ECONOMYNEXT – Land-locked Nepal and the island nation of Sri Lanka are both rich in renewable resources that could be utilised for power generation. And both countries have ambitious plans of increasing their respective installed energy capacities within the next several years by exploiting these renewable energy reserves.

The current Sri Lankan government is targeting a 70percent contribution from renewable energy to the National Grid by 2030, says Lakmal Fernando, Director/CEO of Regen Renewables Pvt. Ltd. Right now that contribution is less than 40%.

Fernando was speaking at a webinar organised by the Friedrich Naumann Foundation (FNF) South Asia, on ‘Ideas and Actions for the Renewable Energy Sector’ in its Restart Asian Economies series, on January 28th. He was joined by Nawa Raj Dhakal, the Deputy Executive Director of Alternative Energy Promotion (AEPC), Nepal. The session was moderated by FNF’s Country Representative in Bangladesh, Dr Najmul Hossain.

It has not been very long since Sri Lanka has taken note of its unlimited access to sun, wind, water as well as biomass, as potential energy providers, which could reduce if not completely replace dependency on costly fossil fuels in the production of electricity. However, research indicates that tea plantation companies had invested in mini-hydro plants as long ago as the early 20th century.

Meanwhile, over a period of ten years or so, says Fernando, Sri Lanka has had a slight shift towards complementing the country’s energy production through ground-mounted and rooftop solar panel installations.

The bulk of the 325MW production of solar energy, however, has been achieved only since the latter part of 2016, facilitated by government initiatives such as net accounting and net plus metering systems. Such schemes encourage consumers, now referred to as ‘prosumers’, to use solar to generate electricity on their own premises while either being paid for extra energy generated or for all of the energy provided to the grid, depending on the scheme selected.

The Battle for Energy (Soorya Bala Sangramaya) for instance, introduced about 4 years ago hoped to add 200MW to the national grid by 2020, and a 1000MW by 2025, through the installation of small-scale rooftop solar panels on hotels, commercial establishments, households and religious places.

Reaching the government’s 70% target would require the production of around 4.6 MW, in the next ten years, and that is an ‘uphill task,’ explains Fernando. He is optimistic, however, that if a million of the 6.5 million houses could be harnessed to produce 2 to 3 kw of solar energy each, 3GW could be connected to the national grid.

He points out that the rest of the shortfall could be met through ground-mounted solar power generators as well as wind power. While the Asian Development Bank provided a USD50 million loan in 2017 to fund rooftop solar energy production, Fernando states that the sector has also received a boost from local banks which have reduced their interest rates on loans to a single-digit.

Furthermore, the government is committed to re-commissioning 7000 rural transformers.

Meanwhile in Nepal, the introduction of a new constitution in 2015 and the resultant three tiers of government, Federal, Provincial and Local is paving the way for the generation of renewable energy locally, says Dhakal.

A country that generates a bulk of its energy through hydro projects, Nepal’s installed capacity is currently at 1430 MW, but experiences a 40% drop in production during dry seasons, explains Dhakal. Electrification of homes is mostly in urban areas and through the grid. The Nepali government has, in recent years been promoting the use of natural energy to further expand electrification of the country. While solar is not a widely used medium, min hydro projects are gaining ground according to Dhakal. Of course, Nepal, he points out, is blessed with ample hydro resources, making it possible for the production of run-of-the-river hydroelectricity. The current focus, he explains, is to popularise off-grid production of electricity for use in rural and suburban areas.

The Nepali government is targeting an expansion in the installed capacity to 5000MW by 2023 and 15,000 MW by 2030.

According to Dhakal, Nepal hopes to see an increase in annual electricity consumption from the current 260kw per capita to 750kw by 2023 and 1500 kW by 2030.

While the Nepali government is committed to giving up to 60per cent in subsidies for the initial investment of schemes designed for off-grid production of energy, it is providing the technical know-how and evolving policies around ‘take and pay’ plans etc. for companies involved in energy production for the grid. These supports also include getting environmental and other clearances from multiple government ministries to make things more realistic and time-bound.

The mini energy production schemes promoted in local government areas says Dhakal are geared towards socio-economic development of local areas. Schemes designed along with co-operative models or through IPP’s involve the setting up of local business and economic centres as well as academic and health-related institutions, which while creating a demand for more energy would also bring about more employment opportunities.

In Sri Lanka, the unit cost for coal-based electricity is LKR. 9.35, while a unit of Liquified Natural Gas(LNG) is LKR14.50 and a diesel powered unit is anything between LKR25 to 50. Solar and wind production, says Fernando is available at LKR8 to 10. Nepal meanwhile, says Dhakal, where production is heavily dependent on its rainfall patterns charges Nepali Rs. 8.40 per unit for hydroelectricity during the dry months and Rs. 4.80 in the wet months of the year. Solar and wind-powered energy costs Nepali Rs. 7.30 per unit.

While a stable grid is essential to absorb the renewable energy that is connected, Fernando points to delays in obtaining approvals and the depreciation of the rupee against the dollar as the greatest challenges private companies must deal with. Tariffs agreed with the utility provider, are usually tagged to the dollar, and will apply for at least ten years, he says. However, by the time the approvals are obtained and raw materials, of which nearly 75percent for both solar and wind are imported, the costings for both supplier and consumer changes. It is necessary, therefore, he says that both suppliers and consumers lobby government to streamline the approval process. The Central Electricity Board (CEB) controls the production and distribution of electricity, and regulations for renewable energy production are applied differently from area to area. When approvals take years, and costs then increase by 15 to 20percent, the project becomes untenable, and, if the current government is committed to ensuring its 70percent target is met, then it must be pro-active in streamlining the necessary processes, says Fernando.

While Foreign Direct Investment (FDI) has not caught on very much in the energy sector in Nepal, dollar PPA’s are allowed, says Dhakal who explains that the Nepali government is very keen to expand both domestic energy usage while also pursuing bi-lateral and multi-lateral agreements with neighbouring countries.

Nepal, which until three years ago experienced severe power shortages, now has the potential of producing 83,000MW of hydro energy. . Domestic consumption, says Dhakal is projected to be around 10,000MW by 2030 with about 5000 MW available for export. Being a signatory to both the South Asian Association of Regional Cooperation (SAARC) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) initiatives towards trading in electricity amongst member countries, Nepal is actively pursuing such trade agreements with India, Bangladesh, Bhutan etc., says Dhakal.

He points out, however, that for such agreements to be viable the production quality must be satisfactory and partnerships should go beyond government to government co-operation to include the private sector. India for instance is moving fast in developing solar and wind power, which could be enhanced with hydro energy contributions from Nepal.

There have also been talks on setting up a South Asian regional grid to further enhance energy sharing between member States. Says Fernando, while such initiatives are welcome, agreements must ensure equity and transparency, without which, smaller countries such as Sri Lanka could get ‘sandwiched between giants and not enjoy the benefits of such a setup.’ Discussions between India and Sri Lanka have been ongoing for quite some time in this regard, he says, adding that FNF could play a role in educating the people on the advantages of inter-regional energy connectivity and also ensuring grid stability.

Despite there being 6.5 million households, Fernando says only 28,000 have opted to move to solar energy usage. More awareness amongst the people on the benefits of renewable energy is needed, he notes, where unlike Nepal, the subject has been included, albeit as only a chapter, even in a school textbook. Sri Lanka offers university-level courses, and in Nepal too, renewable energy is studied by students in the Humanities and Engineering fields. Nepal has also included it in its technical and vocational education training programme.

While promoting renewable energy would open up more employment opportunities, Fernando is hopeful that there will be a push towards educating the young in Sri Lanka on the importance and benefits of moving towards renewable energy options. Children, he says can be the influencers if introduced to the subject early in life, and, if like some other countries subsidies are provided to persuade the public to switch to alternate forms of energy and clear regulatory frameworks are implemented, with time, Sri Lanka too could reduce its dependence on costly fossil-based fuels. (Colombo, February 4, 2021)

Reported by Kshama Ranawana