Sri Lanka solar projects of 200MW are not viable after currency collapse


ECONOMYNEXT – Around 200 MegaWatts of ground-mounted solar projects awarded before the latest collapse of Sri Lanka’s rupee have been halted as they can no longer be carried out at current costs, according to the Federation of Renewal Energy (FRED), an industry association.

Sri Lanka’s renewable generation costs plunged after competitive bidding was introduced in 2015 and new operators came in. Global renewable costs, especially in wind had also fallen in recent years with newer technology.

Renewable prices fell to as low as 12 rupees a unit under competitive bidding. However global renewable energy prices also went up as fuel prices went up last year.

FRED says after the tendering process was introduced in 2015 replacing a feed-in tariff (an administratively decided rate), the number of new projects slowed. Now non-competitive feed in tarriffs have been re-introduced.

There are close to 200MW of ground-mounted solar projects awarded in 2021 at competitive tariffs which are not viable under the current context, according to data released by FRED at a news conference.

In 2022, the rupee collapsed from 200 to 360 to the US dollar after two years of money printing to artificially keep down rates sharply pushing up the cost of solar panels and other materials.

Sri Lanka suffers forex shortages and the rupee collapses from time to time as the central bank prints money to mis-targets interest rates.

The power to mis-target rates and create forex shortages was given to economists and bureaucrats in 1950 through the creation of a soft-peg. Attempts by some economists to take the power to mis-target rates away and restore monetary stability has so far failed.

Since the hard peg was broken in 1950 the rupee has fallen from 4.70 to 360 to the US dollar. (Colombo/Oct05/2022)

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