ECONOMYNEXT – The purchase price of a wind power plant in Mannar, Sri Lanka built by India’s Adani has now been lowered to 8.85 US cents in the latest negotiations, Energy Minister Kanchana Wijesekera said.
“They are now proposing 8.85 US cents or about 26.90 rupees,” Minister Wijesekera told parliament.
The private plant has drawn controversy because it was not coming through competitive bidding and the initial price demanded was said to have been as high at 15.20 US cents a unit.
Power purchase agreements (PPA) which run up to 20 years are among the largest government procurement in the island and dwarfs some capital projects.
Minister Wijesekera said the plant came as a government-to-government deal. A cabinet appointed negotiation committee was appointed to sort out the price.
Some political analysts refer to such power plants as a ‘geopolitical’ cost.
There are now several plants for which prices are being negotiated without competitive tender.
Minister Wijesekera was responding to a question from opposition leader Sajith Premadasa whether the proper environmental cost has been assessed, given that the plant is in the middle of a migratory bird flyway and what was the price.
A bird corridor was expected to be set aside according to an Environmental Impact Assessment, he said.
However concerns have been raise about high tension wires. It is not clear whether buried cables would be used as called for by some activists.
Minister Wijesekera said the price now compared favourably with other renewable plants.
Sri Lanka was a risky country after a sovereign default, he said.
Due to the regulator earlier not increasing tariffs after the central bank depreciated the currency from time to time in the past after inflationary rate cuts, the CEB also runs losses and is unable to pay IPPs, adding another risk to private developers.
Mannar was one of the areas with the highest wind power potential, Minister Wijesekera said and there were already several other plants in the area.
Hiru Ras Power, which had a 15MW plant in the mainland, after a procurement process had asked for 20.54 rupees a unit. The price was set before macro-economists depreciated the currency.
Ceylex (Pvt) Ltd had sought 33.35 rupees for a 20MW plant. These were for 20 – year contracts.
A 50MW wind plant near the existing CEB plant has now been opened for competitive bidding to close in May 2024.
The Adani plant discussions are still underway, he said.
A solar plant in Siyambalanduwa (tendered in crisis period) was as high as 12 cents on tendering.
But after negotiations it was brought down to 8 US cents after negotiations, he said.
Solar panel prices have also plunged after the global commodity bubble ended and the US started to tighten policy, analysts say.
Minister Wijesekera said compared to wind, solar costs were lower.
The Siyambalanduwa plant comes with ramping, which reduces renewable energy stress on the grid.
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It is not clear whether Adani is now offering ramping at 8.85 cents or not.
Adani has meanwhile said it has been unfairly targeted.
Related Indian Adani Group says “vicious campaign” against its Sri Lanka wind project
Investors demanded a price based on the cost, location, plant factor, return on equity and the interest rate, Minister Wijesekera said.
According to data in an Environmental Impact Assessment the Adani 250MW plant would cost 420 million US dollars with 147 million dollars of equity (35 percent) and 273 million (65 percent) in debt
Under so-called ‘feed-in-tariffs’ which are also non-competitive, developers are paid 33.70 rupees per unit for the first 8 years, from 9-15 years 18.90 rupees and from 16 to 20 years 13.80 rupees, he explained.
Energy costs of coal plants are now around 25 rupees.
(Colombo/Mar21/2024)
Is a unit reffered to in this article a MWh? Sri Lanka should transition to a open market where generators bid for pricing every half hour and work in a more dynamic model. That way cheapest available generation is used first.