How long will power cuts be?
by Eng. Parakrama Jayasinghe
This is the question in everybody’s mind these days. Anything up to 10 hours of blackouts have been predicted by the Ceylon Electricity Board (CEB) trade unions. But Minister of Power and Energy, Kanchana Wijesekera, has been quick to contest this prediction while being careful not to say that there will be no power cuts. His offer for guaranteeing uninterrupted power, 24/7, is a massive increase in consumer tariff, coming on top of the recent 75% hike in August 2022. Now, it is reliably understood to be as high as 86% increase immediately. Obviously, these percentages will be calculated on the already punitive tariff levels. It remains to be seen whether saner counsel will prevail and pros and cons of accepting limited power cuts, as against imposing such a hike on the hapless consumers, will be weighed carefully. Even if rupee income is generated to cover the estimated cost, where will the dollars come from to import the coal and oil?
In this context, it is also pertinent to note that the calculations offered in support of the proposed increase in tariff, purportedly to dig the CEB out of the financial hole that it has dug for itself over the years, needs to be evaluated carefully.
Predictions from the CEB Generation Requirements for 2023 are as follows:
Expected energy forecast for 2022 excluding planned power interruptions – 16,370 GWh
Estimated unserved energy due to planned power interruptions for 2022 – 785 GWh
Expected total energy forecast including planned power interruptions in 2022 – 17,155 GWh
Accordingly, assuming 1% annual energy growth, annual energy forecast for year 2023 is calculated to be 17,326 GWh and the same was considered for this study.
This assumption leads to an estimated cost of Rs 900 billion for the year 2023, and hence the call for the 86% escalation of the consumer tariff.
In contrast, the (Public Utilities Commission of Sri Lanka (PUCSL) has recommended the reality of downturn in demand during the year 2021 and 2022, and the real but inevitable power cuts of at least the current duration. Accordingly, its prediction of demand is as follows:
This, when extended, leads to an annual demand of 13,870 GWh. It is their assessment that the recent hike in tariff is more than adequate to cover this cost.
Which estimate is more logical?
The charts below which appeared in the media few weeks back are most revealing. (See Table 2)
How logical is the projection of a significant increase in demand under the present depressed state of the economy? Furthermore, the cost of coal-based generation quoted as Rs 47.91 per unit is highly questionable when the CEB’s own report on generation requirement for year 2023, cites the price of coal as Rs 142 kg. This means a cost of coal alone per unit to Rs 54.00. Thus, the true cost of generation is more likely to be in the order of Rs. 70.00 per unit, way above any type of renewable energy. But the real danger is in the continued use of oil for power generation.
Such assumptions make one wonder if these planners are living in Sri Lanka or in some mythical land. This is not surprising considering the kind of assumptions made in preparing their latest long-term generation plan. This document submitted for review to the PUCSL in July, is based on the dollar parity and other financial parameters prevailing in December 2021. Obviously, the financial crisis that hit Sri Lanka in March 2022 has escaped their attention.
Even more surprising is the assumption that such parity rates will not change over the 20-year time horizon of the plan, as well as the assumption that the world market prices of all fossil fuels oil, gas and coal will be static, proudly displayed in graphical format in the LTEGP. So, this kind of predictions of demand to justify a massive increase in tariff is not surprising.
On the other hand, the PUCSL has done its own calculations to show that with the last tariff increase and a saner, but also more optimistic demand forecast would enable the CEB to break even. The coal power plant will have to operate at lower capacity, due to lack of dollars to import the coal and difficulties in unloading the required number of ships before the onset of the monsoons, and the less said about the Minister’s plan to unload this ships in Trincomalee and to truck them to Norochcholai, the better!
Thus, the assumption of none or reduced hours of power cuts is far removed from reality. It was most encouraging to note that many days during the months of June to October, in 2022, hardly any oil-based generation was used. One would have expected this to signal an oil free electricity generation in the coming year, even if it meant some hardships caused by longer power cuts. Consumers would have made this sacrifice readily if that had been offered as an alternative to the need for huge increases in tariff as well as a coherent plan for accelerated addition of renewable energy sources, which, once installed, does not require any dollars, and firm prices will be guaranteed for the whole lifetime of the project. The impact of price volatility coupled with a highly depreciated rupee is now felt by the entire country highlighting the lack of vision of the planners.
Of course, in contrast there are attempts already underway to bridge the generation deficit using Emergency Power running on oil at enormous cost. This option which also requires dollars to import the oil, in addition to rupees to pay the generation companies, poses an even greater danger of reactivating the dreaded fuel queues an experience best forgotten. The gain made by the introduction of the QR system will be lost.
However, a senior Engineer of the CEB publicly displayed the following cost of generation figures. (See Table 3)
In fact, the true cost of electricity, in 2022, was much higher, if the actual cost of coal is factored in. The increase in cost is obviously due to the overdependence on imported fossil fuels on which we have absolutely no control. But the writing has been on the wall for many years and now the CEB engineers, too, have accepted the reality. But now it is proposed to accept a cost of generation of some Rs 48.00 kWh, for the recovery of which another massive tariff hike is to be imposed. If this is the only solution that can be provided by those in authority, why do we need a Minister of Power and thousands of engineers at the CEB?
The advent of the unavoidable crisis may get pushed back a little with the recent fresh onset of rainy weather, but it would certainly be a short-lived relief. It will be best even if such limited window of opportunity is made use for pragmatic and honest approach to mitigate the crisis, rather than just playing with numbers and creating grave social disharmony. There are many questions being raised as to the underlying motivation for this move, totally against the provisions of the Electricity Act. What will happen if such a tariff hike is allowed and the demand is indeed more realistically of the order of 14,000 GWh or less? Will the CEB reimburse the additional levy imposed on the consumers?
What are the mitigatory measures being adopted to alleviate the same problem that would recur next year too? What is more logical, given the severe shortage of FOREX? Do we waste the scarce and most likely borrowed dollars just to buy the fuel, the need for which will continue year after year, or accept the inevitable hardships and spend such dollars to rapidly expand the renewable energy generation capacity which does not have such a dollar consuming recurrent cost? Perhaps, this is too abstract a proposition for the energy sector professionals to fathom. As it stands, there are no tangible measures being taken targeting the year 2024 even other than various plans and projections, which history has shown to be just so much applesauce. The predictions made in early 2022 of this impending crisis was large ignored. https://www.ft.lk/columns/Sri-Lankan-electricity-sector-The-headless-chicken/4-730564
“May the Minister have the courage to declare that Sri Lanka would no longer operate any oil-based power plants, except perhaps those which can operate on furnace oil and naphtha, produced by our own refinery, for which the supply of crude oil must be treated as a priority for many reasons.”
So, the helpless consumers will conclude that their problems will have to be overcome by themselves and evidence shows that neither the CEB or the Ministry has any viable sustainable plan taking into account the unavoidable ground realities.
Fortunately, such options are now emerging, commencing from the very basic intervention of the consumers themselves individually by conservation of energy and more vigilance in the use of the energy consuming equipment. This will provide immediate monetary benefits to the consumers as well as provide a modicum of relief to those less able to engage in such moves by reducing the over all cost of generation of the CEB and hopefully averting any more ad-hoc tariff increases.
The word DSM-demand Side Management is bandied around often by the authorities, but very little seems to be done to adopt same. It is said that Negawatts are much cheaper than Megawatts. We, the consumers, can take up the challenge ourselves to help ourselves and well as the country. The potential saving has been estimated to be up to 20% without much effort or cost.
The next option available and now proven technically and financially feasible is to minimize the dependence on the national grid for the individual consumer’s electricity needs. Just as an indicator, even before the dreaded 86% tariff increase, the average cost to a consumer above 180 units a month was as follows: (See Table 4 and Figure 2)
The CEB is bound to come up with a myriad of technical reasons why this is not possible! But isn’t it its responsibility to resolve such barriers in the interest of the country without being a naysayer forever?
These options and the financial impacts will be described in detail in the next article with numbers to illustrate the immediate impact. Meanwhile, switch off that extra light and fan and save a dollar for the beleaguered Sri Lanka.
