-the US companies propose. But they envisage a build-own-and-operate (BOO) model for five years with 100 percent foreign direct investment. In the short term, between 100 and 150 megawatts could be installed within two to three months, they say. In the medium term, there can be a 'world class LNG import terminal' and a 300mw power plant operational within 12 to 14 months.

The companies have also proposed converting the existing 300mw West Coast power plant into LNG by providing the required funds and LNG (conversion to be undertaken by GE). And a five-year power purchase agreement is suggested.

Minister Alahapperuma's Cabinet memorandum calls for 'stop gap arrangements' to meet electricity requirements while a number of power projects are under construction. The CEB has outlined several short-term initiatives to bridge capacity shortage.

One of them is to add medium-term furnace oil-fired power capacity up to 200mw for ten years. A second is to start negotiations with three furnace oil-fired independent power producers-ACE Power Embilipitiya, ACE Power Matara, and Asia Power-to extend their contracts beyond April 2021 and up to December 2023. A third is an auto diesel-fired option.

On the auto diesel-fired option, Prime Minister Rajapaksa has said that he has no objection in principle. 'However, all the efforts must be taken to enhance generation capacity including firm power generation capacity using power plants that utilise renewable and more green energy sources rather (than) those (that) consume heavy fuels,' he says. 'Therefore, it is advisable to take stock of all the ongoing power generation projects and look for more environmentally feasible and economical measures prior to proceed [sic] on the proposed action.'

On the other two options, too, he has reiterated the Government's policy in favour of renewable energy. '…apart from its inconsistency with the country's power generation policy in terms of environmental implications, procuring of emergency power from diesel-based independent power producers will add a significant burden to the economy,' he says.

But committed renewal energy champions like Vidhura Ralapanawe pointed out that the Government must put money where its mouth is by fast-tracking large-scale floating solar and wind power projects.

'Unfortunately, these projects are not moving forward, with CEB almost obsessively focused on fossil fuels contrary to the Government policy of 80% renewable energy by 2030,' he said. 'We see so many Cabinet papers for coal, gas and oil plants, but none for large scale renewable.'


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