Energy Committee consultation on electricity tariff 2013

Transcription

1 Energy Committee consultation on electricity tariff 2013 By Energy Committee Market Access Team The European Chamber of Commerce of Sri Lanka

2 SUBMISSION DATE 28 TH FEBRUARY PM 27 th March 2013 Mr. Damith Kumarasinghe Director General Public Utilities Commission 6 th Floor, Bank of Ceylon Merchant Tower 28 St. Michaels Road, Colombo 03. Dear Sir, Re: Public Consultation on Electricity Tariff Observation of The European Chamber of Commerce of Sri Lanka (ECCSL) The ECCSL acknowledges receipt of the public consultation pertaining to the above mentioned, dated 13 th March Globally there is a paradigm shift to Renewable Energy in International and national strategies. The under pinning reason is to reduce GHG emissions levels and fossil fuel dependency. While in the recent years Sri Lanka has opened its policies to accommodate alternates for fossil fuel dependency; the transition is comparatively slow. The effects could be potentially the foreseen energy crisis in Sri Lanka and Drastic reduction in Foreign Investment with the increase in electricity tariffs. ECCSL commends the Public Utilities Commission for being the first government agency to officially launch and initiating Public consultations. We wish to thank the agency for enabling inviting ECCSL for the first public consultation on the Electricity Tariff We do firmly hope that the expert committees recommendations are reviewed with positive interest. The Committee is committed to working closely with all stakeholders and would be glad to present its official view at the upcoming public consultation scheduled for 4 th April The Committee is further open to all future consultations as per the requisites of the Public Utilities Commission Sri Lanka. Please do not hesitate to contact the undersigned for any further clarifications. Thank you Dilipan Tyagarajah President ECCSL Ref : MAT/EC/28/03/

3 PUBLIC CONSULTATION ON ELECTRICITY TARIFF Issue Efficiency levels of installed and aged thermal and hydro machines Background & Recommendation Efficiency testing of thermal and hydro machines should be carried out on a regular basis if found lower than standard efficiency of similar machines. Corrective action should be taken. The assistance of the original manufacturer (OEM) should be sought. Small improvements in efficiency could result in enormous saving completely overshadowing maintenance costs. With regard to Hydro machines, comparable efficiencies may not be available. However with Generators and Turbines which are more than 20 years old, it is certain that rehabilitation would result in improved efficiency. Limitations in LTGP Obsolete Qualitative Limitations on IPPs (1) Qualitative Limitations on IPPs (2) Quantitative limitations in IPPs Public Private Partnerships model Customs Duties on Renewable energy Solar sector accessories The various government departments need to better coordinate and follow the LTGP (long term generation plan), which becomes obsolete the moment it is printed. Lack of transparency, ambiguity and confusion regarding IPPs and the approval process must be addressed. The approval process is not clear and there is no unified direction toward development. Despite the imminent energy crisis, why is it that very few IPPs are being approved and the ones that have been approved are constantly challenged? Investments must be encouraged, and investments into the energy sector are imperative to the survival and growth of the Sri Lankan economy. Doing away with the 10MW Maximum for IPPS. Because the approval process for IPPs becomes more difficult for projects over 10MW, many projects (Hydro) which have the potential to be more than 10MW restrict themselves in order to expedite the approval process. Thus reducing the total installed capacity of the country and essentially wasting valuable resources. The Concept of PPP (Public Private Partnerships) whereby the investor makes 100% investment in return for 49% of the equity must be done away with. This model has never worked, and never will. If any investor brings forward a proposal of this nature, the credibility and intentions of this investor must be seriously questioned. Equally, investors will question the government departments that seek similar proposals. Solar power for especially domestic use should be encouraged. Although action has been taken to waive custom duties for solar power and inventors, accessories such as support rails, connectors, cables, web monitoring systems still attract custom duties. This should be waived. It should be pointed out that Solar power is important to CEB/people of Sri Lanka, firstly, because Solar energy is abundantly available and although the capital cost maybe high, there is little or no recurring cost; in comparison with thermal fueled generators which will have to depend on coal or liquid fuel which is increasing in price every year and has to be purchased, utilising the country s precious foreign currency resources, not to mention the high O&M cost. Solar also has the added advantage that there are no distribution or transmission losses. Customs Duties on Renewable energy Hydro Sector fuel substitutes Purchasing agreements on Coal and other fuel The used of the blended vegetable oil in power plants should be explored. If the existing custom duties on vegetable oil (waste or otherwise) were waived for power generation then the blended oil would be cheaper than pure diesel. The difference in cost is estimated to be 30% per litre, which would significantly reduce the cost of combined cycle operations and diesel engines in the North and East. Purchase of coal is being carried out by Lanka Coal on a long term basis and sold to CEB on a spot basis. Obviously the reason for this is for Lanka Coal to make a profit on the transactions. Both institutions are 2

4 government owned although the structure maybe different. The profit made by the Lanka Coal theoretically should be passed on to the consumers as the profit is a burden on the consumers. Industrial Sector Tariff The present tariff with regard to Peak and Off Peak and Daytime rates do not take into consideration the working practices of Sri Lanka major export industries, i.e. apparel trade. Industrial Purpose Peak Off Peak Day % Increase Industrial Purpose IP % The following changes are suggested. Industrial Purpose Peak Off Peak Day % Increase Industrial Purpose IP % If the above is implemented the cost to the CEB will be minimal but result in a saving to the trade. The ultimate advantage would be the apparel industries would be able to offer their products at a lower price to the increasingly competitive markets. Dependency on liquid fuels. Location of non indigenous energy resources Non competitive investment climate foreign investments Limited technology advancement Limited national economic support schemes Tariff increase contradicts national policy Urban development pre planning Serious revision of National energy mix. Reduce dependency on liquid fuels and restrict them to peaking only. Introduce Natural Gas into the picture. Develop more plants using indigenous energy resources: Hydro, Biomass, Geothermal, Wind, Solar based energy. If Coal is really necessary please build the plant in or near a port so that transport of feedstock still remains feasible. A recent study carried out amongst stakeholders (European Investors and Member state representations) affirmed the key deterrent for investment is High electricity tariffs Loss of unilateral agreements (GSP Plus) manufacturing industry Loss of competitive Labour costs Labour cost comparatively on par with / higher than competitor countries If Sri Lanka is to retain and attract further investment into the country it is important that country actively integrates and adapts an effective energy policy committed towards energy security, economic efficiency and environmental sustainability. The technological advancement globally to increase energy efficiency across various spheres is yet to be fully integrated and adapted in Sri Lanka. Public Education, information and awareness, access to such new technology and its benefits on a long term economic and environmental scale are necessary. The limited public financial schemes to support the use of renewable energy and energy efficient technology is a key contributor. Financial schemes to encourage conversion to energy efficient technology will reduce fossil fuel dependence. For example, in order to make solar power affordable to the general public, soft financing should be made available. In the 2013 Budget Speech and the forward strategy of the Government of Sri Lanka, the interest is to support of the Micro and SME sector development in Sri Lanka. The current electricity tariff increase mainly affects this target group and the middle and low end user of electricity. Sri Lanka is still undergoing post war development phase. Focusing on urban development plans across the country, the national strategy does not give high importance to renewable energy (RE) usage within pre urban development plans, especially in the less populated north, eastern and southern province. The importance of involving experts with post experience of urban development that has effectively adapted RE in urbanization, would pave the way for reduced dependency in fuel. 3

5 QUESTION POSED TO PUCSL 1. Despite the imminent energy crisis, why is it that very few IPPs are being approved and the ones that have been approved are constantly challenged? 2. Has the Government of Sri Lanka carried out intensive Pre-feasibility studies on all alternate energy resources, like currently being carried out for LNG? 3. Why are large scale RE projects, investments deterred? 4. Has Sri Lanka considered the adaptation of Smart Grid Technology to improve efficiency, reliability and sustainability of production and distribution of electricity? 5. Has Sri Lanka carried out a study on Investment promotions and energy cost relation and energy mix in other countries? 6. What are the key constraints barriers faced by the Government of Sri Lanka in the implementation of indigenous renewable energy resources? 7. How effectively would the position of stakeholders be reviewed and what would be the consultation review process? In conclusion, while ECCSL applauds the public Utilities Commission for its interest to consult the public at large, the committee request the consideration of the Public Utilities Commission to enable a minimum 4 6 week window period for future consultations. This would provide the committee ample time review with more effective research. 4

6 Energy security Economic efficiency Environmental sustainability OBJECTIVES OF ECCSL ECCSLs core objective is to enhance trade and investment between the European Union as Sri Lanka. The European Union stands as Sri Lanka s largest trading partner. ECCSL membership of 200 numbers represents a wide group of industries ranging from manufacturing to services, from trading to investment. As the organization perseveres to enhance investment flows to Sri Lanka; the interest is to work in effective partnership with the Government of Sri Lanka to contribute to the economic growth and development of Sri Lanka to its true potential. FIRST ENERGY COMMITTEE IN SRI LANKA MAT-ENERGY SL In 2012, ECCSL officially formulated an Energy Committee (MAT Energy Committee). The committee comprises of key business involved in the energy sector; nationally and internationally. The interest of the Energy Committee is to support the Government of Sri Lanka, in its long term plans of enabling a Sustainable Energy Strategy. The advisory service if provided on an honorary capacity; ensuring that higher principals of advocacy and representation are practiced at all times. EBO Worldwide Network ASBL - Cohesive Global Energy Report 2012 submission to European Parliament EBO WORLWIDE NETWORK ASBL SOLE NATIONAL BUSINESS SUPPORT ORGANISATION WITH INTERTANTIONAL NETWORK As the representative of the EBO Worldwide Network ASBL, ECCSL is the sole business support organization in Sri Lanka that has an international network in over 26 countries outside Europe with industry committees, including Energy. The MAT Energy Committee of Sri Lanka is privy to best practice and current evolutions in energy sector in key markets across the various regions. (SAARC, ASEAN, AMERICAS, EU & EUROPEAN REGION,). In the year 2012 the network submitted cohesive Global Energy Report to the European Parliament which gave insight to global trends in national energy strategies. The Chairman Market Access Team ENERGY COMMITEE The European Chamber of Commerce of Sri Lanka NO 75/4 Barnes Place Colombo 07. Sri Lanka E:Eccsl.euhelpdesk@gmail.com W: 5

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